The Federal Reserve beige book of regional economic conditions came out this last week, and the conclusion was ‘moderate growth,’ although labor has fallen off a bit.  Almost all of the Fed’s regions (Philadelphia was the exception) were generally showing decent growth.  Echoing these same sentiments, Chairman Bernanke’s remarks to the Joint Economic Committee weren’t earth-shattering in terms of surprises.  He classified current economic growth again as ‘moderate,’ although ‘significant downside risks to the outlook’ remain.  Also, he commented on labor market slowing, which he and other economists believe may be partially due to weather issues earlier on in the year and/or choppiness due to a recovery process as the result of excessive layoffs during the Great Recession.  Read more

As you might have expected, there is a lot to talk about this week.  So much so, that we turned this Weekly Review into a ‘Special Edition’ variety.

In the revised estimate, first quarter GDP growth was adjusted from 2.2% down to 1.9%.  This would probably not be as surprising or impactful in its own right, but coupled with more immediate May data, it made a negative dent on investor sentiment.  The details of the report included higher final sales, while consumer spending was revised down, as was government spending (a big part of this).  While disappointing, this data is now old news.  Second quarter growth is expected to be a bit better, but maybe not dramatically so.  Estimates have remained in the 2.0-3.0% range, although we very well could stay in the lower end of that for the time being. Read more

A larger number of eyes were looking at regional Fed surveys this week, due to the weaker-than-expected Philadelphia Fed number from last week.  The Richmond Fed index fell more than expected, from +14 in April to +4 in May, as shipments fell; however, employment rose strongly.

Durable goods orders were generally in line with consensus for April—up +0.2% on the month.  However, the goods orders less transports (aka ‘key components version’) was weaker than anticipated (down -0.6% versus a forecast +0.8%).  ‘Core’ orders, which excluded non-defensive items and aircraft fell by almost 2%.  These figures are poorer, not dramatically so, but still point to a possible soft spot in economic growth during the past few months. Read more

Consumer borrowing increased by $21.3 billion for March to $2.54 trillion, which represented the largest monthly increase since November 2001. In addition, the bank loan officer survey showed an increased willingness to lend. Apparently, the feared credit contraction from consumers buckling down and doing some ‘extreme’ saving hasn’t happened, at least on a permanent basis. Despite a lack of confidence and continued economic fears, this isn’t entirely surprising, as it can take a long time to change economic and cultural behavior—assuming a change is what people are after in the first place. Americans are spenders.
Read more

The April ISM rose somewhat unexpectedly in April (from 53.4 to 54.8—strongest since June of last year), and the composition was not bad either, as new orders, production and employment were all higher. The inventory portion of the index was down, which was an indirect positive as well. This was arguably the most important release of the week.

On the negative side, construction spending rose less than expected for March (up +0.1% versus consensus +0.5%), and a few prior months were revised downward. As for details, the private construction spending side was up almost a percent, while government outlays dropped by a bit more—causing the net difference. Read more

Another mixed, but not bad week for economic news.

The first of several estimates for first quarter 2012 GDP came out at +2.2%, which was slightly weaker than the +2.5% growth rate expected by consensus.  The composition of the report was not especially robust, as inventory buildup contributed more to the growth number than expected, as compared to final sales, and business fixed investments and government expenditures (mostly defense spending) declined.  However, consumer spending as a component of the report was solid and was much better than first thought, and residential investment increased dramatically.  What does this mean?  Not a lot yet.  These numbers are early estimates, and subject to revision, but, at the same time, demonstrate that the economy is still in fragile footing but just plugging along fast enough to avoid the +2% ‘stall speed.’  The 2.0-3.0% is a wide but anticipated range for GDP for most of 2012 and we seem to be right within that band. Read more