The Economy at a Glance

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» Business Activity
After contracting for the first time in three years in Q1, GDP expanded in Q2 at an annual rate of 4.0 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 7.0 percent, vs. a 1.0 percent drop in Q1, exports jumped 9.5 percent after falling 9.2 percent in Q1, and housing construction rose 7.5 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 47 of the last 60 months, the service sector has expanded 54 straight months, and durable goods orders have increased year-over-year in 46 of the last 54 months. Furthermore, the Small Business Optimism Index rose in July for the seventh time in the last nine months and was near May’s 80-month high (highest since September 2007). However, despite the recent rally, the Index at 95.7 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 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 4.0 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 7.0 percent, vs. a 1.0 percent drop in the first quarter, exports jumped 9.5 percent after falling 9.2 percent in the previous quarter, and housing construction rose 7.5 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 nine of the last 11 months, the Industrial Production Index jumped to a record high, increasing 0.7 points in June to 103.9 and was up 4.7 points from a year ago. Additionally, the Index has risen in 47 of the last 60 months since bottoming at 83.5 in June 2009.

Advancing in four of the last five months, new orders for manufactured durable goods rose in June, increasing 1.7 percent sequentially but falling 0.6 percent from a year ago, marking just the 8th year-over-year decrease in the last 54 months. Excluding the volatile transportation component (aircraft orders), durable goods orders increased sequentially for the eighth time in the last 10 months, increasing 0.8 percent in June.

The service sector grew (exceeding 50 on the ISM Non-Manufacturing Index) for the 54th month in a row, with the pace of growth accelerating in July for the fourth time in five months. In July, the Index jumped 2.7 points to register at 58.7, an 8.5 year high, and was 2.8 points above its level of a year ago.

Although up in seven of the last nine months, the Small Business Optimism Index rose for the second consecutive month and inched near May’s 80-month high (highest since September 2007), rising 0.7 points in July to 95.7, and was 1.6 points above its level of a year ago. Despite the recent rally over the last nine 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, “On the positive side expectations for business conditions and outlook for expansion accounted for virtually all of the net gain in July’s Index. However, capital spending reports continue to remain mediocre, spending plans are weak, and inventories are too large, with more owners reporting sales trends deteriorating than improving. As long as these stats continue to hold, the small business half of the economy will continue to not be able to pull its weight.”


Economic Indicators 
» Employment
Total U.S. nonfarm employment grew in July for the 46th consecutive month as 209,000 jobs were created, decelerating from the 298,000 jobs that were created the previous month. Noteworthy, July’s tally marked the sixth straight month that job gains have topped 200,000, the first such stretch since 1997. Job totals were revised upward for the previous two months by a combined 15,000. In July, the private sector expanded for the 53rd consecutive month, adding 198,000 jobs, while the government sector gained 11,000. The unemployment rate, which dipped to a 71-month low of 6.1 percent in June, edged up 0.1 percentage points in July to 6.2 percent but was 1.1 percentage points below its 7.3 percent rate of a year ago. With 329,000 workers entering the labor force in July, the labor force participation rate ticked up to 62.9 percent from 62.8 percent, which had matched a 36-plus-year low. Driven by Microsoft’s plans to reduce its workforce by as many as 18,000, the number of planned job cuts announced by U.S. companies spiked 49.2 percent in July and has risen in three of the last four months. Despite the jump in the number of jobs cuts announced over the last few months as the computer industry continues to streamline, the economy remains on an upward trajectory with 18 of the 28 industries seeing planned job cuts diminish this year. Moreover, the year-to-date number of jobs cuts by U.S. companies was 1.3 percent fewer than those announced in the first seven months of 2013.
Total nonfarm payroll employment expanded for the 46th consecutive month, increasing by a solid 209,000 in July, although decelerating from the 298,000 jobs that were created the previous month. Moreover, July’s tally marked the sixth straight month that job gains have topped 200,000, the first such stretch since 1997. The job figures for May were revised upward from 224,000 to 229,000, while those from June were revised upward from 288,000 to 298,000. Job growth during the 46-month expansionary streak has averaged approximately 189,000 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), retail trade (+27,000), construction (+22,000), and social assistance (+18,000), private-sector payroll employment increased for the 53rd straight month, rising by 198,000 in July after gaining 270,000 the previous month. Approximately 9.9 million jobs have been created in the private sector over the last 53 months. Meanwhile, government employment has declined in 31 of the last 50 months, although it added 11,000 jobs the previous month and has grown in each of the last three months. Over this 50-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 600,000.

After dipping to a 71-month low (lowest since July 2008), the unemployment rate in July edged up 0.1 percentage points to 6.2 percent but was down 1.1 percentage points below its 7.3 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, rose for just the second time in the last seven months after falling to a 68-month low of 12.1 percent. The underemployment rate ticked up 0.1 percent to 12.2 percent but was down 1.7 percentage points from a year ago.

