Business Activity

GDP soared in Q3, rising at an annual rate of 5.0 percent, the fastest pace in 11 years, following a strong Q2 increase of 4.6 percent. Federal government spending, exports, and business capital outlays drove growth in Q3. Improvements in business activity have been widespread as industrial production has increased in 51 of the last 65 months to hit a record high, the service sector has expanded for 59 straight months, and durable goods orders have increased year-over-year in 51 of the last 59 months. Furthermore, the Small Business Optimism Index surged to an eight plus year high (highest since October 2006) after rising for the 11th time in the last 14 months. At 100.4, the Index finally returned to readings that have normally accompanied economic expansions and is in line with its pre-recession average of 100 from 1973 through 2007.

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Business Activity Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
Gross Domestic Product
5.0%
12/23

GDP is the broadest measure of economic activity. Reported quarterly, GDP growth is the percent change in annualized total economic output. The major elements measured by GDP include consumption, investment, net exports, government spending and inventories. One popular definition of a recession is two consecutive quarters of negative percentage change in GDP, although this is not a hard and fast rule.

Industrial Production
106.7
12/15

The Industrial Production (IP) Index, which is tracked by the Federal Reserve Board, measures the real output of the manufacturing, mining, and electric and gas utilities industries. The reference or base period for the index is 2007 at a level of 100. These aforementioned sectors are highly sensitive to interest rates and consumer demand; and thus, industrial production can be an important indicator for forecasting future Gross Domestic Product (GDP) and economic performance.

Durable Goods Order
0.0%
1/6

Durable Goods Orders primarily measures business spending on products expected to last more than three years such as machinery and computer equipment. The year over year change in order levels is a gauge of future growth for the manufacturing industry and a predictor of GDP growth. A subset of the data, nondefense capital goods orders, is considered a good indicator of business investment spending.

ISM Non-Manufacturing Index
56.2
1/6

This is a composite indicator of three factors (employment trends, prices and new orders) in industries outside of manufacturing such as agriculture, construction, transportation, and retail trade. An index value above 50 signals a favorable increase in these factors and a value below 50 signals an unfavorable decrease.

Small Business Optimism Index
100.4
1/13

This is a monthly index based on a survey of small business owners regarding 10 factors including their future plans for hiring, capital investment, and inventory building, as well as their expectations for future sales, profits, economic trends and credit market conditions. It is a broad indicator of current business conditions in the small business sector.

Employment

Total U.S. nonfarm employment grew in December for the 51st consecutive month as a solid 252,000 jobs were created, but decelerated from the 353,000 jobs that were created the previous month, which had marked the largest one month expansion in 34 months. Notably, December’s tally marked the 11th straight month that job gains surpassed the 200,000 level, the longest such stretch since the 19 months that ended in March 1995. Additionally, job totals were revised upward for the previous two months by a combined 50,000. In December, the private sector expanded for a record 58th consecutive month, adding 240,000 jobs, while the government sector gained 12,000. The unemployment rate dipped in December from 5.8 to 5.6 percent, matching a 79-month low (lowest since May 2008) and was 1.1 percentage points below its 6.7 percent rate of a year ago. With 273,000 workers exiting the labor force in December, the labor force participation rate fell from 62.9 to 62.7 percent, marking a 36-plus year low. The number of planned job cuts announced by U.S. companies dipped for the fourth time in the last five months and was just 7.1 percent above September’s 14-plus year low. Moreover, 2014 experienced the fewest number of job cuts since 1997. The Labor Department reported that the average work week rose 0.1 hour in December to 33.9 hours, matching an eight-plus year high.

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Employment Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
Unemployment Rate
5.6%
1/9

The unemployment rate for all civilian workers represents the number of unemployed as a percent of the civilian labor force. To qualify as unemployed, a worker must be actively searching as well as physically able to work, but unable to find employment in the previous 4 week period.

Underemployment Rate
11.2%
1/9

The U-6 unemployment rate is an alternative measure of labor underutilization to the widely referenced U-3, or official unemployment rate. The U-6 rate includes the total unemployed as counted in U-3, plus all persons marginally attached to the labor force (those who would like to and are able to work but have not looked for work in the past year), plus total employed part time for economic reasons, as a percent of the civilian labor force.

Non-Farm Payrolls
252K
1/9

Nonfarm payroll employment is a monthly estimate of the number of paid employees working full-time or part-time in U.S. business and government agencies.  Trends in this figure are considered an indicator of strength and direction of the U.S. economy: increases indicate a growing economy and decreases point to a slowing or contracting economy.

