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April 30, 2004 -- Slow but consistent economic growth appears to be the
bottomline this month. Unseasonally warm weather boosted energy prices but
also appears to have heated up durable goods orders, consumer confidence,
and new home sales. And after months in hibernation, strong job growth
could be poised for a much welcome return. Balancing this is solid but
lower than expected GDP advances. Together, this sets the stage for a
likely increase by the Federal Reserve in interest rates later this year.
For more detailed information on the most recent economic gauges, read this
month's enewsletter.
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Federal Funds Rate: 1.0%, unchanged since June 2003
The Federal Open Market Committee did not meet in April but will convene again on May 4. The April 21 Beige Book reported that nationally, economic growth since the last update is stronger and more widespread across sectors. The St. Louis office reported that growth is continuing slowly, and although the residential real estate market is cooling, the commercial sector appears to be stabilizing. To view the report, go to: http://www.federalreserve.gov/fomc/beigebook/2004/20040421/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 4.2% for 2004Q1, advance
(4.1% in 2003Q4)
Domestic output was lower than expected in the first quarter but still grew at a respectable clip (exceeding trend rates of 3.0% to 3.5%). The major contributors to growth at the beginning of the year were personal consumption (up 0.6% to 3.8%), equipment and software (down 3.4% to 11.5%), government spending (up from -0.1% to 2.0%), exports (down 17.3% to 3.2%) and private inventory investment (down 3.7% to 7.2%). Government spending increases were due to a jump in federal spending, with state and local expenditures shrinking. 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 3.8% for 2004Q1, advance
(3.2% in 2003Q4)
Despite a tumble in durables spending, personal consumption rose in the first quarter by 0.6%. Durable goods spending went from a meek 0.7%in 03Q4 to -4.7% in 04Q1, while nondurable goods grew 6.4% (vs. 5.4% previously) and services increased 4.3% (vs. 2.8% in 03Q4). The poor showing among durables was due to a steep slide in auto sales, down $22.4 billion after last quarter's decrease of $10.2 billion. Food ($19.9 billion) and clothes/shoes ($11.9 billion) pushed nondurable sales up, while "other" ($16.8 billion) and medical care spending ($12.8 billion) provided large boosts 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: 114.5% (of 1997 average), down 0.2% in March
Industrial production shrank slightly in March despite predictions of no change. All of the major market groups declined: products and nonindustrial supplies both fell 0.3% while materials were down 0.1%, Of the major industry groups, manufacturing was flat while mining fell 0.3% and utilities again dropped, this time by 2.3% (due largely to warmer than average temperatures in March). Capacity utilization was down 0.2% to 76.6%. Year-over-year, industrial production was up 3.4%. 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: 62.5%, up 1.1% in March
For the longest run since 1983, manufacturing has been above the 60 percent line for the past five months and in March beat expectations. With few exceptions, the numbers were up across this index. Production grew 1.6% to 65.5%, the backlog of orders was 1.5% higher at 63.5%, supplier deliveries were up 7.8% to 67.9%, employment grew 0.7% to reach 57.0% and new exports rose 7.1% to 62.0%. New orders and inventories were both slightly lower, coming in at 65.7% and 48.3%, respectively. As with last month, 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: 65.8%, up 5.0% in March
The non-manufacturing index reversed the February decline by adding five points in March, exceeding expectations and demonstrating a strong performance for this sector. New orders and inventories both grew by 2.5% to 62.8% and 51.5%, respectively. Employment rose 1.2% to 53.9%. Meanwhile, supplier deliveries and the backlog of orders both fell 0.5% to 55.0% and 52.5%, respectively. Of the 15 sectors reporting growth, the strongest were: wholesale trade; mining; communication; retail trade; construction; and business services. Two industries reported declines: legal services and entertainment. 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: $192.7 billion, up 3.4% in March
Manufacturing demand is picking up steam based on March's better-than-expected increase in durable goods orders. Excluding transportation (up 3.6% to $57.0 bilion), growth was 3.3%. Defense orders fell 6.1% to $9.7 billion while non-defense orders (excluding aircraft) grew 2.4% to $60.4 billion. Shipments were up 3.2% to $195.2 billion, unfilled orders rose 0.8% to $514.5 billion, and inventories edged up 0.1% to $264.7 billion. Year-over-year, new orders were up a strong 11.1%. 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 0.5% in March
The positive bump in producer prices was higher than expected and follows much slower growth of 0.1% in February. Energy prices rose 0.6% while food prices grew 1.5%. The core rate of inflation (excluding food and energy) only rose 0.2%. Prices for intermediate and crude goods both rose 0.7%, a slowdown in the growth of prices for crude materials. Year-over-year, finished goods prices rose 1.4%, its lowest rate in a year. 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 0.5% in March (SA)
Energy prices again fueled a higher than expected rate of inflation. Food prices again rose 0.2% while energy jumped 1.9%. The core rate was slightly lower at 0.4%. Transportation prices rose 1.1%, apparel prices grew 0.9% and medical costs were up by 0.6%. Year-over-year, prices were up 1.7%. 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: 115.3 (1996=100), up 0.3%
in March
After Febuary's no growth, the index is again on an upward trajectory and is 4.4% higher than its record low a year ago. The six indicators that were positive this month include: vendor performance, real money supply, average weekly initial claims for unemployment insurance (inverted), building permits, manufacturers’ new orders for consumer goods and materials, and index of consumer expectations. The coincident index (current economic situation) rose 0.2% to 116.4 and the lagging indicator (past situation) edged up 0.1% to 97.9. 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): 92.9%, up 4.4% in April
Although still below its January level, consumer confidence beat expectations and improved on March's no growth. Those consumers rating the economy as “good” grew 0.7% to 21.4%, while those rating the economy as “bad” fell 1.1% to 22.0%. More consumers said jobs were more plentiful (up 1.1% to 15.8%) while fewer said jobs were harder to get (down 2.3% to 27.6%). The present situation index rose 6.2% to 90.6% and expectations were up 3.2% to 94.5%. More consumers plan to purchase a car or major appliace in the next six months while fewer consumers plan to purchase a house. 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: $333.0 billion, up 1.8% in March
After relatively slow growth in the previous months, retail sales came roaring back in March, exceeding expectations. Excluding auto sales, total sales were still a strong 1.7%. The largest gain was in building material and garden equipment/supplies, which rose 10.6%, followed by more moderate growth for autos (2.1%), clothing (1.9%) and furniture (1.2%). Total year-over-year growth was up by 8.2%. 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: 130.5 billion employed in March (Unemployment rate:
5.7%)
Nonfarm job creation was surprisingly robust and broad based in March, with the addition of 308,000 new jobs. Among goods producers, manufacturing did not lose any jobs while construction added 71,000. Service jobs expanded by 230,000, led by retail (47,000), professional and business services (42,000), and education and healthcare (39,000). The unemployment rate grew by 0.1% due to more people in the labor force. 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: 1,228,000, up 8.9% in March
In March, home sales soared to record levels and easily surpassed expectations. Except for lower sales in the Northeast (down 24.3%), all other regions experienced growth: the South with 19.3%, the West with 5.1% and the Midwest with 5.0%. The average sales price was $260,800 and there is an estimated supply of new homes for 3.7 months. New home sales year-over-year are approximately 21.8% 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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