Tag Archives: Economics reporting
by Liz Hester
Car and truck sales numbers were released Monday, but not everyone saw them in the same light.
The Wall Street Journal story started off with questions about the ability of the market to continue growing, while the Associated Press story was more optimistic.
Here is the top of the WSJ story:
Strong demand for new pickup trucks and sport-utility vehicles boosted U.S. sales in May for major auto makers, but some analysts questioned whether the market’s recovery is starting to level off.
Among auto makers reporting May U.S. sales early Monday, results were mixed—with some companies reporting strong growth from a year ago, and others less dramatic improvements.
Forecasters predict total sales in the U.S. market climbed about 7% in May to 1.42 million light vehicles. Ford officials, in a conference call on Monday, estimated car-sales for the industry were up 9% for the month.
The actual sales total will be available later on Monday after all auto makers have reported their figures.
For the last four years, auto makers have enjoyed a steady recovery in new-car sales, which bottomed out in 2009, when Americans purchased just 10 million cars and light trucks. In 2012, auto sales rose 13% to 14.5 million vehicles.
This year, U.S. light-vehicle sales have continued to surge ahead, thanks to easy credit and an improving housing market that has boosted demand for pickups and lifted home prices, providing a wealth effect to homeowners. In anticipation of another strong year, U.S. car makers at some factories are skipping the traditional summer shutdown to keep cranking out new-car inventory. Ford said it expects to increase its third quarter U.S. production by 10% from a year ago to 740,000.
And now for the Associated Press version (via the New York Times), which is considerably more optimistic:
Price cuts at Nissan and strong demand for pickup trucks helped U.S. auto sales rebound in May after a slight dip in April.
General Motors reported its strongest monthly sales since September of 2008. Chrysler, Ford, and Toyota also reported increases. Nissan Motor Co. notched its highest May sales ever after cutting prices on seven popular models early in the month. Only Volkswagen said sales fell compared with May of last year.
The strong sales are another sign that auto sales will continue to boost the U.S. economy, as consumers replace aging vehicles and businesses invest in trucks as they gain confidence.
Builders are buying pickup trucks at a rapid pace as home construction continues to rebound. Ford Motor Co. said sales of its F-Series pickup — the nation’s best-selling vehicle — hit 71,604, their highest sales since March 2007. Chrysler Group said Ram pickup sales jumped 22 percent from last May to almost 32,000. Chevy Silverado sales rose 25 percent to more than 43,000.
Analysts expected a strong May for the industry after a slightly disappointed April. They forecast a 7 percent increase over May 2012 to around 1.4 million vehicles, putting the industry back on pace for full-year sales of more than 15 million.
The other coverage from Bloomberg and the New York Times blog were fairly straightforward recaps of the numbers for the top automakers. The Bloomberg analyst quote said that the housing market was a driving force behind car and truck sales:
“New home construction remains really the driving force behind growth in the pickup truck market, not to mention the fact that the energy markets have been booming out there,” Alec Gutierrez, an industry analyst for Kelley Blue Book, said in a telephone interview. “It means a ton for the domestic manufacturers. They really dominate the segment.”
It’s obvious that many experts disagree what’s going to happen with the economy and what the current state of auto sales actually forecasts. Maybe it just means that people put off buying new vehicles as long as possible. But maybe it’s a good sign that people are feeling better about their finances. Either way it’s interesting that the business media can see the same numbers so differently.
by Liz Hester
Federal Reserve Board Chairman Ben Bernanke appeared before a Congressional hearing on Wednesday and the headlines he made were decidedly different across the various national media covering his remarks.
First, the Wall Street Journal story, which ran with the headline “Bernanke: Bond Buys Could Slow at ‘Next Few Meetings’” and focused on the Fed’s ending of economic stimulus:
Federal Reserve Chairman Ben Bernanke said the central bank could begin winding down its $85 billion-a-month bond-buying program at one of its “next few meetings” if the economic data continues to improve, but he warned market participants that a step down in purchases won’t mean the Fed has started a one-way march toward the exit.