Challenger, Gray, & Christmas - Layoffs Survey
33K
1/8

A monthly report published by outplacement firm Challenger, Gray, & Christmas on the number of announced large company layoffs. This report can help gauge the strength of the job market, which can be useful in gauging the strength of the overall economy.

Weekly Labor Hours
33.9
1/9

Average weekly hours of production and nonsupervisory workers on private nonfarm payrolls is tracked monthly by the Bureau of Labor Statistics. A rise in weekly labor hours reflects an increase in labor utilization of those employed.

Consumer

Consumer spending, representing roughly 70 percent of U.S. economic activity, advanced for the 61st time in the last 67 months, increasing 0.6 percent in November, and was up a solid 4.0 percent from a year ago. November’s results were driven by spending on durable goods such as autos (motor vehicles and parts accounted for about half of the spending increase) and on health services. Plunging gasoline prices and a strengthening labor market have supported consumer discretionary spending in recent months. Retail sales, which account for 30 percent of consumer spending, dipped 0.9 percent in December, marking the largest sequential decline in 11 months. Still, retail sales were up 3.2 percent from a year ago and have sustained year-over-year increases for 62 consecutive months. Boosted by the drug sector, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 64th consecutive month, growing in December at a robust 5.1 percent clip, matching the second highest growth rate in 39 months. Rising in nine of the last 13 months, the Conference Board Consumer Confidence Index rose in December and was up over 15 points from a year ago. With the Index registering at 92.6, it has surpassed the healthy 90.0 level for the fifth time in the last six months and for the fifth time since the recession began in December 2007.

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Consumer Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
Consumer Spending
0.6%
12/23

A measure of monthly goods and services purchased by household consumers. The dollar figure represents an annualized, seasonally adjusted level of consumption. The percent change from month to month indicates growth (if positive) or contraction (if negative) in household consumption – a major component of GDP.

Retail Sales
3.2%
1/14

An estimate of monthly sales for retail and food service firms, based on a random sample of 5,000 companies. The monthly figure is adjusted for seasonality and holiday/trading day differences, and we record the percentage change from the current month compared with the same month a year ago as indicator of trends in discretionary consumer spending.

Thomson Same Store Sales Index
5.1%
1/8

The monthly SSS index provides a snapshot of U.S. consumer spending relative to expectations ahead of the monthly comps reporting cycle. The index tracks 29 retailers across a variety of specialties, including discounters, department, apparel, teen/kids, and drug stores. Costco® currently has the strongest weighting in the index after Wal-Mart® ceased reporting monthly same store sales results in April 2009.

Personal Income
0.4%
12/23

A measure of income received from wages and salaries, dividends and interest, rental income, and other business sources. The percent change from month to month indicates growth (if positive) or contraction (if negative). Personal income, a key pillar of consumer spending, tends to display a rising trend during periods of economic expansion, and show a stagnant or slightly declining trend during recessionary times.

Consumer Confidence Index
92.6
12/30

This index is based on a survey of households regarding current and future business and employment conditions, as well as expectations for future income. It indicates consumers’ level of optimism and can affect their likelihood to make purchases – a major component of GDP. A declining trend in this index may indicate a slowdown in consumer spending and a slowdown in economic growth.

Housing

Home sales have stumbled over the last two months as existing home sales declined for the second straight month (although were up over 2 percent from a year ago), and new home sales fell for the third straight month – declining slightly from their level of a year ago. While home sales have benefited from steady job creation, rising rental rates, and historically low mortgage rates, issues related to limited inventory and higher home prices have created some headwinds for existing home sales in recent months. Tight inventory over the last year has kept the month supply of existing homes for sale near January 2013’s seven-plus year low. 30-year fixed rate mortgage rates continued their slide into December by falling for the seventh time in the last eight months to hover just 51 basis points above December 2012’s record low of 3.35 percent. Although home prices have advanced in 23 of the last 31 months and were up over 4 percent from a year ago, they remained approximately 15 percent below their April 2006 peak.

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Housing Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
Existing Home Sales
4.93 mil
12/22

This is an annualized, seasonally adjusted figure based on the number of existing home and condominium sale transactions that closed during the month. Month to month changes are considered a good measure of demand in the residential real-estate sector.

Existing Home Inventory
5.1 mo.
12/22

This is an annualized, seasonally adjusted figure based on the number of existing home and condominium sale transactions that closed during the month. Month to month percentage changes are considered a good indicator of activity trends in the housing market. The months supply figure represents the number of months required to sell all current existing home inventory at the current pace of sales activity. The lower this figure, the greater the need for new housing starts and construction activity.

