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October 1, 2003 -- Employment worries are keeping expectations for economic
growth in check, although the GDP is improving and production is up. With
more consumers worried about the job situation and 93,000 fewer people
employed, consumer confidence has suffered. The Federal Reserve will keep
an eye on how employment may further impact the economy in terms of
production and investment decisions. Read this month's enewsletter for
specific details about how the economy is doing.
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Federal Funds Rate: 1.0%, unchanged in September
The Federal Open Market Committee (FOMC) consists of the Federal Reserve Governors and Reserve Bank Presidents, but only five of the 12 presidents vote with the governors on rate changes. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. At the September 16 FOMC meeting, the Committee left the federal funds rate alone, again cautioned that deflation is possible, and added that the employment situation appears to be weakening. The September Beige Book shows an economy that is stabilizing, with most districts reporting an increase in activity this past summer. The St. Louis office noted a moderate increase in manufacturing activity, with announcements of new plant openings, expansions of product lines and the creation of new jobs throughout the district. To view the report, go to: http://www.federalreserve.gov/FOMC/BeigeBook/2003/20030903/default.htm. (Federal Open Market Committee of the Federal Reserve Board) Click here for more information |
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Real Gross Domestic Product (GDP): Growth rate of 3.3% for 2003Q2, final
(1.4% in 2003Q1)
Gross Domestic Product measures the total production and consumption of goods and services in the United States on a quarterly basis. The final figure for the second quarter is 0.2% higher than the preliminary estimate and beat expectations. Major contributors to growth in the second quarter of 2003 included: personal consumption (3.8% from 2.0% in Q1), federal defense spending (45.8% from -3.3% in Q1), and nonresidential fixed (business) investment (7.3% from -4.4% in Q1). The GDP release specifically referred to the increase in computer sales and the decrease in auto production as impacting second quarter GDP results (the former contributing 0.18%, the latter subtracting 0.11%). Real final sales of domestic product grew 4.0% after growing 2.3% the previous quarter. Corporate profits were up $80.6 billion, revised downwards from the preliminary estimate. (Bureau of Economic Analysis) Click here for more information |
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Personal Consumption Expenditures: Growth rate of 3.8% for 2003Q2, final
(2.0% in 2003Q1)
Personal Consumption Expenditures (PCE) measures consumer-spending activity. This month’s final read was the same as the two previous estimates for Q2 growth. Both durable and nondurable goods sales numbers were revised upwards: durable goods surged 24.3% after falling 2.0% last quarter and nondurable goods expenditures increased 1.4% after last quarter's stronger 6.1% growth rate. Services also grew 1.4%, versus 0.9% in the first quarter. Among durable goods, motor vehicle sales grew $28.1 billion and furniture and household equipment gained $18.8 billion. Among nondurable goods, sales of clothing and shoes ($5.3 billion), other goods ($3.3 billion) and food ($1.7 billion) made up for the other, negative growth segments. Services sector growth was again boosted primarily by medical care growth ($10.6 billion). (Bureau of Economic Analysis) Click here for more information |
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Industrial Production: 110.2% (of 1997 average), up 0.1% in August
The industrial production (IP) index measures the change in output since 1997 (base year) in manufacturing, mining, and electric and gas utilities in the United States. This past month's marginal growth was lower than July's revised 0.7% performance but was expected. Products grew 0.1%, with a pickup in business equipment (0.5%) off-setting a decline in consumer goods production (-0.2%). Non-industrial supplies grew 0.3% while materials were stagnant. Of the major industry groups, manufacturing slipped 0.1%, mining edged up 0.2%, and utilities increased by 1.9%. Capacity utilization was 74.6% and is 1.1% higher than it was a year ago. Year-over-year production overall was lower by 1.0%. (Federal Reserve Board) Click here for more information |
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Manufacturing ISM Report on Business: 54.7%, up 2.9% in August
The Institute for Supply Management surveys 400 purchasing managers nationwide representing 20 industries regarding manufacturing activity to create this index. Index values above 50 indicate an expanding manufacturing economy, while values below 50 indicate manufacturing contraction. Last month's figure was better than anticipated and is the second month of expansion since February. Production provided a large boost to the index, growing 8.3% to 61.6, while new orders also gained well, growing 3.0% to 59.6%. The backlog of orders increased 0.5% to 51.5% and new export orders are up 1.5% higher, at 55.3. Employment continues to lag, dropping 0.2% to 45.9%. The thirteen industrial sectors reporting growth include: leather; furniture; wood and wood products; apparel; instruments and photographic equipment; miscellaneous; electronic components and equipment; printing and publishing; chemicals; transportation and equipment; fabricated metals; industrial and commercial equipment and computers; and glass, stone, and aggregate. (Institute for Supply Management) Click here for more information |
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Non-Manufacturing ISM Report on Business: 65.1%, unchanged in August
The Non-Manufacturing Business Activity Index is based on the results of a monthly survey of 370 purchasing and supply executives in 62 different industries. Percentages above 50 generally indicate an expanding non-manufacturing economy, while those below 50 indicate a non-manufacturing decline. The Index remained at its record high in August, beating an expected moderate decline. New orders grew 0.7% to 67.6%, employment edged up 0.3% to 51.0%, new export orders jumped 11.0% to 58.5% and imports grew 6.0% to 60.0%. The backlog of orders fell 3.0% to 51.5% and supplier deliveries also fell, by 1.0% to 52.5%. Those sectors reporting the highest growth included: entertainment; real estate; legal services; retail trade; and construction. Agriculture was the only sector to report a decline in activity. (Institute for Supply Management) Click here for more information |
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Durable Goods Orders: $173.3 billion, down 0.9% in August
