The Economy at a Glance

  September 2014 Print  Subscribe  Contact Us 
» Business Activity
After contracting for the first time in three years during Q1, GDP expanded in Q2 at an annual rate of 4.2 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 10.7 percent, vs. a 1.0 percent drop in Q1, exports jumped 10.1 percent after falling 9.2 percent in Q1, and housing construction rose 7.2 percent after declining 5.3 percent in Q1. Improvements in business activity have been widespread as industrial production hit another record high after increasing in 49 of the last 61 months, the service sector has expanded 55 straight months to a nine-year high, and durable goods orders have increased year-over-year in 47 of the last 55 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 second estimate, real gross domestic product or GDP (the output of goods and services produced within the U.S.) expanded at an annual rate of 4.2 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 10.7 percent, vs. a 1.0 percent drop in the first quarter, exports jumped 10.1 percent after falling 9.2 percent in the previous quarter, and housing construction rose 7.2 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 2.2 percent.

Rising in 11 of the last 12 months, the Industrial Production Index jumped to a record high, increasing 0.5 points in July to 104.4 and was up 5.4 points from a year ago. Additionally, the Index has risen in 49 of the last 61 months since bottoming at 83.5 in June 2009.

Advancing in five of the last six months, new orders for manufactured durable goods rose in July, surging 22.6 percent sequentially and soaring 33.8 percent from a year ago, marking the 47th year-over-year increase in the last 55 months. Excluding the volatile transportation component (aircraft orders), durable goods orders actually decreased sequentially for just the third time in the last 11 months, declining 0.8 percent in July.

The service sector grew (exceeding 50 on the ISM Non-Manufacturing Index) for the 55th month in a row, with the pace of growth accelerating in August for the fifth time in six months. In August, the Index jumped 0.9 points to register at 59.6, a nine-year high, and was 1.7 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 August for the 47th consecutive month as 142,000 jobs were created, decelerating from the 212,000 jobs that were created the previous month. Notably, August’s tally marked the first time in seven months that job gains fell short of 200,000, ending the longest monthly stretch of 200,000+ job growth since 1997. Additionally, job totals were revised downward for the previous two months by a combined 28,000. In August, the private sector expanded for a record 54th consecutive month, adding 134,000 jobs, while the government sector gained 8,000. The unemployment rate edged down 0.1 percentage points in August to match a 73-month low of 6.1 percent and was 1.1 percentage points below its 7.2 percent rate of a year ago. With 64,000 workers exiting the labor force in August, the labor force participation rate ticked down from 62.9 percent to 62.8 percent, which matched a 36-plus-year low. The number of planned job cuts announced by U.S. companies fell nearly 15 percent in August after spiking the previous month and was down over 20 percent from its level of a year ago. While computer firms have experienced the heaviest downsizing thus far in 2014 and drove July’s spike in layoffs, the majority of industries have seen job cuts diminish in 2014 compared to a year ago.
Total nonfarm payroll employment expanded for the 47th consecutive month, increasing by 142,000 in August, although decelerating from the 212,000 jobs that were created the previous month. However, August’s tally marked the first time in seven months that job gains fell short of 200,000, ending the longest monthly stretch of 200,000+ job growth since 1997. Additionally, the job figures for June were revised downward from 298,000 to 267,000, while those from July were revised slightly upward from 209,000 to 212,000. Job growth during the 47-month expansionary streak has averaged approximately 188,000 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 (+47,000), health care (+34,000), food services and drinking places (+22,000), construction (+20,000), private-sector payroll employment increased for the 54th straight month, rising by 134,000 in August after gaining 213,000 the previous month. Approximately 10.0 million jobs have been created in the private sector over the last 54 months, an extension of the longest streak on record for private sector job growth. Meanwhile, government employment has declined in 32 of the last 51 months, although it added 8,000 jobs the previous month and has grown in three of the last four month. Over this 51-month period, government employment has fallen by about 1.1 million. The economy (both the private and government sectors) for the first time 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 800,000.

The unemployment rate edged down in August to match a 73-month low (lowest since July 2008), declining 0.1 percentage points to 6.1 percent and was down 1.1 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 a 70-month low (lowest since October 2008) after declining for the sixth time in the last eight months. The underemployment rate decreased 0.2 percent to 12.0 percent and was down 1.6 percentage points from a year ago.

With the household survey showing that 64,000 workers exited the labor force in August, the labor force participation rate, the share of working-age people in the labor force decreased 0.1 percentage points from 62.9 percent to 62.8 percent, which matched the lowest level since Jimmy Carter was president over 36 years ago (March 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) dipped from 3.2 million to 3.0 million, representing 31.2 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 1.3 million.