“We are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor-market outlook,” Mr. Bernanke said during a congressional hearing Wednesday, when pressed about when the Fed intends to end its easy-money policies.
If Fed officials see continued economic improvement and have confidence that it is going to be sustained “in the next few meetings we could take a step down” in pace of purchases, he said. At the same time, Mr. Bernanke said the Fed wants to be careful not to move prematurely on the policy shift.
When the Fed does take that step, Mr. Bernanke said it won’t mean we are “automatically aiming for a complete wind-down,” Mr. Bernanke said. “Rather we would be looking beyond that to seeing how the economy evolves and we could either raise or lower our pace of purchases going forward. Again that is dependent on the data,” he said.
Overall, Mr. Bernanke’s comments on winding down the bond-buying program indicate the Fed has a plan, but remains undecided about when to pull the trigger. When pressed further on timing, Mr. Bernanke declined to say whether the Fed would make this move by Labor Day.
The New York Times took nearly the opposite approach with a story running under the headline “Fed Stimulus Still Needed to Help Recovery, Bernanke Says”:
Despite recent improvement in the job market, the Federal Reserve needs to continue its stimulus efforts to avoid endangering the recovery, the Fed chairman, Ben S. Bernanke, told Congress on Wednesday.
While acknowledging the risks of historically low interest rates and the Fed’s aggressive policy of buying government bonds to help stimulate the economy, Mr. Bernanke said in testimony that “a premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.”
After his opening statement, however, Mr. Bernanke seemingly opened the door a bit wider to tapering down.
Under questioning by Representative Kevin Brady, a Texas Republican who chairs the Joint Economic Committee, Mr. Bernanke said the Fed could prepare to “take a step down” in the next few meetings if the outlook for the labor market improved.
“It’s dependent on the data,” he said. “If the outlook for the labor market improves, we would respond to that.”
The Washington Post took a much more political angle on the story, pointing out to Congress for the failures in the economy:
Ben Bernanke testifies before Congress today for the first time in three months, and the Federal Reserve chairman has a message for lawmakers: You’re the reason the economy isn’t taking off more.
Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that’s the gist of his message. Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, “fiscal policy at the federal level has become significantly more restrictive.”
“In particular,” his testimony says, “the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year.”
He adds that with the Fed’s interest rate policies already near zero, “monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”
It might be one thing if the fiscal retrenchment was also solving the country’s longer-term deficits. But, Bernanke says, it has not. “Although near-term fiscal restraint has increased, much less has been done to address the federal government’s longer-term fiscal imbalances,” he says in the prepared testimony. “Indeed, the [Congressional Budget Office] projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter.”
That’s three different leads from the nation’s leading newspapers, which makes it a bit confusing to determine the real message behind the Fed chairman’s remarks. Typically large news organizations tend to focus on similar leads and language, especially in covering remarks that are provided before. In this case, your guess to his meaning is as good as any.
by Liz Hester
Stocks rose on Wednesday despite the poor manufacturing numbers that fell for April. There was also mediocre news about the European economic recovery.
So, what are business journalists making of the stock market and how to cover such a seemingly large disconnect?
Here’s the Reuters story, via the New York Times:
Factory output dropped in April and manufacturing activity in New York state contracted this month, a sign that slowing global demand is weighing on the economy.
The anemic growth picture was highlighted by another report on Wednesday showing the largest decline in wholesale prices in three years. The data gives the Federal Reserve latitude to keep priming the economy with an easy monetary policy.
“The somewhat sluggish economic growth and limited inflation are the equivalent of rocket fuel for the Fed,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
U.S. Treasury debt prices rose on the reports and the dollar retreated from 4-1/2 year highs against the yen as investors fine-tuned their bets on Fed policy. Stocks on Wall Street trended higher while gold prices fell to their lowest in nearly a month.
Manufacturing production fell 0.4 percent last month after declining 0.3 percent in March, the Fed said. That pushed overall industrial output down by 0.5 percent, more than unwinding March’s 0.3 percent advance. Economists had expected industrial output to fall only 0.2 percent last month.
