The Economy at a Glance

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» Business Activity
After contracting for the first time in three years during Q1, GDP expanded in Q2 at an annual rate of 4.6 percent. Economists remarked that the weak showing in Q1 was largely the result of some temporary headwinds, including the cold winter, weak exports, and reduced inventory-building. Consumer spending, which makes up more than two-thirds of the economy, increased 2.5 percent in Q2, more than double the 1.2 percent rise in Q1. A faster pace of stockpiling by businesses contributed to the Q2 increase, a reversal from Q1 when a slowdown in inventory building subtracted from GDP growth. Meanwhile, business investment in equipment surged 11.2 percent, vs. a 1.0 percent drop in Q1, exports jumped 11.1 percent after falling 9.2 percent in Q1, and housing construction rose 8.8 percent after declining 5.3 percent in Q1. Improvements in business activity have been widespread as industrial production has increased in 49 of the last 62 months to hover near a record high, the service sector has expanded 56 straight months, and durable goods orders have increased year-over-year in 49 of the last 56 months. Furthermore, the Small Business Optimism Index rose in August for the eighth time in the last 10 months and was near May’s 80-month high (highest since September 2007). However, despite the recent rally, the Index at 96.1 remained below readings that have normally been associated with expansion and below its pre-recession average of 100 from 1973 through 2007.
According to the third estimate, real gross domestic product or GDP (the output of goods and services produced within the U.S.) expanded at an annual rate of 4.6 percent in the second quarter after contracting in the previous quarter by 2.1 percent, which had marked the first time in 3 years, or 12 quarters, that GDP had contracted. Economists remarked that the weak showing in Q1 was largely the result of some temporary headwinds, including the cold winter, weak exports, and reduced inventory-building. Consumer spending, which makes up more than two-thirds of the economy, increased 2.5 percent in the second quarter, more than double the 1.2 percent rise in first quarter. A faster pace of stockpiling by businesses contributed to the second quarter increase, a reversal from the first quarter when a slowdown in inventory building subtracted from GDP growth. Meanwhile, business investment in equipment surged 11.2 percent, vs. a 1.0 percent drop in the first quarter, exports jumped 11.1 percent after falling 9.2 percent in the previous quarter, and housing construction rose 8.8 percent after declining 5.3 percent in the earlier quarter. From the second quarter of 2009, when the recovery began, through the second quarter of this year, the economy has grown at a modest average annual rate of 2.3 percent.

Although rising in 11 of the last 13 months, the Industrial Production Index edged down in August from a record high, decreasing 0.1 points to 104.1 but was up 4.5 points from a year ago. Additionally, the Index has risen in 49 of the last 62 months since bottoming at 83.5 in June 2009.

Declining sequentially for just the second time in the last six months, new orders for manufactured durable goods plunged 18.4 percent in August after surging 22.5 percent the previous month but was up 8.6 percent from a year ago, marking the 49th year-over-year increase in the last 56 months. Excluding the volatile transportation component (aircraft orders), durable goods orders increased sequentially for the ninth time in the last 12 months, rising 0.7 percent in August.

The service sector grew (exceeding 50 on the ISM Non-Manufacturing Index) for the 56th month in a row but with the pace of growth decelerating in September from a nine-year high. In September, the Index ticked down 1.0 point to register at 58.6 but was 4.1 points above its level of a year ago.

Although up in eight of the last 10 months, the Small Business Optimism Index rose for the third consecutive month and inched closer to May’s 80-month high (highest since September 2007), rising 0.4 points in August to 96.1, and was 2.0 points above its level of a year ago. Despite the recent rally over the last 10 months, the Index remained below readings that have normally accompanied an expansion and below its pre-recession average of 100 from 1973 through 2007. NFIB Chief Economist said, “Expectations are still glum, although improving grudgingly. More owners still think business conditions will be worse in six months than think they will be better. Few see the current period as a good time to expand. The outlook for improvements in real sales volumes faded. Interest in borrowing continues to remain at record low levels; owners are satisfied with inventories and aren’t planning a lot of investment. There is still no evidence that we are about to ramp up spending and hiring to ‘3 percent’ GDP growth levels There is so much ‘noise’ and uncertainty in the economic system that small business owners are finding it difficult to be optimistic in this environment. Overall, small business is still not in a good place.”


