Deller's two cents:  Look at the paragraph about the "economic leading indicators", UP weakly.  The fact that they are up is important here.  As we have talked about in the past economists look for indicators to move in the same direction for at least three periods to indicate a trend.  Lots of research that suggests that almost all recessions have been proceeded by the "economic leading indicators" moving downward at least three periods in a row.  The fact that they are up, although weakly, suggests that we are NOT on the edge of a new recession.  Now having said that, sometimes $#@ happens (massive terrorist attack, an oil embargo, massive earth quake, etc) and we could be throw back into recession quickly.  But that one little piece of economic news is good! Economic Week in Review: Fed unveils its latest plan to promote growth September 23, 2011

The economic data released this week were mixed, but long-term persistent troubles were enough for the Federal Open Market Committee (FOMC) to take additional steps in its efforts to boost the economy. On the housing front, existing-home sales increased, while new residential construction fell. The index of leading economic indicators grew, but at a slower pace. For the week ended September 23, the S&P 500 Index fell 6.5% to 1,136 (for a year-to-date total return-including price change plus dividends-of about -8.3%). The yield on the 10-year U.S. Treasury note fell 24 basis points to 1.84% (for a year-to-date decrease of 146 basis points).

At its regular meeting, the FOMC announced a series of moves designed to support the struggling economy. A weak labor market, problems in the commercial and residential real estate markets, and a slowdown in household spending growth are among the challenges cited by the Fed. In an attempt to lower long-term interest rates, the Fed plans to shift $400 billion of its securities portfolio from short-term to long-term U.S. Treasury bonds. The lower rates, the Fed hopes, will keep long-term borrowing costs low and spark spending and investment. Also, the Fed plans to reinvest maturing mortgage debt into new mortgage debt to support the mortgage markets. (It had previously reinvested these maturing securities in Treasuries.) Three of the ten Fed officials voted against the measures, noting concerns about inflation. However, in its official statement, the Fed said inflation has slowed. The Fed also said it would leave its target federal funds rate unchanged at between 0% and 0.25% through the middle of 2013.

Weather was the culprit, as construction on new U.S. homes fell 5% in August to an annualized rate of 571,000, below analysts' forecasts. (Monthly starts have averaged almost 1.5 million since 1959.) Also, July's numbers were revised downward by 0.5%. Multifamily starts dropped 12.4%, while single-family starts retreated 1.4%. The Northeast and South, where hurricanes and tropical storms disturbed construction, showed losses, while the Midwest and West had gains. Compared to a year ago, new construction is down 5.8%. In some good news, permits-which reveal the demand for new homes-are up 3.2% from July and 7.8% from a year ago.

Sales of existing homes rose 7.7% in August to an annualized rate of 5.03 million units. The number, which came in above analysts' forecasts, was triggered by investors buying foreclosed properties. Compared to a year ago, home sales (including single-family dwellings, townhouses, and condominiums) were up 18.6%. All four of the nation's regions experienced increases, although the Northeast's gains were limited as a result of Hurricane Irene. While still historically low, the current sales pace is the fastest since March. Single-family home sales advanced 8.5%, while condo sales were up 1.8%. Total housing inventory fell to an 8.5-month supply from a 9.5-month supply in July. The median home price of $168,300 is down 5.1% compared to a year ago.

The index of leading economic indicators-a weighted measure of ten indicators designed to signal future economic activity-advanced 0.3% in August. It was the index's fourth straight increase and slightly better than analysts expected. However, without a strong rise from the real money supply component, the index would have dropped 0.4%. Only four of the index's ten components were higher. Also, following July's 0.6% gain, growth is slowing. The index's leading detractor was stock prices. The coincident indicator, which measures current economic activity, budged 0.1%.

"The money supply component is a bit misleading right now because much of the jump reflects a rush to safe assets, such as insured bank deposits, which are part of most measures of money. This just reflects the increased risk aversion among investors," said Vanguard senior economist Roger Aliaga-Díaz. "Our Vanguard leading indices have also been signaling weaker economic activity ahead lately."

Each day next week brings a new economic report. Releases are scheduled for new-home sales (Monday), consumer confidence (Tuesday), durable goods (Wednesday), gross domestic product (Thursday), and personal income (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