Deller's two cents: WOW, this is unusual, mostly good news this week for the national economy. In all the news this week, the increase in the Leading Economic Indicators is perhaps the best news. These Indicators do a wonderful job of "peering" into the future and this continued pattern of increases points to a growing economy and the odds of slipping back into recession are declining. Unfortunately, the employment data for Wisconsin is not as positive. The state just announced (Nov 17) that the "latest preliminary seasonally adjusted estimates show total nonfarm employment declined by 9,700 jobs from September to October; and private sector jobs, by 9,300 in the same period." Is this a fluke or are the negative impacts of the massive state budget cuts and changes to public sector employee benefit rules rippling through the economy?
Economic Week in Review: Hopeful signs emerge
November 18, 2011
After sputtering for months, the U.S. economy began to show some hopeful signs. Industrial output, retail sales, and a gauge of potential future economic activity all climbed substantially in October from September, while also significantly exceeding analysts' expectations. Consumer and producer prices declined. For the week ended November 18, the S&P 500 Index fell 3.8% to 1,215.65 (for a year-to-date total return-including price change plus dividends-of about -1.6%). The yield on the 10-year U.S. Treasury note fell 3 basis points to 2.01% (for a year-to-date drop of 129 basis points).
Leading economic indicators rise
The Conference Board's Leading Economic Index (LEI) increased 0.9% in October, bettering analysts' expectations. The gain was significantly better than September's 0.1% increase.
The Conference Board attributed the upturn to a surge in housing permits, and suggested that it represents a lowered chance of a "double dip" recession. Improving consumer sentiment, job growth, and market movement, as well as a solid interest rate spread, were also cited as contributing factors.
"The LEI is pointing to continued growth this winter, possibly even gaining a little momentum by spring. The lack of confidence has been the biggest obstacle in generating forward momentum, domestically or globally. As long as it lasts, there is a glimmer of hope," Conference Board economist Ken Goldstein said.
Producer prices fall
Producer prices fell 0.3% in October, only the second monthly decline in 2011. Compared with a year ago, however, producer prices are up 5.9%.
Analysts suggested that some of the factors that had led to an increase in producer prices in prior months, including vehicle prices, are now diminished. They attributed the October decline to a 1.4% drop in prices for energy goods; the "core" number (excluding energy and food) was unchanged.
Consumer prices drop
Consumer prices fell 0.1% for the month of October, also the second decline in 2011. As with producer prices, the drop was largely attributed to falling energy costs. Excluding energy and food, "core" consumer prices rose 0.1% for the month.
"The temporary factors behind the spikes in the energy and food components of the headline inflation number proved to be stickier than expected," said Vanguard economist Roger Aliaga-Díaz. "Now we're likely entering a period of headline inflation that's lower than core. Still, the important trend to follow is always core inflation."
Business inventories flat
Business inventories were flat in September, representing a reversal from the 0.8% average monthly increase over the first 8 months in 2011. The growth stall broke the string of 20 consecutive months of increases dating back to January 2010.
Retail sales beat expectations
Retail sales climbed 0.5% in October, beating analysts' expectations. Sales for electronics and building supplies led the way as sales numbers rose for the 5th consecutive month.
On the downside, drops in sales for clothing, gasoline, and furniture served to restrain overall growth.
Industrial production exceeds forecast
Industrial production rose 0.7% for the month of October, exceeding analysts' expectations. The primary catalyst for the upswing was a 3.1% spike in auto production. The increase in overall output represented a reversal of September's data, which was revised to reflect a 0.1% downturn.
New residential construction drops
American builders broke ground on approximately the same number of residential homes in October compared with the previous month. Overall, new residential construction figures stood at an annualized 628,000 homes.
However, building permits, a measure of future construction, rose nearly 11% from September figures. The increase was fueled by a 30% jump in apartment permits.
The economic week ahead
A shortened holiday week will feature a report on existing-home sales on Monday, while Tuesday the Department of Commerce will release its GDP report. Reports on durable goods and personal income, as well as minutes from the recent Federal Open Market Committee meeting, will be released on Wednesday.
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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
