Economy | - Part 4

April Retail Sales Disappoints

Markets will likely cheer the news from the Commerce Department that U.S. retail sales flat-lined in April (when most analysts were expecting solid gains) as this makes it less likely that the Federal Reserve will raise interest rates anytime soon.

As shown above, the result for April was slightly negative, but rounded to zero and, when combined with the report on business inventories in the next hour or so should make for an exciting update to the Atlanta Fed’s closely watched GDPNow forecast at 10 AM.

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What a Difference Two Percent Makes?

The chart below from this item at the Wall Street Journal’s Real Time Economics Blog may go a long way in explaining why wages aren’t rising nearly as fast as  they should be, given the tumbling jobless rate and steady rise in non-farm payrolls over the last few years.

While the overall jobless rate is now back to the pre-2008 norm of the low 5 percent range (and, yes, the historically low participation rate has helped push this down), the make-up of that workforce is different enough (i.e., part-time workers for both reasons in the chart above are about one percentage point higher than before the financial crisis) that pressure on wages is much less than it would otherwise be (or so the theory goes).

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Q2 GDPNow Now Available

Much is being made about how yesterday’s report of a widening U.S. trade deficit in March has pushed first quarter economic growth into negative territory, from a rate of +0.2 percent to somewhere around -0.5 percent (subject to further revisions).

Naturally, analysts think things will improve as we head toward summer, but it’s worth looking at what the Atlanta Fed’s GDP Now measure has to say about Q2 growth, seeing as they nailed it in Q1 as noted here last week.

Of course, there’s not a whole lot of data available for the second quarter yet – the April ISM Manufacturing Index is about it as far as I can tell from the Atlanta Fed website.

Nonetheless, their forecast is based on something, rather than the perpetually optimistic outlook from most economists and other analysts in the “Blue Chip consensus” who, collectively, missed the Q1 growth rate by a country mile.


Add the title above to the growing list of oddly amusing new words prompted by the ongoing crisis in Greece though, from the looks of the graphic below from this story at the Telegraph, they may be a bit premature.

Though Ireland appears to have pulled back from the abyss, never to return, the Italian economy is not looking so hot these days along with Cyprus that, until their own crisis a few years back, was flying (relatively) high.

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The Fed/Dollar/Oil Menage a Trois

More evidence of the outsized impact that traders have on the financial world and, as a result, the lives of billions of people on the planet, comes via recent developments in the U.S. economy, signals from the Fed, the trade-weighted dollar, and energy prices.

Yesterday’s stinker of a GDP report and the recent central bank caution about raising interest rates compelled traders to hit the sell button on their U.S. dollar positions and the greenback went tumbling from its recent perch, a trend that seems likely to continue.

Of course, energy traders saw the falling dollar and hit the buy button on oil futures so, now, all of a sudden bottom-calling for  crude oil prices is back in fashion.

Obviously, there are other important factors involved in the 50 percent plunge in oil prices since last summer (i.e., shale oil, Saudi policy), but the 25 percent strengthening of the U.S. currency was a big factor as commodity traders are like Pavlov’s dogs when it comes to the value of the world’s reserve currency relative to its freely traded rivals.

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