Tag: federal reserve

Producer Prices Were Higher in June, Extending the Gains Seen in May

The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.4 percent in June, extending the 0.5 percent increase seen in May. The gains for the goods sector were even stronger. Indeed, producer prices for final demand goods jumped 1.3 percent and 0.7 percent, respectively, in May and June, with each month spurred higher by rising energy and food costs. On the energy front, energy goods were 5.9 percent and 2.4 percent more expensive in those two months, respectively. This was consistent with the rise in West Texas intermediate crude oil prices, up from an average of $54.45 per barrel in April to $59.82 a barrel in June. At the same time, final demand energy goods costs remain 17.9 percent lower today than 12 months ago. (continue reading…)

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Personal Spending Picked Up Strongly in May

The Bureau of Economic Analysis said that personal spending rose 0.9 percent in May, rebounding from a more-cautious 0.1 percent growth rate observed in April. It was the fastest monthly growth rate since August 2009. From the manufacturing perspective, this was welcome news, with spending on durable and nondurable goods up 2.2 percent and 1.9 percent, respectively. More importantly, it provides some encouragement that Americans might return to opening their wallets – something that there has been more hesitance to do so far this year. The year-over-year rate of personal spending in May, 3.6 percent, was the highest since December, up from 3.1 percent since in April. (continue reading…)

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Monday Economic Report – June 22, 2015

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

Last week, one media outlet reported that manufacturing has been in a “technical recession” for the past six months. I am more hesitant to use the R-word to describe the sector’s performance year-to-date, and in my view, this description somewhat overstates the significance of broader market trends, particularly for expectations moving forward. At the same time, manufacturing production has declined since late last year, as illustrated in the graphic below. A number of significant economic headwinds have reduced output in four of the past six months, reducing the year-over-year pace of growth in the sector from 4.5 percent in November to 1.8 percent in May. Capacity utilization has also declined for five consecutive months, down from 78.1 percent in December to 77.0 percent in May. (continue reading…)

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The Federal Reserve Downgraded its Forecast for 2015, Maintained its Existing Policies for Now

The Federal Reserve downgraded its forecast for growth for 2015 in its latest economic projections. Fed participants now expect real GDP to grow between 1.8 and 2.0 percent this year, down from an estimate of 2.3 to 2.7 percent growth seen in its March forecast. Indeed, this represented the second downward revision in growth estimates for the year, decelerating from the 2.6 to 3.0 percent outlook observed in December. As such, the reduced outlook for the economy this year from the Federal Reserve mirrors similar drops in growth estimates from other economists – including me – in light of softer-than-desired performance over the past six months, both in the U.S. and globally. This is consistent with the latest NAM Manufacturers Outlook Survey, which found that respondents were less upbeat about future activity in light of headwinds from a stronger dollar, weaknesses abroad, lower crude oil prices and a still-cautious consumer.

(continue reading…)

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Business Economists Downgrade Their Growth Estimates for 2015

The National Association for Business Economics (NABE) said that panelists in its Outlook Survey downgraded their estimates for growth in 2015. Business economists now expect real GDP growth of 2.4 percent this year, down from 3.1 percent in the March survey. This reflects recent headwinds in the U.S. economy, with 80 percent and 72 percent suggesting that a stronger U.S. dollar and slower growth in China, respectively, were having a negative impact on U.S. economic growth. To illustrate this point, the estimates for export growth have declined from 5.4 percent in December to 2.1 percent in the current report.  (continue reading…)

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Manufacturing Employment Increased by 7,000 in May

The Bureau of Labor Statistics said that manufacturers added 7,000 net new workers in May. This continues a softer-than-desired pace of hiring growth in the early months of 2015, with the sector adding just 4,250 workers on average per month over the past four months (February to May). This compares to 26,000 additional employees per month over the four months prior to that (October to January), and it largely mirrors the softness that we have seen from a number of economic headwinds of late (e.g., a strong dollar, lower crude oil prices, the West Coast ports slowdown, etc.), and policy hurdles coming from Washington (e.g. stalled consideration of Trade Promotion Authority and Export-Import Bank reauthorization, the prospect of a giant ozone regulation).

(continue reading…)

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Personal Spending was Flat in April

The Bureau of Economic Analysis said that personal spending was flat in April, falling back after growing 0.5 percent in March. In general, we have seen softer purchase levels over the past six months, with the year-over-year pace of personal consumption falling from 4.3 percent in November to 2.8 percent in April. The good news is that this still represents a modest pace of growth. Yet, this softer-than-desired level of spending mirrors consumer anxieties about income and labor market growth, and it corresponds with weaknesses in the larger economy year-to-date. For manufacturers, this has translated into sluggish spending on goods, with durable and nondurable goods spending down 0.7 percent and 0.5 percent, respectively, in April. (continue reading…)

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Monday Economic Report – May 4, 2015

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

The U.S. economy stagnated in the first quarter, with real GDP growing by just 0.2 percent. This compares to a consensus estimate of 1.1 percent, and it was lower than the 5.0 percent and 2.2 percent growth rates observed in the third and fourth quarters of 2014, respectively. As one might expect from a data point that is just shy of zero, the underlying contributions to growth were mixed. Net exports and government spending were drags on activity in the first quarter, particularly with headwinds from a stronger dollar. Consumer spending on goods and nonresidential fixed investment were also weak, with the latter experiencing sharp declines stemming from the energy market and its supply chain. The bright spots—to the extent that you could call them that—were service-sector spending and a rebound in inventories. (continue reading…)

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Monday Economic Report – April 20, 2015

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

Manufacturing production increased 0.1 percent in March. This followed three months of weaker data, including declines in both January and February. There have been some significant headwinds hitting the manufacturing sector over the past few months, including a strong U.S. dollar, weakened economic markets abroad, lower crude oil prices, the West Coast ports slowdown and weather. These challenges have slowed activity in the sector since November. The latest Beige Book discussed these headwinds. The year-over-year pace of manufacturing production in March was 2.4 percent, down from 4.5 percent in November. Meanwhile, total industrial production, which includes mining and utilities, fell 0.6 percent in March, declining for the third time in the past four months. As such, the data suggest manufacturers have started the new year on a very soft note despite optimism for better demand and output moving forward. (continue reading…)

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Higher Gasoline Costs Help Increase Consumer Prices for the Second Straight Month

The Bureau of Labor Statistics said that the consumer price index increased for the second straight month in March, up 0.2 percent. This was largely due to higher gasoline prices, which increased 2.4 percent and 3.9 percent in February and March, respectively. To be fair, the price of regular gasoline remains 29.2 percent lower today than it was 12 months ago. Indeed, the average price of regular gasoline rose from $1.982 a gallon on January 26 to $2.348 per gallon on March 30, according to the Energy Information Administration. It has edged marginally lower since then, down to $2.317 per gallon on April 13, or earlier this week. (continue reading…)

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