Deller's two cents: More modest news this week, economy is still moving forward, but the economy is still not firing on all cylinders. Surprisingly, the Wisconsin economy was not hit as hard as the rest of the country in this past recession, but as the national economy is recovering the Wisconsin economy is moving in the opposite direction.
Economic Week in Review: Service-sector activity downshifts again
December 09, 2011
Growth in service-sector activity slowed for the third month in a row as other economic reports issued mixed signals. News from Europe continued to weigh on the markets, even as some European Union nations announced a plan to address the debt burden plaguing the EU economies. For the week ended December 9, the S&P 500 Index rose 0.9% to 1,255.2 (for a year-to-date total return-including price change plus dividends-of about 1.8%). The yield on the 10-year U.S. Treasury note rose 2 basis points to 2.07% (for a year-to-date drop of 123 basis points).
Service sector slips
The Institute for Supply Management (ISM) Non-Manufacturing Index dropped nearly a point in November to 52.0, well below the 53.5 forecast and the third straight monthly decline. The report, culled from surveys of service-sector companies, followed an October index that was the lowest since January 2010. Numbers above 50 indicate expansion, which continues its downward slide from February's yearly high. The report contained some contradictions, as business activity and exports rose while service sector employment fell.
Trade gap narrows
The U.S. trade deficit narrowed for the fourth consecutive month in October, even as exports fell for the first time in four months. The deficit fell to $43.5 billion, as strong exports of capital goods and petroleum products helped offset the slight decline in overall exports. Imports dropped 1% for the month. The trade numbers were expected and could be seen as a good sign for U.S. economic growth.
Consumer credit up
U.S. consumer credit rose to $7.6 billion in October, driven largely by an increase in nonrevolving credit, which includes big-ticket items such as car and student loans. Revolving credit, which includes credit cards, expanded more than $360 million. This marks the ninth monthly increase in outstanding credit this year, as consumers seem more willing to assume debt as they move into the holiday season despite high unemployment and a meager (1.8%) average wage increase.
Factory orders down
U.S. factory orders fell in October for the second straight month, as manufacturers continued their struggle to gain traction in the sluggish economy. Orders fell 0.4% to $450 billion, slightly more than forecast and triggered largely by a nearly 1% drop in orders for nondefense capital goods. Analysts believe the sharp economic pause earlier this year continues to restrain manufacturers.
The economic week ahead
Next week's reports begin Tuesday with data on retail sales and business inventories, along with the Federal Open Market Committee's scheduled meeting. Reports continue on Thursday with the Producer Price Index and industrial production, followed by the Consumer Price Index 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
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