The drop in factory output, which accounts for more than 70 percent of industrial production, was broad-based and in keeping with data earlier this month that showed factory payrolls failed to expand last month.
Industrial capacity utilization, a measure of how fully the nation’s mines, factories and utilities are deploying their resources, dropped sharply from a more than 4-1/2 year high.
Bloomberg’s coverage cited the Federal Reserve’s stimulus as the reason for the continued rally:
JPMorgan & Chase Co. jumped 1.7 percent to its highest level since June 2007 as financial shares rallied. Procter & Gamble Co. added 1.5 percent as the index tracking consumer-staples stocks hit a record. Macy’s Inc. increased 2.5 percent after reporting profit that beat estimates. Netflix Inc. rose 4 percent, extending gains for a sixth day. Cisco Systems Inc. climbed 8.5 percent after the close of regular trading as quarterly earnings topped analyst forecasts.
The Standard & Poor’s 500 Index (SPX) rose 0.5 percent to 1,658.78 at 4 p.m. in New York. The benchmark equity gauge has set a record in nine of the past 10 sessions. The Dow Jones Industrial Average added 60.44 points, or 0.4 percent, to a record 15,275.69 today. More than 6.5 billion shares traded hands on U.S. exchanges today, or 3.5 percent above the three-month average.
Then there’s the Euro-zone’s lagging recovery. Here’s the Wall Street Journal coverage:
The euro-zone debt crisis has mutated into Europe’s longest slump of the postwar era, as the currency bloc’s economy shrank for the sixth-straight quarter with no recovery in sight for most of the 17 countries.
The euro zone’s output of goods and services, or gross domestic product, fell at an annualized rate of 0.9% in the first three months of this year, data released on Wednesday showed, deepening a recession that began in late 2011.
Depression-like conditions in Southern Europe, combined with slowing global growth, are dragging down the core economies: Germany is barely growing, France is steadily contracting.
The euro zone, which accounts for 17% of world GDP, remains the weakest link in the global economy, mired well below its level of economic activity before the 2008 financial crisis.
Low interest rates and abundant liquidity for banks—and above all, the European Central Bank’s pledge to prevent the collapse of euro-zone government bond markets—have led to strong recoveries in many European financial markets. But borrowing costs for businesses in Spain, Italy and Portugal remain significantly higher than in Northern Europe, impeding investment and job creation.
So, it’s a mixed bag in the U.S. and in Europe with investors betting that the central banks will continue to prop up lagging economies. As many in the world struggle to find full employment, it’s probably a good thing that governments are willing to continue to prop up the economy. It’s just a bonus that some are able to make money while they do it.
by Chris Roush
Egan writes, “To be sure, market participants didn’t appear to be suggesting anything sinister on the part of Hilsenrath. Instead, the comments indicate the perception that senior Fed officials may seek to influence market expectations on monetary policy through timely leaks to the Journal.
“‘My stories are based on a lot of reporting across a wide range of people inside and outside the Fed,’ Hilsenrath said in an email. ‘My intent is to accurately inform our readers about what the central bank is up to so they can make their own judgments, to hold the institution accountable and to break news. It is not to be a messenger.’
“The focus on a single reporter may not be entirely appropriate as investors looking to get an inside track on monetary policy similarly paid close attention to columns by other former Journal reporters, including Greg Ip.
“‘I’m glad people trust The Wall Street Journal enough to pay attention to our work,’ Hilsenrath said.
Read more here.
by Liz Hester
While all the international conferences on money may seem a bit over-covered and like they don’t have much influence, each business news outlet tends to focus on different parts of their talks. It’s important to cover meetings when the seven largest economies get together to discuss monetary policy. But what’s more interesting is what the reporters and editors think is most important – and how often that focus differs.
Here’s the lead from the Wall Street Journal:
The Group of Seven leading industrial nations on Saturday reaffirmed their commitment to refrain from deliberately weakening currencies through monetary policies.
The renewal of the commitment comes two days after the U.S. dollar’s exchange rate rose above ¥100 for the first time in four years, a milestone that was partly a consequence of a large stimulus program announced by the Bank of Japan in April.
