The Economy at a Glance

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» Business Activity
GDP increased strongly in Q3, rising at an annual rate 3.5 percent and following the 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 50 of the last 63 months en route to a record high, the service sector has expanded 57 straight months, and durable goods orders have increased year-over-year in 50 of the last 57 months. Furthermore, the Small Business Optimism Index rose in October for the ninth time in the last 12 months to 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.
According to the advance estimate, real gross domestic product or GDP (the output of goods and services produced within the U.S.) expanded at an annual rate of 3.5 percent in Q3 after advancing in the previous quarter by an even greater 4.6 percent. GDP has rebounded strongly over the last two quarters after contracting in Q1 for the first time in 3 years, or 12 quarters. Economists had 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. Growth has exceeded 3.0 percent in four of the past five quarters; however, after including Q1’s contraction the economy has expanded just 2.0 percent so far in 2014, just below its 2.3 percent average annual performance during the five-year-old recovery. In Q3, federal government spending, exports, and business capital outlays drove growth. Business investment increased at a 5.5 percent rate, though it slowed from Q2’s 9.7 percent, and equipment spending increased a solid 7.2 percent. Federal government outlays surged 10 percent, including a 16.0 percent jump for defense, after falling 0.9 percent in Q2. Exports rose 7.8 percent, compared to 11.1 percent increase in Q2. Consumer spending, which accounts for more than two-thirds of the economy, increased 1.8 percent, slowing from 2.5 percent in the previous quarter. Businesses also substantially reined in their stockpiling after rapidly adding to inventories in the previous quarter. Economist James Marple of TD Economics and Dean Maki of Barclays Capital note that the healthy Q3 gains from trade and defense spending are unlikely to continue as the strong dollar is expected to hamper exports and the Eurozone’s economy is slowing.

Rising in 12 of the last 14 months, the Industrial Production Index jumped in September to a record high, increasing 1.1 points to 105.1 and was up 4.9 points from a year ago. Additionally, the Index has risen in 50 of the last 63 months since bottoming at 83.5 in June 2009.

Declining sequentially for the second consecutive month, new orders for manufactured durable goods fell 1.1 percent in September after plunging 18.3 percent the previous month but was up 3.5 percent from a year ago, marking the 50th year-over-year increase in the last 57 months. Excluding the volatile transportation component (aircraft orders), durable goods orders decreased sequentially for just the fourth time in the last 13 months, declining 0.2 percent in September.

The service sector grew (exceeding 50 on the ISM Non-Manufacturing Index) for the 57th month in a row but the pace of growth decelerated for the second straight month from a nine-year high. In October, the Index dropped 1.5 points to register at 57.1 but was 2.0 points above its level of a year ago.

Up in nine of the last 12 months, the Small Business Optimism Index inched closer to May’s 80-month high (highest since September 2007), rising 0.8 points in October to 96.1, and was 4.5 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, “Those were the two bright spots in an otherwise mixed reading. They’re making capital investments and trying to fill positions despite that they cannot anticipate a better economy. Basically they’re preparing to taxi the runway but they don’t expect to take off anytime soon. The political class and a fair number of economists have assumed for years that small business is starved for credit. That appears to be an egregious misdiagnosis. Local business owners, for the most part, can borrow all they need but mainly, they’re not interested now in taking on debt because they’re not confident in the future.”


Economic Indicators 
» Employment
Total U.S. nonfarm employment grew in October for the 49th consecutive month as 214,000 jobs were created, decelerating from the 256,000 jobs that were created the previous month. Notably, October’s tally marked the ninth straight month that job gains surpassed the 200,000 level, the longest such stretch since 1995. Additionally, job totals were revised upward for the previous two months by a combined 31,000. In October, the private sector expanded for a record 56th consecutive month, adding 209,000 jobs, while the government sector gained 5,000. The unemployment rate edged down 0.1 percentage point in October to a 75-month low of 5.8 percent and was 1.4 percentage points below its 7.2 percent rate of a year ago. With 416,000 workers entering the labor force in October, the labor force participation rate ticked up to 62.8 percent from 62.7 percent, which had marked a 36-plus-year low. After falling to a 14-plus year low, the number of planned job cuts announced by U.S. companies surged nearly 68 percent in October and was up about 12 percent from its level a year ago. Still, through 10 months, 2014 has experienced 4.3 percent fewer job cuts than did 2013.
Total nonfarm payroll employment expanded for the 49th consecutive month, increasing by 214,000 in October, but decelerating from the 256,000 jobs that were created the previous month. October’s tally marked the ninth straight month that job gains surpassed the 200,000 level, the longest such stretch since 1995. Additionally, the job figures for August were revised upward from 180,000 to 203,000, and those from September were revised upward from 248,000 to 256,000. Job growth during the 49-month expansionary streak has averaged approximately 192,000 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 food services and drinking places (+42,000), professional and business services (+37,000), retail trade (+27,000), health care (+25,000), manufacturing (+15,000), and transportation and warehousing (+13,000), private-sector payroll employment increased for the 56th straight month, rising by 209,000 in October after gaining 244,000 the previous month. Approximately 10.6 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 53 months, although it added 5,000 jobs the previous month and has grown modestly nine straight months. Over this 53-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 1.3 million jobs.