The Labor Department reported that the average work week for production and nonsupervisory employees on private nonfarm payrolls was unchanged in August at 33.7 hours for the fifth straight month after jumping 0.3 hours in March from a 38-month low. Year-over-year, the average work week was flat.

Challenger, Grey & Christmas reported a drop in the number of planned job cuts by U.S. companies in August after surging the previous month. In August, planned jobs cuts declined 14.7 percent to 40,010 after rising a sharp 49.2 percent the previous month and were down 20.7 percent from its level of a year ago. August job cuts were heaviest in the tech sector, where electronics firm Cisco Systems announced plans to reduce its payroll by 6,000 jobs following weak quarterly sales numbers. It joins fellow tech-sector giants Microsoft, Hewlett-Packard, and Intel in announcing large downsizing initiatives this year. To date, employers in the technology sector, including computer, telecommunications, and electronics firms have announced 80,088 job cuts in 2014. That is 41 percent more than the 56,918 tech-sector job cuts announced in all of 2013. Computer firms have experienced the heaviest downsizing so far this year, announcing a total of 48,928 job cuts. That is 87 percent more than the 26,180 job cut announced by this industry through August 2013. Meanwhile, retailers have the second highest number of job cuts this year, but downsizing in the industry has slowed from a year ago. John A. Challenger, CEO of Challenger, Gray & Christmas said, “Like retail, the majority of industries have seen job cuts decline in 2014. For many of the industries where job cuts are on the rise, economic weakness is not the driving factor. Instead, the cuts appear to be motivated by fundamental changes in the industry. Electronics, computer, telecommunications, transportation, and entertainment are all areas that should be flourishing right now. And, in many cases, firms in these industries are doing well. The cuts we are seeing, are coming from companies that did not keep up with the rapidly changing trends that are constantly redefining what products and services are in demand. Now, they are playing catch-up, laying off workers in some areas, hiring in others, and simply cutting layers of management in order to become more nimble and better prepared to meet the next trend shift.”


Economic Indicators 
» Consumer
Consumer spending, representing roughly 70 percent of U.S. economic activity, declined for the first time in six months, falling 0.1 percent in July but rising 3.6 percent from a year ago. The decline in spending reflected a 0.7 percent drop in purchases of durable goods such as autos and a smaller 0.1 percent dip in purchases of nondurable goods. Auto sales took a breather in July after posting big gains in recent months. Retail sales, which account for 30 percent of consumer spending, were flat in July after rising a modest 0.2 percent the previous month. However, retail sales were up a solid 3.7 percent from a year ago and have sustained year-over-year increases for 56 consecutive months. Among the retail categories posting better sales figures in July were building materials, food and beverage, health and personal care, clothing and restaurants. Boosted by discounts, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 60th consecutive month, growing in August at a solid 4.5 percent clip. Notably, the Consumer Confidence Index jumped to a six-plus year high (highest since October 2007) after advancing in seven of the last nine months. With the Index registering at 92.4, it surpassed the healthy 90.0 level for the second time since the recession began in December 2007.
Consumer spending, up in 57 of the last 63 months, declined for the first time in six months, falling 0.1 percent in July but rising 3.6 percent from a year ago. The July spending decline reflected a 0.7 percent drop in purchases of durable goods such as autos and a smaller 0.1 percent dip in purchases of nondurable goods. Auto sales took a breather in July after posting big gains in recent months. Spending on services was flat, which reflected in part less spending on utilities because of cooler-than-normal weather in July. Americans have been cautious in their purchases partly because of modest wage increases and higher food prices.

Personal income, a key pillar of consumer spending, rose in July for the 17th time in the last 18 months, advancing by a modest 0.2 percent after jumping 0.5 percent the previous month. Furthermore, it has risen in 50 of the last 57 months and 4.5 percent year-over-year. With a slight income gain and spending declining, the personal saving rate rose to 5.7 percent of after-tax income in July, up from 5.4 percent in June. The July saving rate was the highest since it stood at 10.5 percent in December 2012.

U.S. retail and food services sales, up sequentially in 15 of the last 20 months and 35 of the last 47, was flat in July after rising a mild 0.2 percent the previous month. However, retail sales were up a solid 3.7 percent from a year ago and have sustained year-over-year increases for 56 consecutive months. Motor vehicles and parts sales fell 0.2 percent, pulling down the overall results. Excluding motor vehicles and parts, retail sales rose 0.1 percent. Sales fell at department stores, furniture and home furnishings stores, electronics and appliance stores and Internet retailers. Among the retail categories posting better sales figures were building materials, food and beverage, health and personal care, clothing and restaurants. Retail sales shrank in January and then surged in February and March as better weather lured consumers out of their homes and into stores. But monthly growth in sales so far this year peaked with March's 1.5 percent gain. Despite July's weak retail sales report, some economists say spending should improve in the rest of 2014 as the economy absorbs the power of an improving job market.