Economic Indicators 
» Employment
Total U.S. nonfarm employment grew in September for the 48th consecutive month as 248,000 jobs were created, accelerating from the 180,000 jobs that were created the previous month. Notably, September’s tally marked the seventh time in the last eight months that job gains surpassed the 200,000 level. Additionally, job totals were revised upward for the previous two months by a combined 69,000. In September, the private sector expanded for a record 55th consecutive month, adding 236,000 jobs, while the government sector gained 12,000. The unemployment rate dropped 0.2 percentage points in September to a 74-month low of 5.9 percent and was 1.3 percentage points below its 7.2 percent rate of a year ago. With 97,000 workers exiting the labor force in September, the labor force participation rate ticked down from 62.8 percent to 62.7 percent, marking a 36-plus-year low. The number of planned job cuts announced by U.S. companies fell to a 14-plus year low after falling sharply for the second straight month and was down over 24 percent from its level of a year ago. Through three quarters, 2014 is on pace to be the lowest job-cut year since 1997.
Total nonfarm payroll employment expanded for the 48th consecutive month, increasing by 248,000 in September, accelerating from the 180,000 jobs that were created the previous month. September’s tally marked the seventh time in the last eight months that job gains surpassed the 200,000 level. Additionally, the job figures for July were revised upward from 212,000 to 243,000, and those from August were revised upward from 142,000 to 180,000. Job growth during the 48-month expansionary streak has averaged approximately 190,000 jobs per month. Economists believe that approximately 125,000 jobs must be created per month just to keep up with new workers entering the workforce. Led by job gains in professional and business services (+81,000), health care (+23,000), food and beverage stores (+20,000), food services and drinking places (+20,000), construction (+16,000), and financial activities (+12,000), private-sector payroll employment increased for the 55th straight month, rising by 236,000 in September after gaining 175,000 the previous month. Approximately 10.3 million jobs have been created in the private sector over the last 55 months, an extension of the longest streak on record for private sector job growth. Meanwhile, government employment has declined in 31 of the last 52 months, although it added 12,000 jobs the previous month and has grown modestly in eight straight months. Over this 52-month period, government employment has fallen by about 1.1 million. The economy (both the private and government sectors) has fully recovered the 8.7 million total jobs lost between the start of the recession in December 2007 and February 2010 plus has created an additional 1.1 million jobs.

The unemployment rate dropped in September to a 74-month low (lowest since July 2008), declining 0.2 percentage points to 5.9 percent and was down 1.3 percentage points from its 7.2 percent rate of a year ago. The underemployment rate (a.k.a. U-6 unemployment rate), a measure of labor underutilization which accounts for part-time workers due to economic reasons as well as discouraged job seekers, fell to match a six-year low (lowest since September 2008) after declining for the seventh time in the last nine months. The underemployment rate decreased 0.2 percent to 11.8 percent and was down 1.8 percentage points from a year ago.

With the household survey showing that 97,000 workers exited the labor force in September, the labor force participation rate, the share of working-age people in the labor force decreased 0.1 percentage points from 62.8 percent to 62.7 percent, which was the lowest level since Jimmy Carter was president over 36 years ago (February 1978) when the country was in the midst of stagflation. The aging of America, a modest jobs recovery from the last recession which has kept workers in school longer, and the rising number of workers on disability insurance are theories offered to explain the fall in the labor participation rate since it peaked at 67.3 percent in 2000.

The number of long-term unemployed (jobless for 27 weeks and over) was essentially unchanged at 3.0 million, representing 31.9 percent of the unemployed population. Since April 2010, the number of long-term unemployed has fallen by about 3.7 million, and in the last year, by approximately 1.2 million.

The Labor Department reported that the average work week for production and nonsupervisory employees on private nonfarm payrolls edged down in September by 0.1 hour to 33.7 hours, hovering at that level in six of the last seven months. Year-over-year, the average work week rose by 0.1 hour.

Challenger, Grey & Christmas reported a sharp drop in the number of planned job cuts by U.S. companies in September for the second consecutive month. In September, planned jobs cuts plunged 23.8 percent to 30,477 after falling 14.7 percent the previous month and were down 24.4 percent from its level of a year ago. Monthly job cuts fell to their lowest level in over 14 years (since June 2000), and through three quarters, 2014 is on pace to be the lowest job-cut year since 1997. September job cuts were led by the entertainment industry, where the closure of casino resorts in Atlantic City resulted in more than 7,000 job cuts. The computer sector continues to lead all industries in terms of year-to-date job cuts, despite the fact that just 74 announced layoffs were reported by these firms in September. Employers in the computer industry have announced 49,002 job cuts, so far this year, nearly double the 27,892 computer-sector job cuts tallied in the first nine months of 2013. John A. Challenger, CEO of Challenger, Gray & Christmas said, “There have been a couple of bumps in the road for the economy lately, which caused consumer confidence to drop in its latest reading. However, as this report shows, the recent hiccups have not resulted in widespread layoffs. Job security is being helped by the fact that corporate profits remain near record highs. So, we may see some ebb and flow in the rate of hiring, but employers, at this point, are reluctant to make any over-correction in workforce levels. The Atlantic City cuts are not as much an indication of the overall economy as they are an indication of trends re-shaping the casino industry. As states allow more cities to open gambling establishments, destinations like Atlantic City, start to lose their draw. Atlantic City has not been able to mimic Las Vegas, where a diversity of entertainment options beyond gambling attract tourists.”


