Deller's two cents: Lots of disappointing economic news, but is the sky falling in on the recovery? I don't think so. I think people are taking profits out of the stock market, the earth quake in Japan has caused short-term shutdowns in manufacturing, and state-local government budget cuts are placing downward pressure on the recovery. In Wisconsin, for example a lot of public sector employees are holding off on major purchases because of uncertainty over state and local government budgets; the result is downward pressure on the recovery.
Economic Week in Review: Signs of modest improvement even as worries mount
June 10, 2011
On the heels of a dismal unemployment report last week, economic indicators showed slight improvement amid recent signs that the uneven recovery is beginning to slow. The U.S. trade deficit unexpectedly narrowed, consumer credit rose more than anticipated, and the Federal Reserve's Beige Book release reported overall economic growth. For the week ended June 10, the S&P 500 Index fell 2.2% to 1,270.98 (for a year-to-date total return-including price change plus dividends-of about 1.9%). The yield of the 10-year U.S. Treasury note was unchanged for the week at 2.99% (for a year-to-date decrease of 31 basis points).
Fed report finds continued economic growth
Economic activity continued to grow from late April through most of May, according to the Federal Reserve's latest Beige Book survey of nationwide conditions. Reports from all of the Fed's 12 districts showed continued economic expansion, though 4 districts indicated a slowing in the pace of growth.
Fed Chairman Ben Bernanke captured the thrust of the survey in a speech before the International Monetary Conference this week.
"Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers," Mr. Bernanke said.
Manufacturing continued to grow. Activity in the nonfinancial services sectors expanded at a solid pace, fueled by industries related to information technology and business and professional services. Consumer spending was up overall despite high food and energy prices thought to be weighing on consumers' inclination to spend. Auto sales were fairly strong despite the disruptions to the supply of auto parts caused by the Japanese earthquake. Real estate and residential construction continued to show "widespread weakness."
Rise in consumer credit beats expectations
Spurred by increased demand for education and auto loans, consumer credit rose $6.2 billion in April-beating expectations. The gain in March was revised downward to show an increase of $4.8 billion (from $6.0 billion). Analysts tied the April increase to robust auto sales. New vehicle sales may come under pressure in the coming months, however, as a result of high gasoline prices and auto parts supply issues. Nonrevolving credit increased for the ninth consecutive month, while revolving credit-primarily credit card borrowing-continued its decline.
U.S. trade balance unexpectedly narrows
As a result of the rise in exports and drop in imports, the U.S. trade deficit narrowed in April to $43.7 billion, exceeding expectations. The reduction in imported goods was linked to a decline in petroleum volumes and lower auto imports. The increase in export volume wasn't limited to one sector, as industrial supplies, consumer goods, and capital goods all increased.
The economic week ahead
A busy week is on the horizon beginning Tuesday with reports on the Producer Price Index, business inventories, and retail sales. The wave continues with the Consumer Price Index and industrial production on Wednesday, residential construction on Thursday, and the Conference Board's leading indicators on 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
"I started out with nothing and I still have most of it left."
Seasick Steve