S&P / Case-Shiller Home Price Index
173.36
12/30

The S&P / Case-Shiller Index is a monthly index that tracks home price trends in 20 major markets across the country. Prices shown are not seasonally adjusted.

New Home Sales
438K
12/23

This is an annualized, seasonally adjusted figure based on the number of new single family home transaction commitments (e.g. sales for which an agreement was signed) during the month. The level of monthly sales is considered a good indicator of activity trends in housing. Together with existing home sales, trends in housing activity can act as a leading indicator for consumer purchases of household items such as appliances and furniture.

Building Permits
1,052K
12/23

The Building Permits Survey (BPS) produces estimates of the number of permits issued for new housing units each month. The level of permits issued, which is shown at a seasonally adjusted annualized rate, is considered a good leading indicator of future trends in housing.

 

30-Year Fixed Rate Mortgage
3.86%
12/31

The 30-year fixed rate loan is the most common loan in the lending markets, and the 30-year interest rate is a good measure for the availability of credit to eligible borrowers in the home lending market. Changes in the mortgage rate impact both the level of new and existing home sales with a few months of lag time.

Financial

Major U.S. stock market indices retreated slightly in December, although they hit record highs towards the end of the month before sliding late to conclude the year. The indices rose to all-time highs as the Federal Reserve pledged to be patient on the timing of interest-rate increases, and the world’s largest economy expanded at the fastest pace in more than a decade. The Dow Jones Industrial Index, up in 23 of the last 31 months, retreated less than 0.1 percent in December, while the S&P 500 Index, up in 24 of the last 31 months, retreated 0.4 percent in December. For 2014, the DJI Index rose 7.5 percent, while the S&P 500 Index rose a stronger 11.4 percent. Amid worries over the Eurozone’s economy and weak inflationary pressures globally, 10-year treasury yields dipped during December to a 52-week low and have fallen in eight of the last 12 months. Yields remain historically low, likely reflecting the Federal Reserve’s near zero-interest rate policy, investors’ ongoing concerns about the strength of the U.S. economic recovery, sluggish global growth, and modest inflation. Demand for credit strengthened for small businesses in Q3 for the 12th time in the last 15 quarters and at the fastest pace in nine years, while it strengthened for medium to large businesses in Q3 for the 13th time in the last 15 quarters and at the fastest pace in nine quarters. Credit standards for small businesses eased in Q3 for the 16th time in the last 17 quarters, while they eased for medium to large businesses in Q3 for the 18th time in the last 19 quarters.

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Financial Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
S&P 500
-0.4%
12/31

An index containing 500 American stocks (primarily large cap) across a range of industries, representing approximately 75 percent of the total value of the U.S. stock market. The S&P 500 is the most widely watched index of large-cap U.S. stocks and is considered to be a bellwether for the U.S. economy.

Dow Jones Industrial Average
0.0%
12/31

A blue-chip index containing 30 of some of the largest and most widely held stocks in America, representing approximately 25% of the total value of the U.S. stock market. The Dow Jones Industrial Average is one of the most popular indexes used to track the health of the U.S. equities market.

13-Week Treasury Bills
0.04%
12/31

T-Bills are short term U.S. government issued securities that mature in one year or less from their issue date. They are considered to be a nearly credit risk-free investment given their negligible default risk.

10-Year Treasury Notes
2.17%
12/31

Treasury notes are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. Usually, bond market investors are forward-looking and this means interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve. Generally, stock prices and bond yields (interest rates) move inverse of each other.

Federal Reserve Rates
0.25%
12/17

The Federal Open Market Committee consists of the seven Governors of the Federal Reserve Board and five Federal Reserve Bank presidents. The FOMC meets eight times a year in order to determine the near-term direction of monetary policy. These meetings occur roughly every six weeks and and can be one of the most influential events for the markets. The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates.

Tightening/(Easing) of Credit
-8.3%
11/3

The Senior Loan Officer Opinion Survey on Bank Lending Practices addresses changes in the supply of C&I (Commercial and Industrial) loans to businesses. The results reported are based on responses from 60 domestic banks and 24 U.S. branches and agencies of foreign banks. Positive percentages represent a net tightening of credit, while negative percentages represent a net easing. An increase in the net percentage of banks tightening credit standard reflects a decrease in the supply of credit available to businesses to finance business operations (payrolls and inventories) and expansion (plant/equipment and mergers/acquisitions); and thus, may signal slower economic growth.