Economic Indicators 
» Consumer
Consumer spending, representing roughly 70 percent of U.S. economic activity, rebounded strongly after a flattish July, advancing 0.5 percent in August and 4.1 percent from a year ago. Approximately half of the boost in spending came from a big jump in car sales as vehicle purchases remain a source of strength for the economy. Retail sales, which account for 30 percent of consumer spending, jumped 0.6 percent in August after rising by 0.3 percent the previous month. Furthermore, retail sales were up a robust 5.0 percent from a year ago and have sustained year-over-year increases for 57 consecutive months. Americans are splurging on cars and SUVs after deferring such purchases during the economic downturn. Boosted by teen apparel and drug stores, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 61st consecutive month, growing in September at a robust 5.1 percent clip, which matched the second fastest pace of growth in three years. After jumping to a six-plus year high (highest since October 2007), the Conference Board Consumer Confidence Index declined for just the third time in the last 10 months, but was up 5.8 points from a year ago. With the Index registering at 86.8, it slipped below the healthy 90.0 level where it has been stuck in all but two months since the recession began in December 2007.
Consumer spending, up in 58 of the last 64 months, rebounded strongly after a flattish July, advancing 0.5 percent in August and 4.1 percent from a year ago. Approximately half of the boost in spending came from a big jump in car sales. That helped push durable goods purchases up 1.8 percent in August after no change in July. Vehicle purchases remain a source of strength for the economy. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Ward’s Automotive Group. Sales of nondurable goods fell 0.3 percent, a decline that likely reflected falling gas prices. Spending on services including utilities and rent rose 0.5 percent.

Personal income, a key pillar of consumer spending, rose in August for the 18th time in the last 19 months, advancing 0.3 percent after rising by a more modest 0.2 percent the previous month. Furthermore, it has risen in 51 of the last 58 months and 4.4 percent year-over-year. The saving rate fell slightly to 5.4 percent of after-tax income in August. That was down from a saving rate of 5.6 percent in July, which had been the highest monthly rate since December 2012.

U.S. retail and food services sales, up sequentially in 17 of the last 21 months and 37 of the last 48, jumped 0.6 percent in August after rising by 0.3 percent the previous month. Furthermore, retail sales were up a robust 5.0 percent from a year ago and have sustained year-over-year increases for 57 consecutive months. Excluding booming auto purchases, a volatile category, sales rose 0.3 percent. While sales at furniture, electronics and clothing stores rose, department store sales declined. Americans are splurging on cars and SUVs after deferring such purchases during the economic downturn.

For the 61st consecutive month, the Thomson Reuters Same Store Sales (SSS) Index increased year-over-year with the pace of growth accelerating to match the second highest growth rate in three years (since September 2011). The Index advanced at a robust 5.1 percent clip in September after rising 4.5 percent the previous month. Three percent year-over-year growth generally indicates health among U.S. consumers, and the Index has grown at least as much in 34 of the last 47 months. Mall traffic picked up during September as the back to school shopping season kicked off. Discounters and apparel retailers struggled to meet analyst expectations, but teen apparel and drug stores managed to post positive surprises with strong results.

After jumping to a six-plus year high (highest since October 2007), the Conference Board Consumer Confidence Index declined for just the third time in the last 10 months, decreasing 7.4 points in September to 86.0 but was up 5.8 points from a year ago. A reading of 90 generally indicates a healthy economy, and boosted by recent gains, the Index surpassed that level in two of the last three months since the recession began in December 2007. The Present Situation Index decreased to 89.4 from 93.9, while the Expectations Index dropped to 83.7 from 93.1 in August. Director of Economic Indicators at The Conference Board said, “Consumer confidence retreated in September after four consecutive months of improvement. A less positive assessment of the current job market, most likely due to the recent softening in growth, was the sole reason for the decline in consumers’ assessment of present-day conditions. Looking ahead, consumers were less confident about the short-term outlook for the economy and labor market, and somewhat mixed regarding their future earnings potential. All told, consumers expect economic growth to ease in the months ahead.”


