Deller's two cents: Well, this is getting old...I like Vanguard's title for this week's update: "Lukewarm economy chugs along". A guaranteed bar bet to win a beer from your friends: the bet, we will not go into a "double dip recession", you can guarantee it. But how you ask? Because the "Great Recession" is officially over, if we dip into another recession it will be a brand new recession. By definition a "double dip recession" is impossible. Be prepared to accept a cheap beer for that one.
Economic Week in Review: Lukewarm economy chugs along October 01, 2010
The economy expanded in the second quarter but remains weak. Manufacturing continues to grow but also at a slow pace. Consumer confidence fell, even as incomes rose and spending increased modestly. For the week ended October 1, the S&P 500 Index fell 0.2% to 1,146 (for a year-to-date total return-including price change plus dividends-of about 4.3%). The yield of the 10-year U.S. Treasury note fell 10 basis points to 2.52% (for a year-to-date decrease of 133 basis points).
Consumer confidence slips
Consumer confidence fell to 48.5 in September, below analysts' expectations, to its lowest level since February. Consumers were less optimistic about business conditions, the labor market, and an increase in their income over the next six months. Still, there was one bright spot: Consumers didn't expect their incomes to decline. While fewer people were interested in buying a house, more said they would purchase appliances. The number of consumers shopping for autos remained unchanged from a month earlier.
2Q GDP revised upwards
U.S. gross domestic product in the second quarter grew at an annual rate of 1.7%, slightly more than earlier reported. The increase primarily resulted from moderately higher levels of inventory and consumer spending. Businesses trying to meet increased demand boosted production and inventory levels. Consumers added 1.5 percentage points to the quarter's annualized growth by spending money in all the major sectors. However, much of the gains made in the quarter were offset by an increase in imports.
Personal income and spending rise
Personal income rose 0.5% in August, the fastest pace since December,thanks partly to restarted extended unemployment benefits that boosted incomes by nearly $21 billion. Personal spending in August increased 0.4%, the same as a month earlier. With more people earning higher incomes, but not spending much more, the savings rate inched up to 5.8% in August, from 5.7% in July.
Manufacturing growth weakens
The Institute for Supply Management (ISM) manufacturing index declined to 54.4 in September from 56.3 a month earlier. Although an index reading above 50 indicates expansion, manufacturing growth is at its slowest pace in 10 months. Growth in new orders, production, and employment each decreased in September compared with August.
"While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging," said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee. "Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter."
Construction spending inches up
Construction spending rose 0.4% in August, better than expected, driven by increased projects in the public sector. Private construction spending, including both residential and nonresidential projects, fell 0.9%. Government spending on construction rose 2.5% and mostly involved the building of education-related projects and highways. Construction spending in the first eight months of this year fell more than 11% compared with the same period a year ago.
The economic week ahead
The highlight of next week's reports will be September's unemployment figures released Friday. Other reports include factory orders (Monday),the ISM nonmanufacturing index (Tuesday), and consumer credit (Thursday).
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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
"I started out with nothing and I have most of it left."
Seasick Steve
