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March 31, 2004 -- Where are the jobs? The stagnant employment situation
continues to be a drag on the economy, although domestic output and
industrial production are providing a boost, as are durable goods orders.
Consumers and the Federal Reserve remain cautious about the slow job
growth, as is apparent in the confidence index decline and low federal
funds rate. Find specific information about key economic indicators in
this month's e-newsletter.
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Federal Funds Rate: 1.0%, unchanged since June 2003
At its March 16 meeting, the Federal Open Market Committee voted to maintain the federal funds target rate at one percent. The Committee again stated that it would be patient regarding any tightening of monetary policy, noting that output has increased at a solid pace. The Fed however will continue to keep an eye on the weak employment situation. The Beige Book released on March 3 described growth in January and February as moderate across most of the country. The St. Louis office reported that growth was slow and that retail and car sales were off from one year ago. Also, commercial real estate remains weak. To view the report, go to: http://www.federalreserve.gov/fomc/beigebook/2004/20040303/default.htm. 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. (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 4.1% for 2003Q4, final
(8.2% in 2003Q3)
As expected, the final estimate of GDP in the fourth quarter of last year remained unchanged at 4.1%. Major contributors to growth in the fourth quarter include: personal consumption (3.2% from 6.9% in Q3), exports (20.5% versus 9.9% in Q3), equipment and software (14.9% from 17.6% in Q3), inventory (a 0.71% from -.13% in Q3 contribution to GDP percent change), and residential fixed investment (7.9% versus 21.9% in Q3). Business growth was again revised upwards (10.9% from 12.8% in Q3). Often seen as a more reliable indicator of growth, real final sales of domestic product grew 3.4% after growing 8.3% the previous quarter. Gross Domestic Product measures the total production and consumption of goods and services in the United States on a quarterly basis. (Bureau of Economic Analysis) Click here for more information |
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Personal Consumption Expenditures: Growth rate of 3.2% for 2003Q4, final
(6.9% in 2003Q3)
Personal consumption continued to lead headline growth by increasing 3.2% despite heavy consumer spending in the third quarter. Durable goods spending rose a scant 0.7% (28.0% in Q3), nondurable goods grew 5.4% (7.3% in Q3) and services increased 2.8% (2.8% in Q3). Among durables, motor vehicle sales slid $10.2 billion while furniture and household equipment added $10.1 billion. Gas and other energy goods sales (up $10.1 billion) were the largest contributor to nondurables while medical care spending ($14.5 billion) was the largest contributor to services growth. Personal Consumption Expenditures (PCE) measures consumer-spending activity. (Bureau of Economic Analysis) Click here for more information |
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Industrial Production: 114.6% (of 1997 average), up 0.7% in February
Industrial production grew 0.7% in February, beating expectations and continuing January's pattern of steady growth. Products grew 0.8% (versus 0.5% previously), non-industrial supplies rose 0.6% (versus 1.0% in January) and materials added 0.7% (versus 1.0% previously). Of the major industry groups, manufacturing rose 1.0% and mining 0.1%. Utilities shrank 0.7% after posting an increase of 5.3% in January. Capacity utilization increased to 76.6%. Year-over-year, industrial production was up 2.7%. 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. (Federal Reserve Board) Click here for more information |
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Manufacturing ISM Report on Business: 61.4%, down 2.2% in February
Manufacturing continues to expand but at a slower pace in February, roughly in line with expectations. New orders declined 4.7% to 66.4% while production tumbled 7.2% to 63.9%. The backlog of orders grew 1.5% to 62.0%, employment increased 3.4% to 56.3%, and inventories rose 0.5% to 49.4%. All of the 20 industry sectors reported growth. 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. (Institute for Supply Management) Click here for more information |
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Non-Manufacturing ISM Report on Business: 60.8%, down 4.9% in February
Despite a drop in the non-manufacturing index, this sector was still well above the benchmark for growth in February. New orders dropped 4.6% to 60.3% and employment fell 0.7% to 52.7%. Twelve of the 20 sectors reported growth, most significantly mining, transportation, insurance, retail trade, and communication. Construction, entertainment and finance/banking reported declines. 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. (Institute for Supply Management) Click here for more information |
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Durable Goods Orders: $183.8 billion, up 2.5% in February
