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October 30, 2003 -- Nature may be headed for its winter hibernation, but
the economy appears to be waking up this fall. After months and quarters
of mixed or bad news, there are now strong signs that the economy is headed
for more sustainable growth. GDP growth for the third quarter outstripped
estimates for more moderate growth, consumer confidence is on the rise and
even the employment picture looks brighter. With business spending on the
rise and a continued expansionary monetary policy, the outlook for
increased investment is much more positive. One indicator to watch in
November is the Conference Board's Leading Indicator index, which fell
slightly this past month and usually serves as a harbinger of economic
slowdowns. Read this month's e-newsletter for more clues about where the
economy is headed.
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Federal Funds Rate: 1.0%, unchanged in October
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. The Federal Funds rate has remained unchanged since June of this year while the discount rate has remained at 2.0 percent. The FOMC stated that monetary policy will remain accomodative for the foreseeable future to help with the improving economy. According to the October Beige Book, ten of the 12 federal districts reported an increase in economic activity, with the St. Louis office noting a modest improvement in the regional economy. To view the report, go to: http://www.federalreserve.gov/fomc/beigebook/2003/20031015/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 7.2% for 2003Q3, advance
(3.3% in 2003Q2)
Gross Domestic Product measures the total production and consumption of goods and services in the United States on a quarterly basis. Advance estimates for the third quarter were well above expectations. The GDP growth rate has not been this brisk in almost 20 years. Major contributors to growth in the third quarter of 2003 included: personal consumption (6.6% from 3.8% in Q2), equipment and software (15.4% from 8.3% in Q2), residential fixed investment (20.4% from 6.6% in Q2) and exports (9.3% from 1.0% in Q2). Growth was broad-based, with business spending up by 11.1.% (vs. 7.3% in Q2) and motor vehicle production contributing 1.17% (vs. -0.11% in Q2). Real final sales of domestic product grew 7.8% after growing 4.0% the previous quarter. (Bureau of Economic Analysis) Click here for more information |
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Personal Consumption Expenditures: Growth rate of 6.6% for 2003Q3, advance
(3.8% in 2003Q2)
Personal Consumption Expenditures (PCE) measures consumer-spending activity. Durable goods spending grew to 26.9% (24.3% in Q2), nondurable goods jumped 7.9% (1.4% in Q2) and services improved 2.2% (1.4% in Q2). Among durable goods, motor vehicle sales grew $34.5 billion and furniture and household equipment gained $22.5 billion. Among nondurable goods, sales of food ($16 billion from $1.7 billion) led positive growth across this segment. Services sector growth was again boosted primarily by medical care growth ($11.3 billion) and housing and housing operation (combined for $10.5 billion). (Bureau of Economic Analysis) Click here for more information |
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Industrial Production: 110.6% (of 1997 average), up 0.4% in September
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 in line with expectations and beats August's revised -0.1% decline. Products grew 0.5% (led by a 6.3% increase in auto production), while non-industrial supplies shrank 0.1%. Materials grew 0.4%. Of the major industry groups, manufacturing increased by 0.7%, mining saw no growth, and utilities fell by 2.2%. Capacity utilization was slightly higher at 74.7%. Year-over-year, industrial production was lower by 0.6%. (Federal Reserve Board) Click here for more information |
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Manufacturing ISM Report on Business: 53.7%, down 1.0% in September
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. September's figure was lower than expected but still shows manfacturing expanding. At 60.4%, new orders provided the biggest boost to this index (up 0.8%), with production (57.3%, down 4.3%) and prices paid (56.0%, up 3.0%) also providing some lift. Inventories (42.7%, down 0.2%) and employment (45.7%, down 0.2%) continue to contract, and the trade gap appears to be widening, with imports up 60.7% and exports down 52.9%. The 13 of 20 industry sectors reporting growth include: furniture; food; wood and wood products; instruments and photographic equipment; electronic components and equipment; printing and publishing; chemicals; glass, stone, and aggregate; transportation and equipment; fabricated metals; industrial and commercial equipment and computers; rubber and plastic products; and apparel. (Institute for Supply Management) Click here for more information |
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Non-Manufacturing ISM Report on Business: 63.3%, down 1.8% in September
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 lost ground last month, but still indicates healthy growth for non-manufacturing sector. September's retreat was due in large part to a drop of 7.7% to 59.9% in new orders. Employment fell 1.9% to 49.1% and inventories dropped to 47.5%, down 1.5%. The backlog of orders index added 4.4% to reach 57.0%. The sector also saw growth in prices, up 4.4% to 60.1%. Those segments reporting the highest growth included: entertainment; other services; wholesale trade; insurance; transportation; and utilities. (Institute for Supply Management) Click here for more information |