The unemployment rate dropped in October to a 75-month low (lowest since July 2008), edging down 0.1 percentage point to 5.8 percent and was down 1.4 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 eighth time in the last 10 months. The underemployment rate decreased 0.3 percentage points to 11.5 percent and was down 2.2 percentage points from a year ago.

With the household survey showing that 416,000 workers entered the labor force in October, the labor force participation rate, the share of working-age people in the labor force increased 0.1 percentage points to 62.8 percent from 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 decreased from 3.0 to 2.9 million, representing 32.0 percent of the unemployed population. Since April 2010, the number of long-term unemployed has fallen by about 3.8 million, and in the last year, by approximately 1.1 million.

The Labor Department reported that the average work week for production and nonsupervisory employees on private nonfarm payrolls edged up in October by 0.1 hour to 33.8 hours, matching a seven plus year high (highest since June 2007). Year-over-year, the average work week rose by 0.2 hours.

Challenger, Grey & Christmas reported a surge in the number of planned job cuts by U.S. companies in October following a two-month plunge to their lowest level in over 14 years (since June 2000). In October, planned jobs cuts soared 67.9 percent to 51,183 after dropping sharply 23.8 percent the previous month and were up 11.9 percent from its level of a year ago. October job cuts were led by the retail industry, which announced 6,874 planned layoffs during the month. The October total is not only the second highest of the year behind May’s 52,961, but it marks only the fourth time in the last 22 months that job cuts exceeded 50,000. Still, the number of jobs cuts through the first 10 months of 2014 is 4.3 percent fewer than last year. John A. Challenger, CEO of Challenger, Gray & Christmas said, “If there is any good news in the October job-cut surge, it is that the leading job cuts are not indicative of overall weakness in the economy. The heaviest cuts came from companies that are struggling to find their footing in this recovery. In several cases, downsizing organizations are in industries that are going through fundamental changes and these companies are taking steps to catch up to these changes. For example, Sears, which announced the closure of 77 Sears and Kmart stores, has been struggling for years to find its niche in an increasingly competitive retail space. The challenges facing the one-time leader in the retail space have gotten progressively worse as more and more consumers take their shopping online. Meanwhile, Hewlett-Packard, which announced it is increasing previously announced workforce reductions by another 5,000, is another company trying to catch up in an ever-changing, but still robust and competitive technology sector. Likewise, wireless service provider Sprint has undergone large-scale job cuts since the beginning of the year in an effort to better compete in its fiercely competitive sector.”


Economic Indicators 
» Consumer
Consumer spending, representing roughly 70 percent of U.S. economic activity, decreased 0.2 percent in September but was up 3.5 percent from a year ago and has increased in 59 of the last 65 months. Economists blamed the weak September spending figure on falling energy prices and slower auto sales (down 0.2 percent in September after surging 10.4 percent the previous month). Retail sales, which account for 30 percent of consumer spending, dipped 0.3 percent in September after jumping 0.6 percent the previous month. Sales fell at auto dealers, furniture stores, building-supply outlets, and clothing merchants. Even excluding autos, sales still fell 0.2 percent in September as clothing and accessories stores saw sales drop 1.2 percent. Nonetheless, retail sales were up a healthy 4.3 percent over the same month in the prior year and have sustained year-over-year increases for 59 consecutive months. Boosted by the discount sector, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 62nd consecutive month, growing in October at a 3.9 percent clip but decelerating from last month’s 5.1 percent, which had matched the second fastest pace of growth in three years. Rising in 8 of the last 11 months, the Conference Board Consumer Confidence Index jumped to a seven year high and was up over 22 points from a year ago. With the Index registering at 94.5, it has surpassed the healthy 90.0 level for the third time in the last four months and also for the third time since the recession began in December 2007.
Consumer spending, up in 59 of the last 65 months, declined for the first time in nine months, decreasing 0.2 percent in September but was up 3.5 percent from a year ago. Shoppers took a breather after a big spending spree in August. Economists blamed the weak September spending figure on falling energy prices and slower auto sales after a surge the previous month. Demand fell for durable goods such as autos and for nondurable goods, a drop that partially reflected falling prices for gasoline. Spending on durable goods such as autos dropped a sizable 2.0 percent after a 2.1 percent jump in August. Spending on nondurable goods such as clothing, food and gasoline, was down 0.3 percent, while spending on services such as doctor's visits and utilities posted a modest 0.2 percent rise. Economists say September's downturn shouldn't last, especially amid a strengthening job market and a growing economy.

