Economy

Real GDP Grew 2.2 Percent in the Fourth Quarter, Consistent with its Earlier Estimate

The Bureau of Economic Analysis said that real GDP grew 2.2 percent in the fourth quarter.  As such, headline growth did not change in this second revision from its earlier estimate, released one month ago. The U.S. economy expanded 2.4 percent in 2014, only slightly better than the 2.3 percent and 2.2 percent rates seen in 2012 and 2013, respectively. Of course, that somewhat understates the strength of the economy mid-year, when real GDP growth averaged a rather robust 4.8 percent in the second and third quarters. (continue reading…)

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Kansas City Fed: Reduced Manufacturing Activity in March

The Kansas City Federal Reserve Bank said that manufacturing activity declined in March, contracting for the first time in 12 months. The composite index of general business conditions declined from 1 in February to -4 in March. Perhaps more worrisome, the decline in new orders accelerated (down from -10 to -20), falling for the third straight month. The sample comments provide clues about why this is the case, with respondents noting a number of headwinds impacting their demand. These include snowstorms, reduced crude oil prices, the stronger U.S. dollar and the West Coast ports slowdown. (continue reading…)

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Durable Goods Orders and Shipments Were Soft in February

The Census Bureau said that new durable goods orders declined 1.4 percent in February, falling for the fifth time in the past seven months. Much of the decrease in February stemmed from reductions in the demand for transportation equipment, with new orders in that sector down 3.5 percent in February. This included a reduction in sales for motor vehicles and parts (down 0.5 percent for the month) and fewer nondefense and defense aircraft orders (down 8.9 percent and 33.1 percent, respectively). Note that aircraft orders can be quite volatile from month to month, as nondefense aircraft orders had increased 122.2 percent in January. Therefore, we often look at this data by stripping out the transportation equipment sector, and when you do so, durable goods orders decreased by 0.4 percent – still a soft figure. This mirrors other data showing a number of headwinds dampening demand and output in the early months of 2015. (continue reading…)

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Richmond Fed: Manufacturing Activity Contracted in March

The Richmond Federal Reserve Bank said that manufacturing activity contracted in March, declining for the first time in 12 months. The composite index of general business conditions decreased from zero in February to -8 in March. The underlying data were lower across-the-board, reflecting weaknesses for the month in terms of overall activity and a deterioration from February’s numbers. This included new orders (down from -2 to -13), shipments (down from -1 to -13), capacity utilization (down from -4 to -7) and the average workweek (up from -6 to -4). As such, manufacturers clearly pulled back in a number of areas for the month, likely due to global slowness, a stronger dollar and reduced commodity prices. On the positive side, hiring (up from 4 to 6) continued to grow modestly, providing some encouragement moving forward. (continue reading…)

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Consumer Prices Rose for the First Time in Four Months in February

The Bureau of Labor Statistics said that the consumer price index (CPI) rose for the first time in four months, up 0.2 percent in February. This was largely due to higher gasoline prices, which increased 2.4 percent in February. To be fair, the price of regular gasoline remains 33.5 percent lower today than it was 12 months ago. Indeed, the average price of regular gasoline declined from $3.639 a gallon on June 23 to $1.982 a gallon on January 26, according to the Energy Information Administration. It then rose to $2.256 per gallon on February 23, and has since edged up to $2.347 this week. (continue reading…)

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Markit: Chinese Manufacturing Activity Declined Again

The HSBC Flash China Manufacturing PMI reflected reduced activity again, down from 50.7 in February to 49.2 in March. It has contracted in three of the past four months now, reflecting a decelerated rate of growth in China. China has reduced its target real GDP growth rate for 2015 to 7 percent. New orders (down from 50.4 to 49.3), exports (up from 47.1 to 49.0) and employment (down from 49.3 to 47.0) were all below 50 in March – the threshold signifying growth. It was the reduction in demand that pushed the headline index lower. On the positive side, output (unchanged at 50.8) continues to expand very modestly for the month, and the decrease in input prices (up from 42.2 to 44.7) have helped manufacturers in terms of costs, even as the rate of decline was less in March. (continue reading…)

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Monday Economic Report – March 23, 2015

Here is the summary for this week’s Monday Economic Report: 

The U.S. economy has sputtered a bit in the early months of 2015. While it continues to grow modestly, several economic indicators are weaker than we would prefer. For example, manufacturing production decreased by 0.2 percent in February, declining for the third straight month. Many headwinds have combined to bring about this softness in the manufacturing sector, including global economic weakness, a strong U.S. dollar, the West Coast ports slowdown, a cautious consumer and the weather in some parts of the country. (continue reading…)

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Leading Economic Indicators Reflect Modest Growth in February

The Conference Board said that the Leading Economic Index (LEI) rose 0.2 percent in February, the same pace as observed in January. However, this was slower than the stronger rate of growth experienced just four months ago, when the LEI increased by 0.6 percent in October. Weaknesses abroad, a stronger U.S. dollar, weather and factors have been headwinds on the U.S. economy, which continues to expand modestly but at a slower rate. This can be seen in the latest industrial production, housing starts and retail sales figures, for instance. Specific to the LEI, new orders have decelerated, providing a bit of a drag on the headline number. Other challenges included the average workweek and initial unemployment claims.    (continue reading…)

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Philly Fed: Modest Manufacturing Growth in the District in March

The Federal Reserve Bank of Philadelphia reported that manufacturing activity has expanding modestly in March. The composite index of general business activity edged marginally lower, down from 5.2 in February to 5.0 in March. Overall activity has been softer-than-desired in the first three months of 2015, averaging just 5.5; whereas, the composite index had averaged a more robust 18.6 for 2014 as a whole. Nonetheless, the Manufacturing Business Outlook Survey has now expanded for 13 straight months, and business leaders in the district remain relatively optimistic about the coming months. (continue reading…)

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The Fed Drops “Patience” from its Monetary Policy Statement

As expected, the Federal Reserve no longer says that it can be “patient” in normalizing monetary policy. The Federal Open Market Committee (FOMC), which met on March 17 and 18, does say that “an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting.” This would suggest that the soonest that short-term rate might increase would be at the June 16-17 meeting. With that said, the fed funds rate will change only when data warrant such actions. Still, conventional wisdom holds that the FOMC will vote to raise rates at some point in 2015, likely in June, July or September. For the most part, the Fed has been on automatic pilot with its intentions for a mid-year hike, and this action clears the way for that to happen. (continue reading…)

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