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Durable Goods Orders: $176.3 billion, up 0.8% in September
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. Following August's unexpected decline, September's results were lower than anticipated but still favorable news. Computers and electronic goods provided the biggest boost, adding $0.8 billion for a total of $31.5 billion. Shipments grew 2.5% to $181.6 billion and unfilled orders edged up 0.1% to $490.7 billion. Inventories fell 0.7% to $261.3 billion. Defense orders slid 26.7% to $7.4 billion while non-defense orders increased 3.4% to $59.2 billion. Year-over-year, orders for durable goods were up 0.5%. (U.S. Census Bureau) Click here for more information |
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Producer Price Index (PPI): up 0.3% in September
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. September's figure was higher than an anticipated zero growth but excluding the volatile food and energy sectors, the index saw no growth. Food prices grew 1.2% while energy prices rose a mere 0.1%. Prices for intermediate goods slipped 0.1% while crude goods prices rose 3.4%. Year-over-year growth is 3.5%. (Bureau of Labor Statistics) Click here for more information |
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Consumer Price Index (CPI): 185.2, up 0.3% in September
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. This past month's results were expected. For the second month in a row, excluding food and energy, prices were also up 0.1%. Items with the largest increases included transportation (0.9%), apparel (0.5%) and medical care (0.5%). Among the special Indexes, Energy rose 3.0% while Food grew 0.2%. Year-over-year, inflation grew 2.3%. (Bureau of Labor Statistics) Click here for more information |
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Composite Index of Leading Economic Indicators: 113.0 (1996=100), down 0.2%
in September
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. The slight downturn in this index was expected and reverses the recent upward trend. Once again, only four of the ten components were positive: average weekly manufacturing hours, stock prices, manufacturers’ new orders for consumer goods and materials, and manufacturers’ new orders for nondefense capital goods. The coincident index (current economic situation) added 0.1% and now stands at 115.7 and the lagging indicator (past situation) shed 0.5% to reach 97.4. (The Conference Board) Click here for more information |
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Consumer Confidence Index (1985=100, SA): 81.1%, up 4.1% in October
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. After last month's unexpected tumble, this month's increase in consumer confidence was welcome news and beat expectations. Those consumers rating the economy as “good” grew 1.0% to 17.2%, while those rating the economy as “bad” fell 1.1% to 28.4%. More consumers reported that jobs were more plentiful while fewer consumers reported that jobs were harder to find. The present situation index rose 7.1% to 66.8% and expectations rose 2.2% to 90.7%. Compared to last month, this month's consumer outlook for the next six months was far more positive, with more expecting that the economy and employment situation will improve and more planning to purchase a home, auto or major appliance. (The Conference Board) Click here for more information |
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Retail Sales: $320.6 billion, down 0.2% in September
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. Last month's slight decline was not surprising, and excluding autos, retail sales actually grew 0.3% with growth reported in many sectors. Auto sales fell 1.6%, food services and drinking establishment sales shrank 1.4% and electronic and appliance stores sales dipped 0.3%. On the plus side, building material dealers added 1.9%, clothing and accessory stores grew 1.4% and nonstore retailers rose 1.2%. Total year-over-year growth was up by 7.5%. (U.S. Census Bureau) Click here for more information |
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Employment Situation: 129.9 billion employed in September (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 grew by 57,000 jobs although job losses were expected. The largest gains were in the services sector, with professional and business services growing by 66,000 jobs (temporary help making up the lion's share of this growth with 33,000 jobs added) followed by retail with a gain of 10,000. Still a sore spot, manufacturing lost 29,000 jobs. The unemployment rate remained the same. This figure is derived from the household survey, generally thought to be less reliable than the payroll survey. (U.S. Department of Labor) Click here for more information |
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New Home Sales: 1,145,000, down 0.2% in September
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 8.3% higher. Homes sales were up in the West by 12% and Northeast by 26%, down in the Midwest by 18% and the South by 3%. The average sales price was $256,200 and there is an estimated supply of new homes for 3.7 months. New home sales peaked in May but should continue to remain solid through the end of the year. Intertest rates in the mid-6% range and little pent up demand are expected to tame sales next 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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