With the household survey showing that only 329,000 workers entered the labor force in July, the labor force participation rate, the share of working-age people in the labor force increased 0.1 percentage points to 62.9 percent from 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) rose from 3.1 million to 3.2 million, representing 32.9 percent of the unemployed population. Since April 2010, the number of long-term unemployed has fallen by about 3.5 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 was unchanged in July at 33.7 hours for the fourth straight month after jumping 0.3 hours in March from a 38-month low. Year-over-year, the average work week rose by 0.2 hours.

Jumping in three of the last four months, Challenger, Grey & Christmas reported a spike in the number of planned job cuts by U.S. companies in July after plunging the previous month. In July, planned jobs cuts advanced a sharp 49.2 percent to 46,887 after plunging 40.6 percent the previous month and were up 24.4 percent from its level of a year ago. Employers have announced 292,921 job cuts, to date. That is 1.3 percent fewer than the 296,633 job cuts announced in the first seven months of 2013. July job-cut news was dominated by Microsoft, which announced plans to reduce its workforce by as many as 18,000. That is the largest downsizing in the company’s history. It is also the largest layoff announcement this year, surpassing fellow tech giant Hewlett-Packard’s announced plans to shed as many as 16,000 workers from its payroll. The combined cuts by H-P and Microsoft have helped make the computer industry the leading job-cut sector through July. Computer firms announced a total of 48,361 job cuts in the first seven months of 2014, 125 percent more than the 21,517 recorded during the same period a year ago. John A. Challenger, CEO of Challenger, Gray & Christmas said, “A large portion of the Microsoft job cuts were related to its acquisition of Nokia in 2013. However, like Hewlett-Packard, the tech giant is attempting to streamline in order to become more nimble and competitive in an industry that is constantly changing. Both companies were slow to react to the shift from PCs to mobile and simply do not want to get caught flat-footed again. In order to do that, both companies had to flatten the bureaucracy and foster a more entrepreneurial approach to decision making. The large job cuts in the computer industry are certainly not a sign of a stalling economy. The fact is, these are companies that are trying to adjust to where the growth is occurring. The economy is on an upward trajectory, as evidenced by the fact that 18 of the 28 industries we track have seen job cuts decline this year. Even among those with increased job cuts, the year-to-date totals are relatively low by historical standard.”


Economic Indicators 
» Consumer
Consumer spending, representing roughly 70 percent of U.S. economic activity, increased for the fifth consecutive month, advancing 0.4 percent in June and 4.0 percent from a year ago. The report on spending showed that the gains were led by a 1.0 percent rise in purchases of nondurable goods such as food and clothing. Retail sales, which account for 30 percent of consumer spending, were 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. 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 back to school shopping and discounts, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 59th consecutive month, growing year-over-year in July at a robust 4.7 percent clip after growing in June at the second highest pace in three years. Notably, the Consumer Confidence Index jumped to a six-plus year high (highest since October 2007) after advancing in six of the last eight months. With the Index registering at 90.9, it surpassed the healthy 90.0 level for the first time since the recession began in December 2007.
Consumer spending, up in 56 of the last 62 months, increased for the fifth consecutive month, advancing 0.4 percent in June and 4.0 percent from a year ago. The report on spending showed that the gains were led by a 1.0 percent rise in purchases of nondurable goods such as food and clothing. Spending on durable goods such as autos was up 0.5 percent after an even bigger 1.2 percent surge in May. Spending on services, the biggest spending category which covers things such as utilities, rent and health care, rose 0.2 percent in June.

Personal income, a key pillar of consumer spending, rose in June for the 15th time in the last 17 months, advancing by a strong 0.4 percent for the second consecutive month. Furthermore, it has risen in 48 of the last 56 months and 4.3 percent year-over-year. With income and spending both rising at the same rate, personal saving as a percentage of disposable personal income was unchanged from the previous month at 5.3 percent.

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 59th consecutive month, the Thomson Reuters Same Store Sales (SSS) Index increased year-over-year with growth decelerating in July from the second highest growth rate in three years (since June 2011). The Index advanced at a 4.7 percent clip in July after rising 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 32 of the last 45 months. Retailers faced difficult sales comparisons from July last year, and still managed to top them. Mall traffic picked up during July as the back to school shopping season kicked off. Consumers were still looking for deals, though, as the discount sector had a strong result, driven by Costco.

The Conference Board Consumer Confidence Index jumped to a six-plus year high (highest since October 2007) after advancing in six of the last eight months, increasing 4.5 points in July to 90.9 and 9.9 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 first time since the recession began in December 2007. The Present Situation Index increased to 88.3 from 86.3, while the Expectations Index rose to 92.7 from 86.4 in June. Director of Economic Indicators at The Conference Board said, “Consumer confidence increased for the third consecutive month and is now at its highest level since October 2007 (95.2). Strong job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations. Recent improvements in consumer confidence, in particular expectations, suggest the recent strengthening in growth is likely to continue into the second half of this year.”


