Deller's two cents: Finally a string of good economic news, only "bad" news is demand for new housing starts. I was at a Central District In-service talking about what is happening to the economy and we spent a fair amount of time talking about the St Louis Federal Reserve Bank's FRED (Federal Reserve Economic Data) system. This is the "data warehouse" for all the most current economic data. The site is here:
http://research.stlouisfed.org/fred2/
Its a one-stop-center for all the data that is reported in these summary reports from Vanguard...more data then you know what to do with...an economist's dream!!!
Economic Week in Review:
Spending climbs while inflation stays flat November 19, 2010
The week's news suggests that the economy continues to recover at a steady but slow pace. Retail sales were up more than 1% for the month of October, while businesses expanded their inventories to keep pace with shoppers and to prep for the upcoming holiday rush. Meanwhile, last month's slight increase in consumer prices barely registered, sending inflation to its lowest level in more than 50 years. For the week ended November 19, the S&P 500 Index remained unchanged at 1,199 (for a year-to-date total return-including price change plus dividends-of about 9.5%). The yield of the 10-year U.S. Treasury note rose 12 basis points to 2.88% (for a year-to-date decrease of 97 basis points).
Consumer spending continues to rise
Retail sales were up for the fourth consecutive month in October, jumping 1.2%. Consumer sales are now at their highest point since August 2008, before the fall of Lehman Brothers hobbled financial markets. The rise in sales is a good sign for retailers as they head into the holiday season.
Sales were up across most industries for the month, with soaring auto and parts sales leading the way. Building supply, sporting goods, and hobby stores also reported strong sales, as did restaurants and bars. But sales fell at furniture and electronics stores, suggesting that consumers aren't quite ready for big-ticket purchases yet.
Prices go nowhere in October
Inflation sank to a level it hadn't touched in more than five decades. Consumer prices inched up 0.2% in October from September, but virtually the entire gain was attributable to a rise in the cost of energy, the Labor Department said on Wednesday.
This marked the third consecutive month during which the core rate of inflation, which excludes the always-volatile food and energy categories, was essentially flat. Over the past 12 months, the core price index rose 0.6%-the smallest 12-month increase in the history of the index, which dates to 1957. During the same period, energy prices rose 5.9% (with gasoline up more than 9%) and food costs climbed 1.4%.
The low inflation rate highlighted the economy's weakness and appeared to provide support for the Federal Reserve's contention that more U.S. Treasury bond purchases, intended to boost economic growth, pose little risk of setting off a big spike in prices.
During October, the cost of shelter and medical care rose, but declines in the prices of new and used cars and trucks, clothing, recreation, and tobacco offset those gains.
Businesses plan for the holiday rush
U.S. business inventories were up 0.9% for the month of September, indicating that suppliers were stockpiling goods before the holiday shopping rush. Auto inventories saw the largest gains, with building materials following in second place. Department stores were the only
category in which inventories declined.
Leading indicators signaling a spring pickup?
The Conference Board on Thursday said that its index of leading economic indicators rose 0.5% in October. The increase was driven by three of the index's financial measures: stock prices, real money supply, and the interest-rate spread-the difference between the yield of the 10-year U.S. Treasury note and the federal funds rate.
The index, composed of 10 financial- and consumer-related indicators, gained 1.6% over the past six months, well below the 4.6% annualized
gain of the previous six months.
"The economy is slow, but latest data on the U.S. LEI suggest that change may be around the corner," said Ken Goldstein, an economist at
The Conference Board. "Expect modest holiday sales, driven by steep discounting. But following a post-holiday lull, the indicators are
suggesting a mild pickup this spring."
Demand for new homes plummets
Housing starts fell 11.7% in October to a seasonally adjusted annual rate of 519,000, suggesting that there's not much of a market for new
homes these days.
This was the lowest annual rate of housing starts since April 2009 and the third-lowest on record since January 1959. Housing permits, a
good indication of future construction, rose 0.5% for the month-less than what analysts had expected.
Energy prices are on the rise
Wholesale prices rose only slightly for the month of October, suggesting that inflation remained almost as inconsequential to producers as to consumers. The Producer Price Index (PPI)-which measures how much manufacturers and wholesalers pay for goods and materials-was up 0.4% for finished goods. The increase was mostly due to higher energy costs, which jumped 3.7% for the month. Meanwhile, the core index-excluding food and energy prices-was down 0.6%.
Utility output drops in October
Industrial production was unchanged from September to October. While manufacturing production jumped 0.5%, it was offset by a drop in
utilities, as October's warmer-than-usual weather sent output declining 3.4%. Mining output was also down for the month, falling 0.1%.
Manufacturing's biggest gains came from auto production and business equipment, which were up 1.6% and 1.1%, respectively. Production of
consumer goods was flat.
The economic week ahead
Next week's highlight will be Tuesday's release of the updated third-quarter gross domestic product estimate. Other news will include
the latest on existing-home sales (Tuesday), durable goods, personal income, and new-home sales (Wednesday).
--
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