Demand for Credit
25.0%
11/3

The Senior Loan Officer Opinion Survey on Bank Lending Practices addresses changes in the demand for C&I (Commercial and Industrial) loans to businesses. The results reported are based on responses from 60 domestic banks and 24 U.S. branches and agencies of foreign banks. Positive percentages represent a net strengthening of demand, while negative percentages represent a net weakening. A rise in demand for credit reflects an increase in financing needs for business operations (payrolls and inventories) and expansion (plant/equipment and mergers/acquisitions); and thus, may signal faster economic growth.

Inflation

The Consumer Price Index (CPI) declined 0.3 percent on a monthly basis in November after holding steady the previous month. The gasoline index posted its sharpest monthly decline since December 2008 and was the main cause of the decrease in the all items index. The annual rate dipped from 1.7 to 1.3 percent, which was only 0.3 percentage points above October 2013’s four-year low and below the Fed’s 2.0 percent target rate that is considered to be moderate. The Core CPI (removing volatile prices of food and energy) edged up by 0.1 percent after rising 0.2 percent the previous month, while the annual rate ticked down from 1.8 to 1.7 percent, just 0.1 percentage point above last February’s 33-month low. In December, energy prices plummeted to five-and-a-half plus year lows as both gasoline and crude oil prices have retreated sharply over the last six months. Plummeting energy prices, subdued annual CPI, tame core inflation, and normal utilization rates for physical capital should continue to temper inflationary concerns, enabling the Fed to keep interest rates at historically low levels for some time to stimulate economic growth. Down in seven of the last nine months, the Baltic Dry Index (a barometer of ocean freight shipping costs) plunged more than 32 percent in December and declined nearly 66 percent from a year ago.

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Inflation Indicators

Expanding the indicators below will showcase multi-year historical trends.

Indicator
Latest
Trend
Date
Expand all
Consumer Price Index
1.3%
12/17

The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. The CPI is divided into two measures, with the ‘core’ rate excluding volatile food and energy costs. The year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate. The Federal Open Market Committee (FOMC) implements monetary policy to help maintain an inflation rate of 2.0 percent per year. Historically, inflation has averaged about 3.0 percent per year.

Producer Price Index
1.1%
1/15

The Producer Price Index measures a basket of finished goods purchased by businesses to sell to consumers. The PPI is used as an early indicator of inflation, since it gives some insight into the costs incurred by businesses to produce their goods and services. The most important indicator is the underlying core PPI number, which excludes volatile food and energy prices.

Capacity Utilization
80.1%
12/15

The Federal Reserve Board constructs estimates of capacity and capacity utilization for industries in manufacturing, mining, and electric and gas utilities. For a given industry, the capacity utilization rate is equal to an output index (seasonally adjusted) divided by a capacity index. Effectively, it is the employment rate for physical capital. When the economy is healthy, total capacity utilization should be near 80.0 percent. The long-term average rate from 1972 through 2013 is 80.1 percent. If it gets up close to 85 percent it is a serious sign that the economy is overheating and that inflation will soon be a very serious issue. Therefore, capacity utilization beyond a certain threshold may signal inflation is on the rise.

Fuel Prices
-16.5%
12/31

The Energy Information Administration publishes a weekly survey of fuel prices gathered from a sampling of service stations across the country. The association also publishes weekly WTI crude oil spot prices per barrel.

Currency - Euro & Pound (GBP)
-2.3%
12/31

The chart below shows the exchange rate of the U.S. Dollar with the Euro and British Pound. The vertical axis shows the number of U.S. dollars equal to one Euro and Pound. When the graph is falling, the dollar is strengthening, since it takes fewer dollars to purchase one euro. When the graph is rising, the dollar is weakening. The strength of the dollar is an important economic indicator as a strong dollar generally means bad news for American companies as their products will be more expensive in relation to foreign competitors, but good news for consumers as a stronger dollar results in lower prices for imported goods and services.

Baltic Dry Index (BDI)
-32.2%
12/31

The Baltic Dry Index is a daily average of prices in the spot market to ship raw materials in bulk. It represents the cost paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts. The Baltic Exchange is similar to the New York Mercantile Exchange in that it is a medium for buyers and sellers of contracts and forward agreements (futures) for delivery of dry bulk cargo. This index can be used as an indicator of the direction of overall global economic activity because it measures the changing demand for shipping capacity (which is generally limited and increases very slowly over time); consequently, small changes in demand can lead to much larger changes in shipping rates. The BDI can also be a good indicator of the future direction of inflation.

Disclaimer: The information being provided in the Economy at a Glance is an informational service of Insperity and is drawn from various governmental agencies and third parties who have expressly disclaimed its accuracy and completeness. The information is provided "as is" and Insperity makes no representation or warranty regarding it or its accuracy or completeness. The information herein should not be relied upon for any investment, hiring, or other operational decision.