Economic Indicators 
» Housing
Home sales were mixed in June as existing home sales continued its upward streak, rising in each of the last three months, while new home sales reversed its recent two-month streak. Existing home sales jumped to an eight-month high in June but were down year-over-year for the eighth consecutive month following 29 straight months of year-over-year increases. Sales of new homes rose fell over 8 percent in June and were down over 11 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 had created headwinds for existing home sales in early 2014. 30-year fixed rate mortgage rates have increased in 11 of the last 19 months but have edged down over the last three and hover just 78 basis points above December 2012’s record low of 3.35 percent. Tight inventory over the last year has kept the month supply of existing homes for sale near January 2013’s seven-plus year low. Although home prices advanced in May for the 20th time in the last 26 months and were up over 9 percent from a year ago, they remained nearly 17 percent below their April 2006 peak.
Rising for the third consecutive month, existing home sales edged jumped to an eight-month high in June. In June, existing home sales rose 2.6 percent to a seasonally adjusted annual rate of 5.04 million but were 2.3 percent below its annual rate of a year ago. This marked the eighth 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, “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices. On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices. Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month. However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

Month’s supply of existing homes based on the current sales rate was flat 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 June climbed 2.2 percent to 2.30 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from 5.5 months in May but up 7.8 percent from 5.1 months a year ago. Unsold inventory is 6.5 percent higher than a year ago, when there were 2.16 million existing homes available for sale but 43.1 percent below the record of 4.04 million in July 2007.

New home sales dipped for the first time in three months, falling 8.1 percent in June to an annual rate of 406,000 and were down 11.5 percent year-over-year. June’s annual rate was 46.0 percent above August 2010’s record low annual rate (since 1963) of 278,000. The number of building permits issued for new housing units retreated in June for the second straight month after climbing in April to a 70-month high (highest since June 2008). The number of permits dropped 3.2 percent in June to an annual rate of 973,000, but was up 3.7 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 20 of the last 26 months. In May, the Index edged up 1.1 percent to 170.64 and was up 9.3 percent from a year ago, but it was 16.7 percent below its April 2006 peak and remained mired at nine-plus year levels (below September 2004 levels).

Average monthly rates on a 30-year fixed rate mortgage have rallied in 11 of the last 19 months but edged down in July for the third consecutive month. 30-year mortgage rates fell a marginal 3 basis points in July to 4.13 percent and were 24 basis points lower than a year ago but 78 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 44 months and in 13 of the last 35 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 31 months.


Economic Indicators 
» Financial
Major U.S. stock market indices retreated in July for the first time in six months. U.S. labor costs, which rose the most in more than five years in Q2, sparked inflationary concerns towards the end of July leading to speculation that the Federal Reserve could raise interest rates sooner than some had expected. Additionally, problems in overseas economies added to the bearish tone, with Argentina defaulting on its debt for the second time in 12 years. The Dow Jones Industrial Index, up in 20 of the last 26 months, declined 1.6 percent in July, while the S&P 500 index, up in 21 of the last 26 months, declined 1.5 percent in July. In the bond market, 10-year treasury yields edged up in July for just the third time in the last seven months, rising by 4 basis points to close the month at 2.56 percent. Yields remain historically low, likely reflecting the Federal Reserve’s bond purchase program (although it has been dialed back by $10 billion per month) as well as its near zero-interest rate policy, investors’ ongoing concerns about the strength of the economic recovery, and modest inflation. Demand for credit strengthened for small businesses in Q2 for the 11th time in the last 14 quarters, while it strengthened for medium to large businesses in Q2 for the 12th time in the last 14 quarters. Credit standards for small businesses eased in Q2 for the 15th time in the last 16 quarters, while they eased for medium to large businesses in Q2 for the 17th time in the last 18 quarters.
Although rallying in 20 of the last 26 months and establishing record highs in 13 of the last 15, major U.S. stock market indices retreated for the first time in six months in July. U.S. labor costs, which rose the most in more than five years in the second quarter, sparked inflationary concerns towards the end of July leading to speculation that the Federal Reserve could raise interest rates sooner than some had expected. Additionally, problems in overseas economies added to the bearish tone, with Argentina defaulting on its debt for the second time in 12 years. The Dow Jones Industrial Index (DJI) declined 1.6 percent in July, although hit a record high during the month and was up in 20 of the last 26 months and 6.9 percent from a year ago. The S&P 500 Index declined 1.5 percent, although hit a record high during the month and was up in 21 of the last 26 months and 14.5 percent from a year ago.