Economic Indicators 
» Housing
Home sales were mixed in August as existing home sales fell for the first time in five months after climbing to a nine-month high, while new home sales surged to a six plus year high. Existing home sales declined nearly 2 percent in August and were down year-over-year for the 10th consecutive month following 29 straight months of year-over-year increases. Sales of new homes soared 18 percent in August and were up a whopping 33 percent from 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 headwinds for existing home sales. Tight inventory over the last year has kept the month supply of existing homes for sale near January 2013’s seven-plus year low. Since falling to a record low, 30-year fixed rate mortgage rates have increased in 12 of the last 22 months but hover just 81 basis points above December 2012’s record low of 3.35 percent. Although home prices advanced in July for the 22nd time in the last 28 months and were up nearly 7 percent from a year ago, they remained approximately 15 percent below their April 2006 peak.
After climbing to a nine-month high, existing home sales edged down in August for the first time in five months. In August, existing home sales decreased 1.8 percent to a seasonally adjusted annual rate of 5.05 million and were 5.3 percent below its annual rate of a year ago. This marked the 10th consecutive month that sales were beneath year-ago levels after 29 consecutive months of year-over-year increases. The National Association of Realtors® (NAR) chief economist said, “There was a marked decline in all-cash sales from investors. On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country. As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”

Month’s supply of existing homes based on the current sales rate was flat for the third straight month and hovered only 27.9 percent above January 2013’s seven-plus year low (since May 2005 near the peak of the housing boom). Total housing inventory at the end of August fell 1.7 percent to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from 5.5 months in July but up 12.2 percent from 4.9 months a year ago. Unsold inventory was 4.5 percent higher than a year ago, when there were 2.21 million existing homes available for sale, but was 45.3 percent below the record of 4.04 million in July 2007.

New home sales surged to a six plus year high (highest since May 2008), soaring 18.0 percent in August to an annual rate of 504,000 and were up a whopping 33.0 percent year-over-year. August’s annual rate was 81.3 percent above August 2010’s record low annual rate (since 1963) of 278,000. The number of building permits issued for new housing units declined in August for the third time in the last four months but remained within 5.3 percent of April’s 70-month high (highest since June 2008). The number of permits dipped 5.1 percent in August to an annual rate of 1,003,000 but was up 5.8 percent from a year ago.

Since sagging to its cyclical low of 134.07 in March 2012, the S&P/Case-Shiller Home Price Index has advanced in 22 of the last 28 months. In July, the Index edged up 1.6 percent to 173.34 and was up 6.7 percent from a year ago, but it was 15.4 percent below its April 2006 peak and remained mired at nine-plus year levels (below November 2004 levels).

Since falling to a record low, average monthly rates on a 30-year fixed rate mortgage have rallied in 12 of the last 21 months although edged up in September for just the first time in the last five months. 30-year mortgage rates rose 4 basis point in September to 4.16 percent, 33 basis points lower than a year ago but 81 basis points higher than when they bottomed out at a record low rate (since 1971) of 3.35 percent in November and December of 2013. A record low had been established 14 times over the last 46 months and in 13 of the last 37 months. Since 1971, the 30-year fixed rate has been below 4.0 percent in only 17 months, and those have all been in the past 33 months.


