Deller's two cents: Can Obama's economic plan "do the job"? Depends on what the "job" is; prevent another recession, maybe, get the economy growing, probably not. Despite what businesses say in their "lobbying" they really do not respond to taxes that much, particularly small businesses where a lot of Obama's plan is aimed. Small businesses respond to sales, if sales are going up, they hire, if sales are flat they do not hire, plain and simple. The bigger test will be if the Republicans in congress will work with Obama: if there is a repeat of the debt ceiling fiasco there will be a huge vote of "no confidence" by consumers and businesses and we might (will?) end up back in a new recession.
Economic Week in Review: Better news on exports, but a bleak report from the Fed September 09, 2011
Despite a few good signs, the market's mood turned grim as somewhat favorable reports on spending, trade, and service-sector growth were offset by higher new jobless claims and continued caution from Federal Reserve officials throughout the country. In remarks similar to those he made a few weeks ago, Fed Chairman Ben Bernanke said the central bank has a few more tools in the box to bolster the weakening economy. However, he didn't say whether he'd use them before the Federal Open Market Committee meets on September 20 to consider other measures to promote economic growth. For the week ended September 9, the S&P 500 Index fell 1.7% to 1154.23 (for a year-to-date total return-including price change plus dividends-of about -6.9%). The yield on the 10-year U.S. Treasury note dropped 9 basis points to 1.93% (for a year-to-date decline of 137 basis points).
Trade deficit down
The U.S. trade deficit in July narrowed more than expected, by $6.8 billion, to $44.8 billion, as exports jumped 3.6% and imports dropped 0.2%. Auto exports led the way-surging 11.3% to an all-time high-and real exports of industrial supplies and food and beverage products also increased at a healthy rate. Analysts cautioned that weakness in the latter part of the third quarter may tame future U.S. exports, though expansion should continue at a lower rate.
Beige book flashes yellow light
The Fed report painted a bleak picture for the national economy amid slower manufacturing activity, a weak housing market, and the destruction caused by Hurricane Irene. The Beige Book, based largely on observations by business leaders and economists from mid-July through August 26, said that only five of the 12 bank regions reported even "modest or slight" expansion. "Several districts also indicated that recent stock market volatility and increased economic uncertainty had led many contacts to downgrade or become more cautious about their near-term outlooks," the Fed report noted.
Consumer credit jumps
Consumer credit increased by $12 billion in July, double expectations and the largest increase in nearly four years after June's figure was revised down. The annualized growth of 6% reflected a sharp increase in nonrevolving credit on big-ticket items such as car loans, which rose along with auto sales. However, revolving credit-primarily credit cards-fell $3.4 billion, suggesting continued caution among consumers.
Service sector expands slightly
The Institute for Supply Management's nonmanufacturing index rose to 53.3 in August, as service sector expansion continued in the face of poor weather and economic deceleration. The number was more than forecast but considerably below the year's high of 59.7. Analysts say the results, based on a national survey of purchasing executives, are consistent with other data that suggests the economy is growing at a tepid pace.
The economic week ahead
Wednesday brings reports on producer prices, retail sales, and business inventories, followed Thursday by the consumer price index and industrial production.
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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
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