Personal income, a key pillar of consumer spending, rose in September for the 19th time in the last 20 months, advancing 0.2 percent after rising by 0.3 percent the previous month. Furthermore, it has risen in 51 of the last 59 months and 4.0 percent year-over-year. The small rise in income and the decline in spending in September resulted in a slight increase in the saving rate. Savings as a percentage of after-tax income rose to 5.6 percent in September, up from 5.4 percent in August. The saving rate averaged 4.9 percent in 2013, down from 7.2 percent in 2012. That had been the highest level in nearly two decades as Americans worked to boost savings following the 2007-2009 recession.

U.S. retail and food services sales, up sequentially in 17 of the last 22 months and 37 of the last 49, dipped 0.3 percent in September after jumping 0.6 percent the previous month. Still, retail sales were up a solid 4.3 percent from a year ago and have sustained year-over-year increases for 59 consecutive months. Sales fell at auto dealers, furniture stores, building-supply outlets, and clothing merchants. Even excluding autos, sales fell 0.2 percent in September. After surging 10.4 percent in August, auto sales fell 0.8 percent in September. Clothing and accessories stores saw sales drop 1.2 percent. Electronics purchases helped offset the decline with sales up 3.4 percent, possibly benefiting from Apple's release of the new iPhone. Apple says it sold more than 10 million iPhone 6 and 6 Plus models, a record for a new model, in the three days after the phones went on sale.

For the 62nd consecutive month, the Thomson Reuters Same Store Sales (SSS) Index increased year-over-year although the pace of growth decelerated from the second highest growth rate in three years (since September 2011). The Index advanced at a solid 3.9 percent clip in October after rising a sharper 5.1 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 35 of the last 48 months. The apparel retailers struggled to meet analyst expectations, but the discount sector managed to post a positive surprise led by Costco.

Rising in eight of the last 11 months, the Conference Board Consumer Confidence Index jumped to a seven year high (highest since October 2007), increasing 5.5 points in October to 94.5 and was up a notable 22.1 points from a year ago. A reading of 90 generally indicates a healthy economy, and boosted by recent gains, the Index has surpassed that level in three of the last four months and for the third time since the recession began in December 2007. The Present Situation Index edged up from 93.0 to 93.7, while the Expectations Index increased sharply to 95.0 from 86.4 in September. Director of Economic Indicators at The Conference Board said, “Consumer confidence, which had declined in September, rebounded in October. A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation. Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential. With the holiday season around the corner, this boost in confidence should be a welcome sign for retailers.”


Economic Indicators 
» Housing
Home sales continued their recent upward trend in September as both existing and new home sales advanced for the fifth time in the last six months. Existing home sales increased 2 percent in September but were down year-over-year for the 11th consecutive month following 29 straight months of year-over-year increases. Sales of new homes edged up 0.2 percent in September and were up 17 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 some 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 69 basis points above December 2012’s record low of 3.35 percent. Although home prices advanced in August for the 23rd time in the last 29 months and were up nearly 6 percent from a year ago, they remained approximately 15 percent below their April 2006 peak.
Existing home sales advanced for the fifth time in the last six months, increasing 2.4 percent to a seasonally adjusted annual rate of 5.17 million but were 1.7 percent below its annual rate of a year ago. This marked the 11th 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, “Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline. Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter.”

