|
|
|
|
||
Re: CS post with graphs showing drift toward recessionhttp://www.businesscycle.com/news/1186/ Economy Firms, Weaker Sectors Improve Del.icio.us Digg Print 26-May-2007 May 25, 2007 (Investor’s Business Daily) The economic outlook for the second half of 2007 looks slightly better ahead of a data-packed week that includes May reports on jobs and national factory activity. The Economic Cycle Research Institute's gauge of future economic activity has perked up. Its leading index's annualized growth rate hit new three-year highs in each of the last three weeks. "This points to improving prospects for the economy in the second half," said Lakshman Achuthan, ECRI's managing director. He called the possibility of a recession this year "minuscule." The index's rise stems from some healing in sickly manufacturing. "Services were always holding up. But the industrial side is (improving) where it used to be a drag on the economy," he said. Durable goods orders rose 0.6% in April, the third straight monthly gain. Core capital goods orders, a proxy for business investment, are turning higher again as well. The ISM manufacturing index and industrial production also signal a factory rebound. Achuthan characterized the current economy as "Goldilocks with blemishes," or one marked by moderate growth and expectations for moderate inflation. So what about those blemishes? Right now, core inflation remains just above the Federal Reserve's 2% comfort zone. While policymakers seem hopeful that price pressures will continue to cool, they remain biased toward hiking rates if that doesn't happen. Gasoline prices are already at record highs as the summer driving season kicks off. But wages, a bigger factor for inflation, have risen less than expected for much of the year. Sustained productivity growth has kept anticipated inflationary increases mostly at bay, though efficiency gains are slowing. "It's a mixed picture but when I add up pluses and minuses, pluses look a little better now than they have over the last six months," said Stuart Hoffman, chief economist at PNC Financial Services. But he does see some slowdown ahead for consumers. April tax payments, gas prices and smaller wage gains could weigh on consumer sentiment. Plus, hiring has slowed in recent months. Jobless claims have fallen over the last few weeks — the four-week average sank to a 15-month low last week. And that's with unemployment already at a low 4.5%. Economists expect Friday's jobs report to show an increase of 140,000 jobs in May after April's anemic 88,000 payroll gains. The final worry remains, of course, housing. But last week offered a ray of hope on that front. Existing-home sales fell 2.6% in April to a four-year low. But new-home sales surged last month. Builders continue to slash construction plans to try to pare a glut of unsold homes. But after weighing heavily on overall economic growth for the last three quarters, hopes are rising that housing's drag is lessening. Stock investors are bullish. The major averages have all hit record or multiyear highs in recent days. Bond traders also seem to see room for optimism. The 10-year Treasury yield has jumped 23 basis points this month to 4.86%. "The bond market is expecting economic growth will accelerate . . . but won't necessarily be inflationary," Hoffman said. |
return to message board, top of board |