The yen’s sharp drop is a potential source of tension with other G-7 nations as it benefits Japanese manufacturers at the expense of their rivals elsewhere.
However, U.K. Chancellor of the Exchequer George Osborne on Saturday worked to dispel speculation that there are strains within the G-7, saying the statement members made in February—a pledge to let market forces determine exchange rates and an assertion that central-bank policy would be focused solely on domestic objectives—had been successful.
The New York Times story chose to focus its introduction on Japan and the avoidance of tension about its stimulus policies:
Finance ministers from leading global economies on Saturday avoided a public rift with Japan over policies driving down the value of its currency, while keeping up pressure on Germany to help lift growth in Europe.
At the end of two days of talks among the Group of 7 finance ministers outside London, other nations appeared to accept — at least for now — Japan’s explanation that its new monetary efforts were meant to stimulate its domestic economy, rather than to drive down the yen on international currency markets.
The chancellor of the Exchequer in Britain, George Osborne, said on Saturday that ministers from the G-7, made up of the United States, Germany, Japan, Britain, Italy, France and Canada, had reaffirmed earlier commitments on exchange rates and agreed to make sure policies are “oriented towards achieving domestic objectives.” Other officials described the talks as in-depth and positive. Last week, the dollar breached the 100-yen mark for the first time in over four years.
The two-day meeting, in Buckinghamshire, also focused on efforts to stem tax avoidance and on banking reform, and Mr. Osborne said it was “important to complete swiftly our work to ensure that no banks are too big to fail.” The officials discussed efforts to create a European banking union, which have slowed in recent months.
“We agreed on the importance of ensuring banks’ balance sheets are adequately capitalized to enable them to play their role in supporting the economy,” Mr. Osborne said.
The talks took place against a background of growing austerity fatigue in Europe, and concern that the region’s focus on reducing deficits and debt risked driving some economies into a downward spiral.
Reuters (via CNBC) decided that banking reform was the biggest piece of news from the summit:
Group of Seven finance officials agreed on Saturday to press on with measures to deal with failing banks and gave a green light to Japan’s efforts to galvanize its economy.
British finance minister George Osborne said the finance ministers and central bankers meeting outside London focused on unfinished banking reforms.
The emergency rescue of Cyprus in March acted as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.
“It is important to complete swiftly our work to ensure that no banks are too big to fail,” Osborne told reporters after hosting a two-day meeting in a stately home 40 miles outside London.
“We must put regimes in place … to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner,” he said.
And Bloomberg chose to focus on Europe and its continuing struggles to put member economies back on track:
European policy makers expressed a willingness to consider new ways to revive their ailing economy as they confronted fresh U.S. pressure to take action.
The bloc’s finance ministers and central bankers left weekend talks of the Group of Seven signaling that they’re poised to scale back austerity, are open to increased monetary aid and looking to unfreeze bank lending. European officials will meet in Brussels tomorrow to discuss the economy and review aid payments for crisis-struck nations from Greece to Spain.
Europe’s governments are in the midst of a policy rethink after three years of slimming budgets as they face up to a deepening recession in the euro area and a record unemployment rate that’s exceeded 12 percent. Still in doubt for economists is what kind of stimulus will actually be delivered and what effect it could have in the crisis-torn 17-member currency bloc.
“The new ‘fiscal realism’ is in evidence,” Mark Wall, co-chief European economist at Deutsche Bank AG in London, said in a report to clients. “Austerity may have reached its political limits and markets are happy to see some rebalancing. The key remains economic growth.”
But no matter which part you think it most important, the agreements and policy decisions coming out of these summits or meetings do have an effect on the average person. Markets will move, portfolio decisions will be made and investors need to pay attention to the signals coming from these meetings. It could be the difference between a return to growth and continued recession.
by Chris Roush
Last week, ProPublica and NYU’s Arthur L. Carter Journalism Institute hosted a discussion on the 2008 financial crisis and how, if at all, it impacted our panel of top Wall Street journalists – both their outlook and their work.