Month’s supply of existing homes based on the current sales rate declined after holding steady for the previous three months and hovered only 23.3 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 September fell 1.3 percent to 2.30 million existing homes available for sale, which represents a 5.3-month supply at the current sales pace, down from 5.5 months in August but up 8.2 percent from 4.9 months a year ago. Unsold inventory was 6.0 percent higher than a year ago, when there were 2.17 million existing homes available for sale, but was 43.1 percent below the record of 4.04 million in July 2007.

Rising in five of the last six months, new home sales edged up 0.2 percent in September to an annual rate of 467,000 and were up 17.0 percent year-over-year. September’s annual rate was just 1.5 percent below October 2013’s six-plus year high of 474,000 and was 68.3 percent above August 2010’s record low annual rate (since 1963) of 278,000. The number of building permits issued for new housing units increased in September for the second time in the last three months to within 2.6 percent of April’s 70-month high (highest since June 2008). The number of permits rose 2.8 percent in September to an annual rate of 1,031,000 and was up 3.8 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 23 of the last 29 months. In September, the Index edged up 0.2 percent to 173.66 and was up 5.6 percent from a year ago, but it was 15.2 percent below its April 2006 peak and remained mired at nine-plus year levels (below December 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 22 months although edged down in October for the fifth time in the last six months. 30-year mortgage rates declined 12 basis point in October to 4.04 percent, 15 basis points lower than a year ago but 69 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 47 months and in 13 of the last 38 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 34 months.


Economic Indicators 
» Financial
With a majority of S&P 500 companies beating Q3 earnings expectations, major U.S. stock market indices rebounded in October and hit record highs to close the month. The markets closed out a tumultuous month that featured a number of dramatic sell-offs and rebounds as investors worried about a series of global crises, including the U.S.-led airstrikes in Syria, Hong Kong protests, and Ebola. The Dow Jones Industrial Index, up in 22 of the last 29 months, rallied 2.0 percent in October, while the S&P 500 index, up in 23 of the last 29 months, rallied a sharper 2.3 percent in October. Amid worries over the Eurozone’s economy and low inflation, 10-year treasury yields dipped during October to a 52-week low and have fallen in six of the last 10 months. Yields remain historically low, likely reflecting the Federal Reserve’s 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 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.
Rallying in 22 of the last 29 months and establishing record highs in 15 of the last 17, major U.S. stock market indices rebounded in October, even hitting a record high to close the month, after falling in two of the previous three months. The markets closed out a tumultuous month that featured a number of dramatic sell-offs and rebounds as investors worried about a series of global crises, including the U.S.-led airstrikes in Syria, Hong Kong protests, and Ebola. Markets were also in flux thanks to concern over the outlook of the global economy as well as fears that the U.S. Federal Reserve would raise interest rates sooner than expected. The majority of S&P 500 companies are beating third-quarter earnings expectations so far. With results in from 70 percent of companies, 75.8 percent are reporting earnings above analysts' expectations, according to Thomson Reuters data, well above the 63 percent average in the past 20 years. Furthermore, news of the Bank of Japan’s increased stimulus boosted investor confidence in the global economy, sent stocks soaring around the world higher. The Dow Jones Industrial Index (DJI) rallied 2.0 percent in October, hitting a record high to close month and rising in 22 of the last 29 months and 11.9 percent from a year ago. The S&P 500 Index rallied a stronger 2.3 percent in October and also hit a record high to close the month. Additionally, the Index was up in 23 of the last 29 months and 14.9 percent from a year ago.

Amid worries over the Eurozone’s flagging economy and alarmingly low inflation, 10-year treasury yields dipped during October to a 52-week low and have fallen in six of the last 10 months since climbing to a 17-month high (highest since July 2011). Yields declined 17 basis points in October to close the month at 2.34 percent, only 25 basis point above its 52-week low and just 94 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 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 48 consecutive periods, which dates back to December 2008. Also, in its last meeting, the Fed announced the conclusion to its monthly bond-purchase program (of longer-term U.S. treasuries and mortgage-backed securities) as the U.S. economy has gained traction. But weaker growth in Japan and the Eurozone has pushed both the Bank of Japan and the European Central Bank to step up stimulus.

