Deller's two cents: One thing to keep in mind when reviewing this material is that where one is located matters. There was a story in the Wisconsin State Journal this morning that reported on a survey of Wisconsin businesses that showed optimism. But, it varies by where in the state one is talking. The northeast part of Wisconsin appears to have higher levels of business optimism than other parts of the state. As we are in a process of national recovery we can look back and see how we did; Wisconsin actually was not hit by the recession nearly as hard as many states including many of our neighboring states.
Economic Week in Review: Economy gains momentum
January 14, 2011
A variety of reports-from retail sales to industrial production-pointed to strengthening economic growth this week as consumer and producer prices continued an upward move. For the week ended January 14, the S&P 500 Index rose 1.7% to 1,293.24. The yield of the 10-year U.S. Treasury note increased 1 basis point to 3.35%.
Good news on everything but real estate
Economic activity continued to improve at year-end 2010, according to the Fed's January Beige Book, a compilation of reports from the business contacts of the central bank's 12 regional branches. While the report noted generally positive signs in retailing, service industries, and manufacturing, commercial and residential real estate lagged behind.
Notably, the Fed reported that "labor markets appeared to be firming somewhat" in most districts. The survey also noted that companies are paying more for materials including oil, food products, steel, textiles and chemicals. However, they have yet to pass these price increases along to consumers.
Producer and consumer prices rising
Rising prices for fuel and food pushed producer prices for finished goods up 1.1% in December, above consensus. This is the first time that a monthly increase in the producer price index (PPI) surpassed 1% since January 2010. Producer prices for finished goods have risen about 4% since December 2009. Excluding prices for food and energy, prices for finished goods rose only slightly, however. The consumer price index (CPI) increased 0.5% in December, the strongest rise in more than a year. Excluding food and energy, the CPI rose only 0.1%, the same as in November.
Trade deficit narrows unexpectedly
The U.S. trade deficit, which analysts had expected to widen in November, actually narrowed slightly to $38.3 billion. Since June 2010, the trade deficit has shrunk by nearly a quarter. However, analysts believe this trend is unlikely to persist because the U.S. recovery is growing stronger, which typically leads to a rise in imports.
6th sales gain in a row
For all of 2010, retail sales rose 6.6% over 2009. U.S. retail sales rose 0.6% in December, marking the sixth straight monthly increase (albeit one that was smaller than expected), as consumers bought more goods from online retailers, drug stores, and building-supply companies. Excluding the volatile automotive sector, retail sales rose 0.5%. For the fourth quarter, the only segments that didn't experience sales gains were furniture and electronics and appliance stores, all stemming from the lack of home sales throughout the year.
Industrial production improves
Industrial production-the output of factories, mines, and utilities-rose 0.8% in December, more than forecast. November's figures were revised to reflect a 0.3% gain. Manufacturing and mining each edged up 0.4%, while utility output climbed 4.3%, thanks to especially cold weather. Excluding motor vehicles, manufacturing increased 0.5%. High-tech equipment drove manufacturing gains.
Business inventories slowly rise
Business inventories rose 0.2% in November, slower than in recent months and below expectations. Total business sales advanced 1.2%, and retail sales climbed 0.9%. Retail inventories were even from the previous month despite a 0.8% decline in retail auto inventories. Clothing stores and auto dealers shed inventory, while furniture and building-material stores had gains. The inventory-to-sales ratio, a measure of how long it would take to deplete current levels of inventory at current levels of demand, dropped slightly.
The economic week ahead
Next week's releases include new residential construction (Wednesday) and existing-home sales and the Conference Board's leading indicators (Thursday).
--
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
