Economy | timiacono.com - Part 5

The Commerce Department reported(.pdf) that retail sales were unchanged in July following a modest 0.2 percent gain in June and, for the second month in a row, auto sales declined.

Motor vehicle sales dropped 0.2 percent after falling 0.3 percent the month prior, but the July weakness was not only in autos as retailers in five of the thirteen major categories reported lower receipts. Excluding motor vehicles, sales rose just 0.1 percent and, excluding both autos and gasoline, sales were also up just 0.1 percent.

General merchandise stores saw sales drop 0.5 percent and smaller declines were reported at furniture stores, electronics stores, and at nonstore retailers (e.g., internet sales). Strength was reported at clothing stores and health stores where sales rose 0.4 percent and miscellaneous store retailers saw an even larger increase of 0.9 percent for the month.

After robust GDP growth during most of the second quarter, it appears the American consumer may be taking a break over the summer, at least when it comes to buying cars.

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The Labor Department reported that U.S. employers added 209,000 jobs in July and prior months were revised slightly higher as the unemployment rate rose from 6.1 percent to 6.2 percent, due largely to people entering the labor force but not being able to find work.

In a separate report from the Institute for Supply Management, the broadest measure of the nation’s manufacturing sector showed strong growth last month as the Purchasing Managers Index rose from 55.3 in June to 57.1 in July, the highest level since April 2011.

The key new orders index jumped from 58.9 to 63.4, the best reading of the year, and the employment index rose from 52.8 to 58.2, the best reading in over two years.

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Economy Expands at 4.0% Annual Rate in Q2

The Commerce Department reported that the U.S. economy expanded at a rate of 4.0 percent in the second quarter, well above the consensus estimate of 3.0 percent, and the contraction during the first quarter was revised up from a -2.9 percent rate to -2.1 percent.

Inventory growth was the primary reason for the strong expansion as this component contributed 1.7 percentage points to the overall growth rate after subtracting 1.1 percentage points to the first quarter rate. Consumer spending also contributed 1.7 percentage points with durable goods sales, particularly autos, responsible for the bulk of the increase.

This report also included regular annual revisions to the data that showed growth in 2011 and 2012 was worse than previously believed but that 2013 was much better. Based on the quarterly rates, 2011 growth was revised down from 2.1 percent to 1.7 percent and, in 2012, the economy expanded at a rate of just 1.6 percent versus 2.0 percent  as previously reported. Data for last year was revised sharply higher, up from 2.6 percent to 3.1 percent.

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Warren, Yellen, and Too Big to Fail

It appears they left the best for last yesterday as Sen. Elizabeth Warren (D-MA) closed out day one of Fed Chair Janet Yellen’s semi-annual monetary policy report to Congress with this wholly unsatisfying exchange about too-big-to-fail banks (hat tip Not Quant).

Skip to the 1:34:45 mark of the entire CSPAN video here to find another interesting exchange, this one with Sen. Tom Coburn (R-OK) where Yellen is asked whether it might not be a better idea to just not create so many asset bubbles to begin with.

Well, he didn’t exactly ask it like that…

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