The discussion included Jesse Eisinger, ProPublica; Chrystia Freeland, Reuters; James B. Stewart, New York Times; and Megan McArdle, Newsweek/Daily Beast. It was moderated by Felix Salmon of Reuters.
by Liz Hester
The closely watched Federal Reserve meeting this week had some investors and journalists looking for changes to the bond-buying plans that have been in effect for much of the past year. And they got it with the Fed signaling that it might increase the purchases if necessary, a shift from previous statement they would remain constant.
Here’s the story from the Wall Street Journal:
Federal Reserve officials said they will press ahead with their $85-billion-a-month bond-buying program and signaled they could either increase or decrease the amount they purchase each month depending on the job market and inflation.
The Fed’s latest policy statement marks a shift from earlier this year, when officials didn’t explicitly hold out the possibility of increased bond purchases. Rather, they had begun to openly discuss gradually winding down the program.
“The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes,” the Fed said in its official statement.
In the policy statement released Wednesday, the Fed said inflation was “running somewhat below” the central bank’s 2% goal and that the job market had “shown some improvement,” almost exactly how it described the economic situation in its March statement. The Fed has said it would keep the bond-buying programs going until it saw substantial gains in the job market.
One of the bigger shifts for the Fed since its March policy meeting is on the inflation front. The Commerce Department reported Monday that consumer prices—as measured by its personal-consumption-expenditure price index—were up 1% in March from a year earlier, the smallest year-on-year increase since late 2009.
The New York Times added this context to the discussion:
The pace of economic growth appeared to slow in the weeks before the meeting. Inflation slackened in March to the slowest pace in two years, while employers added the fewest jobs in any month since last summer. And economists say that the pain of federal spending cuts is just starting to be felt.
Inflation was just 1.1 percent in the 12 months that ended in March, according to the most recent data from the Fed’s preferred inflation gauge, the Commerce Department’s index of personal consumption expenditures. That is well below the 2 percent annual pace that the Fed considers healthy.
Moreover, the share of Americans with jobs has not increased since the recession.
The central bank is modestly expanding its stimulus campaign each month as it expands its bond portfolio. But the Fed’s most recent economic projections, published in March, showed that most officials expected persistently low inflation and persistently high unemployment for years to come.
Officials, however, are reluctant to do more. They see modest benefits and uncertain costs in buying more bonds. The volume of the Fed’s first-quarter purchases already roughly equaled the volume of new mortgage bond issuance and about 72 percent of the volume of new issuance of long-term federal debt.
And the Fed already has tied the duration of low interest rates to the unemployment rate, announcing in December that it intended to hold its benchmark short-term interest rate near zero at least as long as the unemployment rate remained above 6.5 percent, provided that inflation remained under control.
Still, the Fed changed the language of its statement to emphasize that it was willing to adjust the pace of its asset purchases. “The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes,” it said.
What’s interesting is that many analysts expected the Federal Reserve to decrease its purchases, not signal an increase if necessary. This may be a sign that members of the Fed are also having difficulty piecing together the economic news to get a full picture of where the economy is heading. Here’s the USA Today take on the news:
Until recently, strong economic activity and job growth early this year had persuaded Fed policymakers to signal that they could begin to scale back the bond purchases by midyear to head off inflation and market instability.
But a report earlier in late April showed inflation in March increased just 1% versus a the same a year ago, well below the Fed’s 2% target. Such a meager rise in wages and prices typically reflects a weak economy and it can prompt consumers to put off purchases on the belief that prices are likely to remain low.
As a result, some Fed officials recently have discussed the possibility of increasing the pace of the bond purchases in the unlikely event that very low inflation persists.
The Fed said in its May 1 statement that the economy has continued to grow moderately the past six weeks but it noted that deficit-cutting “is restraining economic growth.”
Recent across-the-board federal spending reductions and Congress’s failure to renew a payroll tax cut have begun to dampen growth.