According to the Senior Loan Officer Survey, the net percentage of banks tightening credit standards for small businesses fell in Q3 2014 by 8.3 percent, marking the 16th time in the last 17 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 18 of the last 19 quarters with a net 10.7 percent facing an easing of credit standards in Q3. 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 25.0 percent in Q3, the fastest pace in nine years, and has improved in 12 of the last 15 quarters. Demand for credit by medium to large businesses has strengthened in 13 of the last 15 quarters, improving 30.7 percent in Q3, the fastest pace in nine quarters. 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) rose 0.1 percent on a monthly basis in September after dropping 0.2 percent the previous month, which had marked the Index’s first decline since April 2013. Increases in shelter and food indexes outweighed declines in energy indexes. The annual rate held steady at 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) edged up by a mere 0.1 percent for the third time in the last four months, while the annual rate held steady at 1.7 percent, 0.1 percentage point above February’s 33-month low. In October, energy prices cooled for the fourth 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 six months, the Baltic Dry Index (a barometer of ocean freight shipping costs) rallied over 34 percent in October but was down approximately 5 percent from a year ago.
The Consumer Price Index (CPI) rose 0.1 percent on a monthly basis in September after dropping 0.2 percent the previous month, which had marked the Index’s first decline since April 2013. Increases in shelter and food indexes outweighed declines in energy indexes. The food index rose 0.3 percent as five of the six major grocery store food group indexes increased, while the energy index declined 0.7 percent as the indexes for gasoline, electricity, and fuel oil all fell. On an annual basis, the Index held steady at 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, edged up by a mere 0.1 percent for the third time in the last four months, while the annual rate held steady at 1.7 percent, 0.1 percentage point above February’s 33-month low. Along with the shelter index, the index for medical care increased, and the indexes for alcoholic beverages and for personal care advanced slightly.

The Producer Price Index (PPI) declined 0.1 percentage points on a monthly basis in September after a flattish August. The decline in prices for final demand goods was led by the index for gasoline, which dropped 2.6 percent. Prices for meats; oilseeds; corn; dry, condensed, and evaporated milk products; and inedible fats and oils also moved lower. Nearly half of the September decline in the index for final demand services can be traced to prices for traveler accommodation services, which dropped 6.9 percent. On an annual basis, the Index fell from 1.8 percent to a modest 1.6 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, jumped to a 76-month high (highest since April 2008), increasing 0.6 percentage points to 79.3 percent in September. Although the capacity utilization rate has risen in 39 of the last 63 months and was 0.9 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 October for the fourth straight month as both gasoline and crude oil prices have retreated over the last four months. Gasoline prices fell 10.4 percent in October and were down 8.0 percent from a year ago, while crude oil prices fell 12.7 percent in October and were down 16.1 percent from a year ago. In the final week of October, WTI crude oil spot prices averaged $81.29 per barrel, and retail gasoline prices in the U.S. averaged $3.08 per gallon.

In October, the Euro weakened against the U.S. dollar for the fifth time in the last six months, down 0.6 percent, while the Pound weakened against the U.S. dollar as well for the fifth time in the last six months, down 1.5 percent. Year-over-year, the Euro weakened against the U.S. dollar, down 8.3 percent, while the Pound slightly weakened, down 0.3 percent. At October close, 1 Euro yielded 1.26 U.S. dollars, and 1 Pound, 1.60 U.S. dollars.

Down in four of the last six months, the Baltic Dry Index (BDI), which measures the daily average of prices in the spot market to ship raw materials in bulk, rallied 34.3 percent in October but was down 5.1 percent from a year ago.


Economic Indicators 
  Economic Indicators    Expand All  
 
      Indicator Latest Trend Date
» Business Activity
Gross Domestic Product3.5%10/30

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 Production105.110/16

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 Order3.5%11/4

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 Index57.111/5

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 Index96.111/11

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 Rate5.8%11/7

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 Rate11.5%11/7

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 Payrolls214K11/7

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 Survey51K11/6

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 Hours33.811/7

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-0.2%10/31

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 Sales4.3%10/15

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 Index3.9%11/6

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 Income0.2%10/31

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 Index94.510/28

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 Sales5.17 mil10/21

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 Inventory5.3 mo.10/21

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 Index173.6610/28

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 Sales467K10/24

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 Permits1,031K10/27

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 Mortgage4.04%10/31

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
S&P 5002.3%10/31

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 Average2.0%10/31

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 Bills0.01%10/31

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 Notes2.34%10/31

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 Rates0.25%10/29

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 Credit25.0%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
Consumer Price Index1.7%10/22

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 Index1.6%10/15

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 Utilization79.3%10/16

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-10.4%10/31

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)-0.6%10/31

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)34.3%10/31

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.



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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.