Economic Indicators 
» Financial
Major U.S. stock market indices retreated in September for the second time in the last three months. Stocks have been hurt by conflict abroad, in places like Ukraine, Iraq, and Syria. Also, recent pro-democracy protests in Hong Kong have added to geopolitical risk. The Dow Jones Industrial Index, up in 21 of the last 28 months, inched down 0.3 percent in September, while the S&P 500 index, up in 22 of the last 28 months, fell a sharper 1.6 percent in September. However, both indices had hit record highs earlier in the month. Amid speculation the Federal Reserve will signal an increase in interest rates next year as the economic recovery firms, 10-year treasury yields rallied in September after dipping to a 52-week low the previous month. Yields remain historically low, likely reflecting the Federal Reserve’s bond purchase program (although it has been dialed back by $10 billion per month) as well as its near zero-interest rate policy, investors’ ongoing concerns about the strength of the economic recovery, and modest inflation. Demand for credit strengthened for small businesses in Q2 for the 11th time in the last 14 quarters, while it strengthened for medium to large businesses in Q2 for the 12th time in the last 14 quarters. Credit standards for small businesses eased in Q2 for the 15th time in the last 16 quarters, while they eased for medium to large businesses in Q2 for the 17th time in the last 18 quarters.
Although rallying in 21 of the last 28 months and establishing record highs in 14 of the last 16, major U.S. stock market indices retreated in September for the second time in the last three months. Stocks have been hurt by conflict abroad, in places like Ukraine, Iraq, and Syria. Also, recent pro-democracy protests in Hong Kong have added to geopolitical risk. Investors have also had to come to grips with the fact that the Federal Reserve will eventually have to start raising interest rates sometime next year. The Dow Jones Industrial Index (DJI) inched down 0.3 percent in September despite hitting a record high earlier in the month and rising in 21 of the last 28 months and 12.6 percent from a year ago. The S&P 500 Index fell 1.6 percent in September following its best August in 14 years and ascent to a record high earlier in September. Additionally, the Index was up in 22 of the last 28 months and 17.3 percent from a year ago.

Amid speculation the Federal Reserve will signal an increase in interest rates next year as the economic recovery firms, 10-year treasury yields rallied in September after dipping to a 52-week low the previous month. Treasuries posted their worst month of the year (bond prices are inversely related to yields). Nonetheless, yields have fallen in five of the last nine months since climbing in December to a 17-month high (highest since July 2011). Yields rose 17 basis points in September to close the month at 2.51 percent, only 18 basis point above its 52-week low and just 111 basis points above its record low rate of 1.40 percent which was established near the end of July 2012. Bond yields remain low by historical standards, reflecting the Federal Reserve’s monthly bond-purchase program ($25 billion of longer-term U.S. treasuries and mortgage-backed securities purchased in September) as well as its near zero-interest rate policy, investors’ ongoing concerns about the prospects for a strong economic recovery, subdued inflationary environment, and geopolitical concerns. Amidst global uncertainly and turmoil, U.S. Treasuries remain the world’s favored refuge by investors.

In its last meeting, the Fed stated that it will maintain the target range for the federal funds rate at 0 to 1/4 percent for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2.0 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. The Fed has maintained the target range for the federal funds rate at 0 to 1/4 percent for 47 consecutive periods, which dates back to December 2008. Also, in its last meeting, the Fed said that it would reduce its monthly bond purchases to $15 billion from $25 billion, as expected, keeping it on track to end the program before the end of the year.

According to the Senior Loan Officer Survey, the net percentage of banks tightening credit standards for small businesses fell in Q2 2014 by 7.0 percent, marking the 15th time in the last 16 quarters that credit standards have eased for small businesses. The recent easing for small businesses has stood in strong contrast to the previous 14 quarters in which credit standards tightened in every quarter but one. Medium to large businesses have faced an easing of credit standards in 17 of the last 18 quarters with a net 11.1 percent facing an easing of credit standards in Q2. Demand for credit by small businesses as well as medium to large businesses improved as compared to the previous quarter. Demand for credit by small businesses strengthened by 8.5 percent in Q2 and has improved in 11 of the last 14 quarters. Demand for credit by medium to large businesses has strengthened in 12 of the last 14 quarters, improving 13.9 percent in Q2. An easing of credit standards or rise in demand for credit by businesses may signal faster economic growth.


Economic Indicators 
» Inflation
The Consumer Price Index (CPI) dropped 0.2 percent on a monthly basis in August, the Index’s first decline since April 2013, after rising a marginal 0.1 percent the previous month. The dip in the CPI in August was primarily driven by declines in energy indexes, especially gasoline. The annual rate fell from 2.0 to 1.7 percent, which was only 0.7 percentage points above last October’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) was flat on a monthly basis after edging up by a mere 0.1 percent in each of the previous two months, while the annual rate fell 0.2 percentage points to 1.7 percent, 0.1 percentage point above February’s 33-month low. In September, energy prices cooled for the third consecutive month with both gasoline and crude oil prices below their levels of a year ago. Falling energy prices, subdued annual CPI, tame core inflation, and below 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 four of the last five months, the Baltic Dry Index (a barometer of ocean freight shipping costs) retreated approximately 7 percent in September and was down nearly 47 percent from a year ago.
The Consumer Price Index (CPI) dropped 0.2 percent on a monthly basis in August, the Index’s first decline since April 2013, after rising a marginal 0.1 percent the previous month. The indexes for food and shelter rose, but the increases were more than offset by declines in energy indexes, especially gasoline. The energy index fell 2.6 percent, with the gasoline index declining 4.1 percent and the indexes for natural gas and fuel oil also decreasing. On an annual basis, the Index dipped by 0.3 percentage points to 1.7 percent, below the Fed’s 2.0 percent inflation target and 0.7 percentage point above last October’s four-year low. The Core CPI Index, which removes the effects of volatile food and energy prices, was flat in August after edging up by a mere 0.1 percent in each of the previous two months, while the annual rate fell 0.2 percentage points to 1.7 percent, 0.1 percentage point above February’s 33-month low. This was the first month since October 2010 that the Core Index did not increase. While the shelter index increased and the indexes for new vehicles and for alcoholic beverages also rose, these advances were offset by declines in several indexes, including airline fares, recreation, household furnishings and operations, apparel, and used cars and trucks.