Growth in February's durable goods orders beat expectations and helped regain some of the ground lost in January's revised decline of 2.7%. Excluding transportation (up 9.9% to $54.4 bilion), orders actually fell 0.3%. Defense orders rose 11.6% to $9.8 billion while non-defense orders grew 2.9% to $60.3 billion. Shipments were up 0.8% to $187.6 billion, unfilled orders rose 0.6% to $508.8 billion, and inventories added 0.4% to reach $264.3 billion. Year-over-year, new orders were up 8.0%. 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. (U.S. Census Bureau) Click here for more information |
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Producer Price Index (PPI): up 0.6% in January
The conversion of PPI data to the North American Industry Classification System (NAICS) delayed the release of January's PPI. The increase of 0.6% in January was due mainly to higher fuel prices. Energy prices rose 4.7% while food prices fell 1.4%. Excluding these two volatile categories, core inflation only rose 0.3%. Prices for intermediate goods rose 0.8% and crude goods increased 2.8%. Year-over-year, finished goods prices rose 3.3% 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. (Bureau of Labor Statistics) Click here for more information |
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Consumer Price Index (CPI): up 0.3% in February (SA)
The rate of inflation for February was in line with expectations and was led primarily by a large increase in energy prices (up 1.7%). Food prices were up 0.2% and excluding food and energy, the core rate was up 0.2%. Once again, transportation reported the largest gain (0.7%) with rising medical costs a close second (0.6%). 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. (Bureau of Labor Statistics) Click here for more information |
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Composite Index of Leading Economic Indicators: 115.1 (1996=100), no change
in February
The index held steady in February, weighed down by lackluster consumer confidence. However, revisions to previous months' figures has put the index's annual pace of growth in the 3.0 to 4.0% range. Six of the ten indicators for this index were positive, including: real money supply, vendor performance, 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) rose 0.3% and now stands at 116.1 while the lagging indicator (past situation) again remained at 98.2. 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 Conference Board) Click here for more information |
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Consumer Confidence Index (1985=100, SA): 88.3%, down 0.2% in March
Confidence was flat last month despite predictions of another decline. Those consumers rating the economy as “good” grew 1.4% to 20.7%, while those rating the economy as “bad” increased slightly to 23.3%. More consumers said jobs were harder to come by (up 1.1% to 30.0%) but slightly more also answered that jobs were more plentiful (up 0.2% to 14.7%). The present situation index inched up 0.8% to 84.1% while expectations fell 0.9% to 91.0%. Slightly more people expect to purchase a home or major appliance in the next six months, while fewer expect to purchase a car. 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. (The Conference Board) Click here for more information |
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Retail Sales: $327.2 billion, up 0.6% in February
Retail sales in February were in line with expectations and, as with January's decline, were due mainly to auto sales. Excluding auto sales, total sales were flat. Auto sales increased 2.7% and general merchandise stores grew 1.3%. Among the losers were furniture and home furnishing stores (down 0.4%) and food and beverage stores (down 0.5%). Total year-over-year growth was up by 7.9%. 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. (U.S. Census Bureau) Click here for more information |
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Employment Situation: 130.15 billion employed in February (Unemployment
rate: 5.6%)
Nonfarm job creation was a disappointing 21,000, far below expectations. January job growth was also revised downwards to 97,000. Among goods-producers, manufacturing lost 3,000 jobs and construction lost 24,000 jobs. On the service side, education and health services and retail both added 13,000 jobs. Leisure and hospitality was the only service segment reporting a loss (down 9,000). The unemployment rate remained the same. 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. (U.S. Department of Labor) Click here for more information |
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New Home Sales: 1,163,000, up 5.8% in February
Home sales in February beat expectations and are at a six-month high. Sales were higher in the Northeast (12.0%) and West (28.5%) and lower in the South (-1.2%) and Midwest (-10.6%). The average sales price was $257,200 and there is an estimated supply of new homes for 3.8 months. New home sales year-over-year are approximately 24.4% higher. 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. (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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