As everyone searches for the elusive signal that the economic growth is actually here to stay, looks like even those at the top of the monetary policy are going to play it safe. They’re certainly not ready to make a call one way or the other based on Wednesday’s statements.
by Chris Roush
Tom Hudson, who had been co-anchor of “Nightly Business Report” until it was acquired earlier this year by CNBC, has gotten a job as a special correspondent for WLRN in Miami producing and hosting a series of programs on key economic issues for South Florida.
The six, one-hour programs will air in May and June and be called “The Sunshine Economy.” Along with veteran Time Latin America correspondent Tim Padgett, the first program on May 6 will examine the changing relationship between the U.S. and Latin America.
Other shows will examine health care, tourism, real estate, the business of hurricanes, and the future of start-ups in South Florida.
“The last time I was on FM radio the job market was weak, the U.S. economy was being buffeted by emerging markets and a health care debate was raging,” said Hudson in an email to Talking Biz News. “Some things haven’t changed since 1993.”
Hudson became the co-anchor of Miami-based “Nightly Business Report” on PBS stations in early January 2010, replacing Paul Kangas, who had been an anchor on the show for its first 30 years.
Hudson came from the Midwest. He previously was at Chicago-based “First Business,” where Hudson played a leading role in steering the show’s editorial direction both on-air and online. Previously, Hudson was an anchor for WebFN.com, a news anchor at WMAQ Radio in Chicago, and news director at the Quad Cities Radio Group in Davenport, Iowa.
by Liz Hester
This week is a big one for economic news with housing reports, the Federal Reserve meeting and confidence numbers in just the first two days. The national news outlooks chose to focus on different pieces of the equation. While there’s no easy way to pull it all together, let’s take a look at what we have so far.
The New York Times did an A1 piece Tuesday about expectations for Federal Reserve monetary policy given the nascent recovery in the economy, but not employment numbers:
The Federal Reserve is making modest progress in its push to reduce the unemployment rate. But that is not the jobs goal Congress actually established for the Fed. The central bank is supposed to be maximizing employment. And on that front, it is not making progress.
The share of American adults with jobs has hovered around 58.5 percent for more than three years, roughly five percentage points below its prerecession peak.
Job creation has merely kept pace with population growth. The unemployment rate, now 7.6 percent, has fallen mostly because people stopped looking for work.
There is little sign, however, that Fed officials are considering an expansion of their four-year-old stimulus campaign as the Fed’s policy-making committee prepares to convene Tuesday and Wednesday in Washington.
The article goes on to say that the Fed cites increased home prices as another reason that the economy is rebounding. The Wall Street Journal reported that home prices climbed the most in seven years:
Sharp drops in the number of homes listed for sale and growing demand for home purchases sent U.S. home prices up by 9.3% in February from a year ago, the largest growth rate in nearly seven years, according to a report released Tuesday.
The Standard & Poor’s/Case-Shiller home-price index tracking 20 cities offered the latest signal that the U.S. housing market has rebounded after home prices reached a bottom in March 2012.
All 20 cities in the index posted an increase in prices versus one year ago for the second straight month. That hasn’t happened since 2005. Prices in Atlanta rose by 16.5%, the largest increase in the 21-year history of the Case-Shiller series for that market, and prices in Dallas were up by 7.1%, the record for the 12-year history of that index.
But the story did sound a note of caution:
Some economists have warned that home prices may not be rising nearly as quickly as home-price indexes, such as the widely watched Case-Shiller index, would suggest. The Case-Shiller index is based on repeat sales of the same homes and includes foreclosure-related sales, which tend to sell for less than comparable nondistressed properties because they require more upkeep. The upshot is that when sales of cheaper foreclosed properties are rising, the Case-Shiller index will look worse. The inverse is true today. As the share of foreclosed-property sales has declined, the index is being pushed higher.
The home-price growth shown in Tuesday’s report is “not broadly reflective of what’s happening in the national housing market right now,” said Stan Humphries, chief economist at Zillow Inc., which publishes a separate home-value forecast that doesn’t include foreclosures. That series showed that home prices through March were up by 5.1% from one year ago. The Case-Shiller series, “is overly skewed to quickly rebounding markets…and is being boosted by a shift in transactions away from foreclosure resales,” said Mr. Humphries.