The Census Bureau measures the dollar amount of new factory orders received by U.S. manufacturers. Durable goods are industrial products expected to last more than one year, such as steel, lumber, electronic components, finished industrial machinery and equipment, and finished consumer durable goods. This past month’s decline was unexpected and is the first negative report since April. Declining transportation orders, which fell 2.2% to $51 billion, was the largest single influence. Shipments fell 2.9% to $176.3 billion while unfilled orders improved 0.7% to $489.1 billion. Inventories fell again, down 0.4% to $263.5 billion. Nondefense capital goods orders fell 2.0% to $57 billion, while defense orders surged 35.3% to $10.1 billion after a decline the previous month -- defense orders are expected to remain volatile over the next several months. Year-over-year, orders for durable goods were down 0.4%. (U.S. Census Bureau) Click here for more information |
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Producer Price Index (PPI): up 0.4% in August
The Bureau of Labor Statistics takes a random sampling of various industries in the mining, manufacturing, agriculture, fishing, forestry, services and utility sectors to measure the average change in selling prices for domestically produced goods and services. July's figure was consistent with expectations for growth. Excluding food and energy, wholesale prices rose 0.1% (food prices grew 0.7% while energy prices advanced 1.2% thanks to increases in gas and electricity prices). Crude goods prices again fell, by -1.4% in August, while intermediate goods rose 0.5%. Year-over-year growth is 3.4%. (Bureau of Labor Statistics) Click here for more information |
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Consumer Price Index (CPI): 184.6, up 0.4% in August
The Consumer Price Index (CPI-U) is a measurement of the average change over time in the prices paid by all urban consumers for specific consumer goods and services, commonly referred to as the rate of inflation. August's results were expected. Excluding food and energy, prices were also up 0.1%. Like the PPI, energy costs were behind the month's growth. Items with the largest increases included transportation (1.0%), education and communication (0.5%) and food and beverage (0.3%). Among the special Indexes, Energy rose 2.7% while Food grew 0.3%. Year-over-year, inflation grew 2.2%. (Bureau of Labor Statistics) Click here for more information |
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Composite Index of Leading Economic Indicators: 113.3 (1996=100), up 0.4%
in August
The Composite Leading Index is constructed as a weighted average of ten key economic data series designed to predict economic conditions in the near term. The index generally turns down before a recession and turns up before an expansion. August's positive figure was expected and represents the fifth straight month of improvement. This bodes well for improved growth in the second half of this year. Only four of the ten components were positive: interest rate spread, vendor performance, real money supply, and building permits. The coincident index (current economic situation) held steady at 115.4 and the lagging indicator (past situation) also remained unchanged at 98.1. (The Conference Board) Click here for more information |
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Consumer Confidence Index (1985=100, SA): 76.8%, down 4.9% in September
The Consumer Confidence Survey measures consumer attitude about the performance of the economy using a monthly representative sample of 5,000 U.S. households. Confidence is gauged on respondents’ assessment of such key factors as the business, employment, inflation and income outlook. Consumer confidence lost the ground it had gained in August, taking an unexpected tumble. Those consumers rating the economy as “good” edged up 0.1% to 16.0%, while those rating the economy as “bad” fell 0.4% to 29.6%. More consumers reported that jobs were harder to come by (35.3% versus 34.1% in August). The present situation index again dipped, falling 2.5% to 59.5%, and expectations slid 8.5% to 88.4%. Consumers had a bleaker outlook for the next six months, with fewer expecting the economy to improve (down 1.2% to 21.4%) and fewer expecting an improved job market (down 1.3% to 16.7%) (The Conference Board) Click here for more information |
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Retail Sales: $319.2 billion, up 0.6% in August
Retail sales include merchandise sold (for cash or credit at retail or wholesale) by establishments primarily engaged in retail trade. Services that are incidental to the sale of merchandise, and excise taxes that are paid by the manufacturer or wholesaler and passed along to the retailer, are also included. Growth in retail sales was weaker than anticipated. Excluding autos and gas, core retail sales only grew 0.4%. Big winners in August included gas stations(2.7%), electronics and appliance sales (1.4%), food services and drinking places(1.4%) and general merchandise (1.1%). Total year-over-year growth was up by 5.4%. (U.S. Census Bureau) Click here for more information |
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Employment Situation: 129.8 billion employed in August (Unemployment rate:
6.1%)
The Department of Labor conducts the Current Population Survey (CPS) to obtain information about the labor force, employment, and unemployment. The U.S. Census Bureau conducts the survey, which is a random sample of 60,000 households, for the Bureau of Labor Statistics. Non-farm payroll shed 93,000 jobs, although consensus expectations were for moderate improvement. The unemployment rate fell 0.1%. Manufacturing jobs fell again, by 44,000 jobs. The service sector also lost jobs, shedding 67,000 jobs, with only education and health care and the leisure/hospitality sectors reporting growth. The employment situation does not appear to be positively affected by improvements in other areas of the economy, as hiring remains stagnant. (U.S. Department of Labor) Click here for more information |
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New Home Sales: 1,150,000, up 3.4% in August
The U.S. Census Bureau and the Department of Housing and Urban Development (HUD) report monthly on the number of new single-family homes built to be sold. New home sales year-over-year are approximately 12.2% higher than last August’s estimate of 1,025,000. Homes sales were up across most of the country, with gains in the Northeast, Midwest, and West. Only the South saw a decline The average sales price was $237,500 and there is an estimated supply of new homes for 3.7 months. Sales have begun to slow but are expected to remain solid through the end of the year. (U.S. Census Bureau) Click here for more information |
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For more information about Greater Louisville, go to: http://www.greaterlouisville.com/economic/default.htm Contact Lisa Itamura with comments or suggestions.
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