10-year treasury yields edged up in July for just the third time in the last seven months after climbing in December to a 17-month high (highest since July 2011). Yields rose 4 basis points in July to close the month at 2.56 percent, which was 116 basis points above its record low rate of 1.40 percent established near the end of July 2012. Also, 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 July) as well as its near zero-interest rate policy, investors’ ongoing concerns about the prospects for a strong economic recovery, subdued inflationary environment, and overhang and uncertainty from the European sovereign-debt issue. 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 0.3 percent on a monthly basis after jumping 0.4 percent the previous month, the largest monthly increase since February 2013. CPI in June was primarily driven by the gasoline index as it rose 3.3 percent and accounted for two-thirds of the increase. The annual rate was unchanged at 2.1 percent, which was 1.1 percentage points above last October’s four-year low and just above 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 0.1 percent on a monthly basis but ticked down on an annual basis from 2.0 to 1.9, just 0.4 percent above February’s 33-month low. In July, energy prices cooled 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 two-month rally, the Baltic Dry Index (a barometer of ocean freight shipping costs) declined in July for the fourth straight month and was down nearly 29 percent from a year ago.
The Consumer Price Index (CPI) rose 0.3 percent on a monthly basis in June after jumping 0.4 percent the previous month, the largest monthly increase since February 2013. CPI in June was primarily driven by the gasoline index as it rose 3.3 percent and accounted for two-thirds of the increase. On an annual basis, the Index was unchanged at 2.1 percent, just above the Fed’s 2.0 percent inflation target and 1.1 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 just 0.1 percent in June after advancing 0.3 percent the previous month, while the annual rate fell from 2.0 to 1.9 percent, 0.3 percent above February’s 33-month low. The indexes for shelter, apparel, medical care, and tobacco all increased in June, and the index for household furnishings and operations rose for the first time in a year.

The Producer Price Index (PPI) rose on a monthly basis after dropping for the first time in 10 months, advancing 0.4 percent in June after declining by 0.2 percent in May. In June, a 6.4-percent advance in gasoline prices accounted for most of the increase in the final demand goods index, while a 5.9-percent jump in the index for services related to securities brokerage and dealing led the advance in prices for final demand services. On an annual basis, the Index declined from 2.0 percent to 1.9 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, was unchanged at 79.1 percent in June, matching a 6-year high. Although the capacity utilization rate has risen in 38 of the last 60 months, and was 1.2 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 July as gasoline prices decreased for just the second time in the last nine months, while crude oil prices decreased for the seventh time in the last 11 months. Gasoline prices fell 4.2 percent in July and were down 3.5 percent from a year ago, while crude oil prices fell 4.8 percent in July and were down 3.3 percent from a year ago. In the final week of July, WTI crude oil spot prices averaged $102.19 per barrel, and retail gasoline prices in the U.S. averaged $3.60 per gallon.

In July, the Euro weakened against the U.S. dollar for just the fifth time in the last 15 months, down 1.8 percent, while the Pound weakened against the U.S. dollar for just the 4th time in the last 14 months, down 0.6 percent. Year-over-year, the Euro and Pound strengthened against the U.S. dollar, up 1.0 percent and 10.6 percent, respectively. At July close, 1 Euro yielded 1.34 U.S. dollars, and 1 Pound, 1.69 U.S. dollars.

Following a two-month rally, the Baltic Dry Index (BDI), which measures the daily average of prices in the spot market to ship raw materials in bulk, retreated for the fourth month in a row, dipping 11.2 percent in July and 28.9 percent from a year ago.


Economic Indicators 
  Economic Indicators    Expand All  
 
      Indicator Latest Trend Date
» Business Activity
Gross Domestic Product4.0%7/30

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 Production103.97/16

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 Order-0.6%8/5

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


ISM Non-Manufacturing Index58.78/5

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 Index95.78/12

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 Rate6.2%8/1

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 Rate12.2%8/1

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 Payrolls209K8/1

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 Survey47K7/31

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 Hours33.78/1

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


» Consumer
Consumer Spending0.4%8/1

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 Index4.7%8/7

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 Income0.4%8/1

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 Index90.97/29

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


» Housing
Existing Home Sales5.04 mil7/22

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


Existing Home Inventory5.5 mo.7/22

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


S&P / Case-Shiller Home Price Index170.647/29

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 Sales406K7/24

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 Permits973K7/25

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

 


30-Year Fixed Rate Mortgage4.13%7/31

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 500-1.5%7/31

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


Dow Jones Industrial Average-1.6%7/31

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%7/31

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 Notes2.56%7/31

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 Index2.1%7/22

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 Index1.9%7/16

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


Capacity Utilization79.1%7/16

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-4.8%7/31

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)-1.8%7/31

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)-11.2%7/31

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.