For the 60th consecutive month, the Thomson Reuters Same Store Sales (SSS) Index increased year-over-year although growth decelerated in August for the second straight month after climbing to the second highest growth rate in three years (since June 2011). The Index advanced at a solid 4.5 percent clip in August after rising 4.7 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 33 of the last 46 months. Retailers faced difficult sales comparisons from August last year, and still managed to pull decent results driven by discounts.
The Conference Board Consumer Confidence Index jumped to a six-plus year high (highest since October 2007) after advancing in seven of the last nine months, increasing 2.1 points in August to 92.4 and 10.6 points from a year ago. A reading of 90 generally indicates a healthy economy, and boosted by recent gains, the Index surpassed that level for the second time since the recession began in December 2007. The Present Situation Index increased to 94.6 from 87.9, while the Expectations Index edged down to 90.9 from 91.9 in July. Director of Economic Indicators at The Conference Board said, “Consumer confidence increased for the fourth consecutive month as improving business conditions and robust job growth helped boost consumers’ spirits. Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings. Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market.”


Economic Indicators 
» Housing
Home sales were mixed in July as existing home sales continued their upward streak, climbing to a nine-month high after rising for the fourth consecutive months, while new home sales dipped for the second month in a row. Existing home sales rose over 2 percent in July but were down year-over-year for the ninth consecutive month following 29 straight months of year-over-year increases. Sales of new homes fell over 2 percent in July but were up over 12 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, higher home prices, and an abnormally cold winter created headwinds for existing home sales in early 2014. 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 11 of the last 20 months but have edged down over the last four months and hover just 77 basis points above December 2012’s record low of 3.35 percent. Although home prices advanced in June for the 21st time in the last 27 months and were up over 8 percent from a year ago, they remained nearly 16 percent below their April 2006 peak.
Rising for the fourth consecutive month, existing home sales edged jumped to a nine-month high in July. In July, existing home sales rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million but were 4.5 percent below its annual rate of a year ago. This marked the ninth 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, “The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market. More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise. Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy.”

Month’s supply of existing homes based on the current sales rate was flat for the second 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 July climbed 3.5 percent to 2.37 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from 5.5 months in June but up 10.0 percent from 5.0 months a year ago. Unsold inventory was 5.8 percent higher than a year ago, when there were 2.24 million existing homes available for sale, but was 44.6 percent below the record of 4.04 million in July 2007.

New home sales dipped for the second consecutive month, falling 2.4 percent in July to an annual rate of 412,000 but were up 12.3 percent year-over-year. July’s annual rate was 48.2 percent above August 2010’s record low annual rate (since 1963) of 278,000. The number of building permits issued for new housing units surged in July, climbing within 0.2 percent of April’s 70-month high (highest since June 2008). The number of permits advanced a sharp 8.6 percent in July to an annual rate of 1,057,000, and was up 8.2 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 21 of the last 27 months. In June, the Index edged up 1.0 percent to 172.33 and was up 8.1 percent from a year ago, but it was 15.9 percent below its April 2006 peak and remained mired at nine-plus year levels (below October 2004 levels).

Since falling to a record low, average monthly rates on a 30-year fixed rate mortgage have rallied in 11 of the last 20 months but edged down in August for the fourth consecutive month. 30-year mortgage rates fell a marginal 1 basis point in August to 4.12 percent and were 34 basis points lower than a year ago but 77 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 45 months and in 13 of the last 36 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 32 months.


Economic Indicators 
» Financial
Major U.S. stock market indices rebounded in August after retreating in July for the first time in six months. Largely upbeat U.S. economic data, especially data which highlighted improving consumer confidence, as well as speculation that central banks will continue to spur growth helped to offset geopolitical worries. The Dow Jones Industrial Index, up in 21 of the last 27 months, rallied 3.2 percent in August, while the S&P 500 index, up in 22 of the last 27 months, rallied 3.8 percent in August and was the benchmark’s best August in 14 years. In the bond market, 10-year treasury yields dropped in August for the fifth time in the last eight months, falling by 21 basis points to close the month at 2.34 percent, 1 basis point above a 52-week low. 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.
Rallying in 21 of the last 27 months and establishing record highs in 13 of the last 15, major U.S. stock market indices rebounded in August after retreating for the first time in six months in July. Largely upbeat U.S. economic data, especially data which highlighted improving consumer confidence, as well as speculation that central banks will continue to spur growth helped to offset geopolitical worries. The Dow Jones Industrial Index (DJI) rallied 3.2 percent in August, and was up in 21 of the last 27 months and 15.4 percent from a year ago. The S&P 500 Index rallied 3.8 percent in August and was the benchmark’s best August in 14 years. Additionally, the Index hit a record high during the month and was up in 22 of the last 27 months and 22.7 percent from a year ago.

