Good News & Bad News On the Economy
Kurt Brouwer December 27th, 2007
This final quarter of the year 2007, seems to be a pivot point. Is the economy going to maintain its momentum or succumb to the combined onslaught of soaring energy prices and slumping home prices? The recent news is mixed. Consumer confidence rose a bit, but orders for durable goods (cars, planes, washing machines…) fell a bit, while retail sales did okay. A key question is what is the Federal Reserve planning? Most still think a few interest rate cuts are in order [emphasis added below]:
U.S. Economy: Durable Goods Orders Increase Less Than Forecast (Bloomberg, December 27, 2007, Courtney Schlisserman and Robert Willis)
‘…The U.S. economic slowdown spread beyond housing as companies ordered fewer durable goods than forecast, even as consumer confidence improved.
Demand for cars, aircraft and other items made to last several years increased 0.1 percent in November, the Commerce Department said today in Washington. The previous month’s drop was revised to 0.4 percent, greater than estimated. Excluding transportation, orders fell 0.7 percent…
… The Conference Board’s confidence index rose to 88.6 in December from 87.8 the previous month, the New York-based group said today. The organization’s measure of present conditions fell to 108.3 from 115.7. The gauge of expectations for the next six months increased to 75.5 from 69.1…
Pimco’s McCulley Says Fed to Cut Rates at Most of 2008 Meetings (Bloomberg, December 27, 2007, Daniel Kruger)
‘…The Federal Reserve will reduce interest rates at every policy setting meeting “for the next two to three quarters,” Pacific Investment Management Co.’s Paul McCulley said in a note released today to clients…
Retail Rush Appears to Fall Short (Wall Street Journal, December 26, 2007, Kris Hudson, Ann Zimmerman, Mike Barry, Ray A. Smith & Vanessa O’Connell)
‘Spurred by heavy discounting, U.S. shoppers spent furiously in the days just before Christmas. But holiday retail sales appeared to still fall short of industry expectations, according to new data, setting the stage for bigger markdowns in the increasingly important post-Christmas period.
The 11th-hour rush helped strengthen a weak holiday season. From the day after Thanksgiving to midnight Monday, total retail sales, excluding automobiles, rose 3.6% over the previous year, according to MasterCard SpendingPulse, a unit of MasterCard Advisors…’
Headline writers frequently crack me up. Consider the WSJ headline which seems negative until you read the article and find that holiday sales rose 3.6% over last year. Note that the operative word is rose by 3.6%. From the headline, one would think they fell.
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