But consumers don’t seem too concerned about the caution some economists are urging as confidence rose in April, according to Bloomberg:
Consumer confidence unexpectedly jumped in April, and the rebound in home values accelerated earlier this year, showing the recovery in residential real estate is buttressing the U.S. economy.
The Conference Board’s sentiment index climbed to 68.1, exceeding the highest estimate in a Bloomberg survey of economists, data from the New York-based private research group showed today. The S&P/Case-Shiller index of home prices in 20 cities rose 9.3 percent in February from the same month in 2012, the biggest year-to-year advance since 2006.
“It’s pretty clear that housing is recovering,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, and the second-best confidence forecaster for the past two years, according to data compiled by Bloomberg. “That’s a positive for growth. It boosts wealth and confidence.”
Rising home and stock prices are helping repair finances left in tatters by the recession, leading to gains in sentiment that may limit any slowdown in household spending, the biggest part of the economy. For now, an increase in the payroll tax and cuts in federal outlays may be starting to pinch, prompting a slackening in manufacturing that is restraining growth.
The increase in the confidence gauge was led by a gain in the measure of expectations for the next six months, which climbed to a five-month high.
The share of households projecting their incomes will rise over that time period advanced to the highest since April 2011.
All of this confidence and recovery will hopefully translate into a more stable economy, but some are still skeptical, Bloomberg said:
Chipotle Mexican Grill Inc. (CMG) is among companies seeing a lack of consistency from the American consumer.
“It seems like the economy is off to a great start and then every time, about this time every year for the last two years in the spring, we get mixed signals on consumer confidence and job creation and things like that,” Chief Financial Officer John Hartung said in an April 18 conference call.
Household spending in the first quarter increased at a 3.2 percent annualized rate, the biggest gain since the fourth quarter of 2010, Commerce Department figures showed April 26.
At the same time, a report yesterday showed spending began to cool late in the quarter. Purchases climbed 0.2 percent in March after a 0.7 percent surge in the prior month, the Commerce Department said. Economists project outlays in the current quarter will grow at a 1.8 percent annual rate, according to the median estimate in a Bloomberg survey from April 5 to April 9.
Hindering households is the two percentage-point increase in the tax that funds Social Security, which took effect at the start of the year. Americans earning $50,000 a year are taking home about $80 less a month.
While there are obviously many different opinions on where the economy is heading, it’s good that most of these stories seem to be presenting a balanced view. Coverage is not just cherry picking the up or the down data to present a simple story, but taking into account the nuances of trying to pull all the data together. Only time will tell which way the economy is heading, but I’m glad to see organizations trying to look at all the data and not just what suits their theories.
by Chris Roush
The Wall Street Journal has published an article on Monday that has debunked the myth that federal disability benefits are to blame for the shrinking labor force, a claim previously pushed by the paper itself, reports Hannah Groch-Begley of Media Matters for America.
Groch-Begley writes, “An April 29 Journal article headlined “Real Culprit Behind Smaller Workforce: Age” explained that the recent decrease in the labor force — the number of employed and unemployed Americans who are currently seeking work — ‘has more to do with retiring baby boomers than frustrated job seekers abandoning their searches.’ The article noted that claims that Americans are voluntarily leaving the workforce to receive Disability Insurance instead of working, for example, ‘may be exaggerated,’ and explained that retirees and students made up a far more significant portion of those leaving the labor force. The article included the following graph, showing disability was the least common reason for individuals leaving the workforce in March 2013:
“However, the Journal has previously pushed the myth that Disability Insurance accounted for much of the dropping labor force participation rate. An April 10 article headlined ‘Workers Stuck in Disability Stunt Economic Recovery’ claimed that workers receiving disability benefits were costing the economy billions by not instead participating in the labor force, and quoted economist Michael Feroli’s claim that ‘worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences.’ These claims are in direct contradiction to the Journal’s most recent reporting.”
Read more here.