Economy Continues to Gain Traction
Monday, February 25, 2013
Press release from the issuing company
Last week: The U.S. economy is gaining some traction. The Conference Board Coincident Economic Index® for the U.S. (a measure of where the economy is right now) rose in January for the third consecutive month. The Conference Board Leading Economic Index® for the U.S. (a signal of where the economy is headed near-term) also increased, suggesting the economy is building momentum, even as the federal government is about to face some serious spending cuts. It’s not just the domestic economy that’s showing some improvement. The Conference Board Leading Economic Index® for China rose by 1 percent. If the domestic economy is picking up a little steam, and economies abroad are starting to expand a little faster, then international trade is also likely to gain some traction, reinforcing some of these positive trends over the next few months.
Tuesday, February 26
Job growth remained relatively modest through January. But consumer expectations turned lower. Did this change in February?
Wednesday, February 27
The euro-zone economy contracted by 0.6 percent in the fourth quarter, and is probably still contracting this quarter. Consumers are not spending. Factories are not busy. And the public sector continues to operate under an austerity regime in many countries. Trade with European partners and the rest of the world is not picking up. Did the indicator data in January suggest any improvement in the second and third quarters of 2013?
EURO-AREA Economic Sentiment Index, February (European Commission)
Sentiment remains pessimistic, although the mood could be improving slightly as the pace of economic contraction slows and financial volatility quiets down. There is some sense that conditions might actually improve in 2013. This is a view shared at the World Economic Forum in Davos. But only if employment and income start improving will sentiment continue to recover.
8:30am Orders for Durable Goods, January (Bureau of the Census)
The ordering rate has remained relatively weak for more than a year. With consumer demand a little stronger, is there reason to think “core” orders (which exclude transportation) are gaining some traction? And if so, might industrial production also gain a little traction?
Thursday, February 28
The initial estimate (0.1 percent decline in fourth quarter GDP annualized) was surprising. Since the initial release, data on international trade and inventory have pointed to an upward revision – a small positive gain instead of a slight decline. More importantly, data to date suggest a better first quarter of this year, notwithstanding the hike in withholding rates and the looming cuts in federal spending.
Friday, March 1
With the economy contracting, and energy prices falling, overall retail inflation is slow, though it remains above the European Central Bank target of 2 percent. It was just above that rate in November and December, but edging lower. With the economy contracting, there is some downward pressure on prices. Ironically, austerity in some cases entails raising taxes, which effectively raises prices. The rate of retail inflation might have dipped below 2 percent in February. It likely won’t go much lower, but it’s still a long way off from climbing, even with tax hikes and possibly higher oil prices.
8:30am Personal Income and Outlays, January (Bureau of Economic Analysis)
Income growth has been in a range of about 0.2 to 0.3 percent, while spending has generally been in a slightly lower range. With the exception of pent-up demand for vehicles, spending has generally been reflecting continued consumer caution, especially with respect to financing purchases. Moreover, with the higher withholding rates, spending might even be a little slower in the first quarter than during the holidays. The underlying trend of slow job growth and even slower wage growth, along with a desire to pay down debt, continues to limit consumer demand.
10:00am U.S. PMI, February (Institute for Supply Management)
U.S. purchasing managers have been a little more optimistic than their counterparts across either ocean. Why? Consumer demand has been showing some strength. Industrial production has been rising, despite a soft ordering rate. However, these conditions aren’t likely to send the purchasing manager sentiment significantly higher. So the reading in February isn’t likely to be much higher than in January.
Vehicle Sales, February
The pace of vehicle buying has remained close to a range of about 15.5 to 16.0 million units over the past few months, largely as a result of pent-up demand. In some cases, consumers had waited since 2007 to buy a new car. By 2012, it was clear that the old clunker either would not go any more or was too costly to repair. The only real question is how long it will take before pent-up demand runs its course. That could be developing this winter. In fact, it would not be surprising if the pace started to moderate as early as January.
THE SITUATION ABROAD
FACT OF THE WEEK
The economy has been weak for nearly a decade. One response among younger potential workers is to stay in school or go back to school to more fully develop their skill sets. The result: 6 million are currently enrolled in graduate schools across the nation. And as a consequence, 40 percent of all households are paying down student loans (now totaling over a trillion dollars), up from 34 percent in 2007 (according to data from the Pew Research Center).
QUESTION OF THE WEEK
One big problem with seven billion people on the planet today, and perhaps 2.5 billion more by mid-century, is how to feed the world. The task is made more difficult as farm land is converted to urban use. One potential solution is the use of so-called genetically modified food. An experiment beginning this year: growing “Golden Rice” in the Philippines. This rice has been modified to contain more vitamin A. Why?
Three billion people, not quite half the global population, depend on rice as a basic staple in their diet. Moreover, one in ten among this population group is at risk (according to the World Health Organization) of a deficiency in vitamin A. Among other consequences, blindness can result from such a deficiency. Hence, much research has been conducted focusing on ways to modify rice so that it would contain more of this vitamin, limiting deficiency especially among very young children (5 years of age or younger).
The American Journal of Clinical Nutrition suggests that 50 grams of this rice (two ounces) might provide 60 percent of the recommended daily intake of vitamin A. In short, if it works, golden rice might be more nutritional than spinach. Of course, a child could be given a vitamin pill. Golden rice holds the promise, if it works, of being cheaper than a pill, maybe even one-twentieth the cost. And if it works, the child grows to adulthood with his sight not impaired. Thus, a more productive workforce could be the long-term benefit, if it works.
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