Elliott Pollack sizes up the Fed’s stimulus

Retail sales up in Maricopa County, state.

The Monday Morning Quarterback: A quick analysis of important economic data released over the last week

It was an important week for the economy.  The Fed announced that it would move forward with QE3.  The Fed pledged to keep interest rates low into 2015.  This is an indication of how weak the Fed considers present economic conditions. Obviously, the stock market liked the Fed’s actions. The economy is moving forward like a sprinter in a mud bog. Another month of, at best, mixed economic reports left the consensus forecast predicting continued disappointing performance next quarter and next year.

Real GDP is expected to register growth of 1.7% this quarter.  That is about the same as the second quarter’s 1.8%. For 2013, year over year growth in real GDP is expected to be a modest 2.1%.  Even that assumes a “fiscal cliff” (the automatic spending cuts and tax increases that would occur because of Congress failing to deal with the recommendations of the Supercommittee).

In July, total consumer credit decreased at a seasonally adjusted annual rate (SAAR) of 1.5%. Revolving credit declined at a 6.75% SAAR.  Non-revolving credit increased at a 1% rate.  The decline in consumer credit of $3.3 billion was a surprise as the consensus forecast predicted an increase of $10.0 billion.

This suggests that consumers are not done restructuring and are still nervous about spending.  On the other hand, the University of Michigan index consumer sentiment increased to 79.2 in September compared to 74.3 in August.  While the overall level is still low by historic standards, it was above expectations.  Retail sales were up 0.9% in August over July and now stand 4.7% above year earlier levels. Initial claims for unemployment insurance jumped to 382,000 for the week ending September 8.  This is up from 367,000 claims the week earlier.

Industrial production fell 1.2% in August.  This was below expectations.  Hurricane Isaac restrained output in the Gulf Coast region at the end of August.  When September data comes out, the extent that the decline was due to Isaac will be evident.  As a result of the decline, capacity utilization declined from 79.2% to 78.2%.  This is important because business historically has expanded spending on new plant when capacity utilization gets above 80%.

Consumer prices nationally (CPI-U) increased 0.6% in August on a seasonally adjusted basis.  While this is a significant increase, consumer prices were up just 1.7% over year earlier levels.  All items less food and energy (the base rate of inflation) were up only 1.9% over a year ago.

As for Arizona data, retail sales were up 4.7% over year earlier levels in July.  For Maricopa County, retail sales were up 5.4% in July on a year over year basis.

Top Stories of the Week

Efficacy of stimulus in Arizona debated 

Gas prices rise, and so does demand 

Share this!

Additional Articles

News Categories

Get Our Twice Weekly Newsletter!

* indicates required

Rose Law Group pc values “outrageous client service.” We pride ourselves on hyper-responsiveness to our clients’ needs and an extraordinary record of success in achieving our clients’ goals. We know we get results and our list of outstanding clients speaks to the quality of our work.

September 2012