The Producer Price Index (PPI) was flat on a monthly basis in August after rising by just 0.1 percent the previous month, advancing 0.1 percent in July after jumping 0.4 percent the previous month. The index for final demand goods moved down 0.3 percent in August (offsetting the 0.3 percent rise in the final demand services index), the largest decrease since a 0.7-percent drop in April 2013. Over 80 percent of the August decline is attributable to prices for final demand energy, which fell 1.5 percent. On an annual basis, the Index ticked up from 1.7 percent to 1.8 percent, well below the cyclical peak of 7.1 percent that was reached in July 2011.

The capacity utilization rate, effectively the employment rate of physical capital in the manufacturing, mining, and utilities industries, edged down from a 74-month high (highest since May 2008), falling 0.3 percentage points to 78.8 percent in August. Although the capacity utilization rate has risen in 38 of the last 62 months and was 0.8 percentage points higher than prior year, it remained below the long-term average (from 1972-2013) of 80.1 percent; and thus, is not stoking near-term concerns of inflation.

Energy prices cooled in September for the third straight month as both gasoline and crude oil prices have retreated over the last three months. Gasoline prices fell 2.9 percent in September and were down 1.9 percent from a year ago, while crude oil prices fell 3.2 percent in September and were down 9.7 percent from a year ago. In the final week of September, WTI crude oil spot prices averaged $93.15 per barrel, and retail gasoline prices in the U.S. averaged $3.43 per gallon.

In September, the Euro weakened against the U.S. dollar for the fourth time in the last five months, down 3.4 percent, while the Pound weakened against the U.S. dollar as well for the fourth time in the last five months, down 2.2 percent. Year-over-year, the Euro weakened against the U.S. dollar, down 6.2 percent, while the Pound slightly strengthened, up 0.6 percent. At September close, 1 Euro yielded 1.27 U.S. dollars, and 1 Pound, 1.62 U.S. dollars.

Down in four of the last five months, the Baltic Dry Index (BDI), which measures the daily average of prices in the spot market to ship raw materials in bulk, retreated 7.3 percent in September after surging 51.9 percent in August and was down a notable 46.9 percent from a year ago.


Economic Indicators 
  Economic Indicators    Expand All  
 
      Indicator Latest Trend Date
» Business Activity
Gross Domestic Product4.6%9/26

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 Production104.19/15

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 Order8.6%10/2

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 Index58.610/3

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 Index96.19/9

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
Unemployment Rate5.9%10/3

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 Rate11.8%10/3

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 plus all persons marginally attached to the labor force. 


Non-Farm Payrolls248K10/3

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 Survey30K10/2

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 Hours33.710/3

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 Spending0.5%9/29

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 Sales5.0%9/12

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 Index5.1%10/9

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 Income0.3%9/29

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 Index86.09/29

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
Existing Home Sales5.05 mil9/22

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 Inventory5.5 mo.9/22

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 Index173.349/30

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 Sales504K9/24

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 Permits1,003K9/25

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 Mortgage4.16%9/30

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
S&P 500-1.6%9/30

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-0.3%9/30

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 Bills0.01%9/30

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 Notes2.51%9/30

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 Rates0.25%9/17

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-7.0%8/4

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 Credit8.5%8/4

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
Consumer Price Index1.7%9/17

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 Index1.8%9/16

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 Utilization78.8%9/15

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-2.9%9/30

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)-3.4%9/30

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)-7.3%9/30

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.



© 2014 Insperity


Disclaimer: The information being provided in the Economy at a Glance is an informational service of Insperity and is drawn from several governmental and other agencies. The information is provided as is and Insperity makes no representation regarding it or its accuracy.