10-year treasury yields dipped in August for the fifth time in the last eight months after climbing in December to a 17-month high (highest since July 2011). Yields fell 21 basis points in August to close the month at 2.34 percent, 1 basis point above a 52-week low which was established towards the end of the month 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 monthly bond-purchase program ($35 billion of longer-term U.S. treasuries and mortgage-backed securities purchased in August) 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 46 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 $25 billion from $55 billion, as expected, keeping it on track to end the program as soon as October.

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) rose just 0.1 percent on a monthly basis in July, the smallest monthly rise since February, after rising 0.3 percent the previous month. CPI in July was primarily driven by the indexes for shelter and food. The annual rate ticked down from 2.1 to 2.0 percent, which was only 1.0 percentage points above last October’s four-year low and in line with 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 just 0.1 percent on a monthly basis for the second straight month and was unchanged on an annual basis at 1.9, just 0.3 percent above February’s 33-month low. In August, energy prices cooled for the second consecutive month with both gasoline and crude oil prices below their levels of a year ago. Stable 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. Following a four-month retreat, the Baltic Dry Index (a barometer of ocean freight shipping costs) surged nearly 52 percent in August and was up approximately 1 percent from a year ago.
The Consumer Price Index (CPI) rose just 0.1 percent on a monthly basis in July, the smallest monthly rise since February, after rising 0.3 percent the previous month. The indexes for shelter and food rose, but were partially offset by declines in the energy index and the index for airline fares. The food index rose 0.4 percent in July, with the food at home index also rising 0.4 percent. The decrease in the energy index was its first since March and featured declines in the indexes of all the major energy components. On an annual basis, the Index ticked down by 0.1 percentage points to 2.0 percent, in line with the Fed’s 2.0 percent inflation target and 1.0 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 in July by just 0.1 percent for the second straight month, while the annual rate was unchanged at 1.9 percent, 0.3 percent above February’s 33-month low. Along with the shelter index, the indexes for medical care, new vehicles, personal care, and apparel all increased in July.

The Producer Price Index (PPI) rose on a monthly basis for the second month in a row after dropping for the first time in 10 months, advancing 0.1 percent in July after jumping 0.4 percent the previous month. Leading the July increase, the index for final demand transportation and warehousing services moved up 0.5 percent. On an annual basis, the Index declined from 1.9 percent to 1.7 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 74-month high (highest since May 2008), rising 0.1 percentage points to 79.2 percent in July. Although the capacity utilization rate has risen in 40 of the last 61 months and was 1.5 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 August for the second straight month as gasoline prices decreased for just the third time in the last 10 months, while crude oil prices decreased for the eighth time in the last 12 months. Gasoline prices fell 5.8 percent in August and were down 11.2 percent from a year ago, while crude oil prices fell 1.6 percent in August and were down 3.9 percent from a year ago. In the final week of August, WTI crude oil spot prices averaged $96.25 per barrel, and retail gasoline prices in the U.S. averaged $3.54 per gallon.

In August, the Euro weakened against the U.S. dollar for just the sixth time in the last 16 months, down 2.0 percent, while the Pound weakened against the U.S. dollar for just the 5th time in the last 15 months, down 2.0 percent as well. Year-over-year, the Euro weakened against the U.S. dollar, down 0.7 percent, while the Pound strengthened, up 7.1 percent. At August close, 1 Euro yielded 1.31 U.S. dollars, and 1 Pound, 1.66 U.S. dollars.

Following a four-month retreat, the Baltic Dry Index (BDI), which measures the daily average of prices in the spot market to ship raw materials in bulk, soared 51.9 percent in July and was up 1.3 percent from a year ago.


Economic Indicators 
  Economic Indicators    Expand All  
 
      Indicator Latest Trend Date
» Business Activity
Gross Domestic Product4.2%8/28

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 Production104.48/15

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 Order33.8%9/3

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 Index59.69/4

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 Rate6.1%9/5

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 Rate12.0%9/5

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 Payrolls142K9/5

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 Survey40K9/4

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 Hours33.79/5

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-0.1%8/29

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 Sales3.7%8/13

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 Index4.5%9/4

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%8/29

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 Index92.48/26

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 Sales5.15 mil8/21

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 Inventory5.5 mo.8/21

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 Index172.338/26

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 Sales412K8/25

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 Permits1,057K8/26

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 Mortgage4.12%8/31

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 5003.8%8/31

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 Average3.2%8/31

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 Bills0.02%8/31

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%8/31

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%7/30

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 Index2.0%8/19

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 Index1.7%8/15

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 Utilization79.2%8/15

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-1.6%8/31

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


Currency - Euro & Pound (GBP)-2.0%8/31

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)51.9%8/31

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.



© 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.