Deller's two cents:....not much to say....mark the date down!!!
Economic Week in Review: Retail sales take a detour
June 11, 2010
The latest reports showed that the economy was continuing to take steady steps out of recession-although May retail sales seemed to be following a different script. The U.S. stock market had a volatile week: The S&P 500 Index rose 2.5% to about 1,092 (for a year-to-date total return-including price change plus dividends-of about -1.3%). The yield of the 10-year U.S. Treasury note rose 4 basis points to 3.24% (for a year-to-date decrease of 61 basis points).
Fed survey reports widespread growth
The Federal Reserve said in its June Beige Book survey that economic activity rose "modestly" from late March through May in all of the 12 districts it surveys. Not since October 2007 have all 12 regions reported growth. The Fed noted increases in retail sales, tourism (despite some concern about the Gulf of Mexico oil spill and Tennessee floods), and business spending. Home sales and construction climbed before the April 30 expiration of the federal homebuyer tax credit.
Employment was up slightly, and prices of final goods and services were mostly unchanged. Commercial real estate activity remained weak, and consumer lending fell in most areas.
Retail sales take a surprising tumble
Retail sales fell 1.2% in May, surprising analysts who had expected an increase of 0.2%. The decline was the first since September of last year. Building-supply stores accounted for half of this figure, possibly because of a seasonal drop in purchases of energy-efficient appliances, which had earlier been spurred by a combination of government tax credits and bad weather. Compared with a year ago, however, retail sales were strong: up 6.9% from May 2009. (April sales were 9.0% higher.) May's retreat in monthly sales figures was disappointing because economists are counting on consumer spending to help pull the economy out of recession as government spending programs are expected to taper off.
Consumers remain cautious about credit
Revolving debt, which consists mostly of credit card borrowing, fell at an annual rate of 12% in April-the 19th straight monthly drop and an indication that consumers are continuing to moderate their spending. In contrast, nonrevolving debt, such as auto loans, rose at an annual rate of 7.3%, reflecting lower interest rates and incentives offered by car makers. Total consumer borrowing increased by $1 billion, to $2.4 trillion, at an annual rate of 0.5%-only the second gain in over a year.
"There are many reasons to believe that the U.S. recovery will be slow and subdued as households continue to repair their balance sheets by paying back debt and saving more," said Roger Aliaga-Diaz, Vanguard economist. "Mixed numbers from retail sales and continuing weakness in consumer credit confirm this trend."
Businesses continue restocking
Businesses appeared to be confident in their outlook for consumer spending even as retail sales dropped in May. Inventories in April grew by 0.4%-the latest increase since businesses began restocking after recession-induced drawdowns. The inventory buildup occurred across the board, in manufacturing, wholesaling, and retailing.
Trade deficit widens a bit
The U.S. trade deficit widened slightly in April to $40.3 billion from $40.0 billion a month earlier. Both exports and imports, which had generally been rising, declined during the month. Information-technology sector products continued to show growth in both exports and imports, which some analysts viewed as a sign that the economic recovery was gaining strength. The value of crude-oil imports increased and the price per barrel rose to $77.13-the highest since October 2008-even as the volume of these imports declined slightly.
The economic week ahead
Key reports on inflation and output are scheduled to be released. The latest figures for the producer price index, new residential construction, and industrial production will be available on Thursday. Release of the consumer price index and The Conference Board's leading economic indicators are set for Friday.
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Steven C. Deller
Professor and Community Development Economist Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension Madison, WI 53706
608-263-6251
"Conformity can be costly in a world of uncertainty"
Nobel winning economist Douglass North
Recently published: Targeting Regional Economic Development For more info: http://www.routledge.com/9780415775915
