Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Full employment wikipedia , lookup
Economic growth wikipedia , lookup
Nominal rigidity wikipedia , lookup
Early 1980s recession wikipedia , lookup
Consumerism wikipedia , lookup
Post–World War II economic expansion wikipedia , lookup
Economic calculation problem wikipedia , lookup
Long Depression wikipedia , lookup
The President’s Report to the Board of Directors December 2, 2010 CURRENT ECONOMIC DEVELOPMENTS - December 2, 2010 Data released since your last Directors' meeting show the economy grew in the third quarter at a higher rate than first estimated and also suggest fourth quarter growth is likely to be in line with the growth seen over the previous six months. General areas of strength and weakness remain mostly the same as over the past few months. More positive data has come from initial claims for unemployment insurance and consumer attitudes, while house prices have started to fall again and business investment has slowed a bit. Overall, the recovery is continuing at the expected, slow pace. In November, initial claims fell to their lowest level in over two years and consumer attitudes improved. Vehicle sales held steady in November, as the industry continues to show significant gains over last year. In October, real consumption rose again while incomes rebounded from the small drop seen in September. The real estate market continued to struggle in October, as sales of both new and existing homes slowed. New construction also remains historically low, having shown little change since early 2009. In the manufacturing sector, the ISM index eased in November but held above 50. Industrial production was flat in October and capacity utilization posted a small gain. Orders for both durable goods and nondefense capital goods, excluding aircraft, fell in October but were well above their year-ago levels. Low inflation levels remained a concern in October, as the total CPI was flat and the core index slowed to a record low. Oil prices rose slightly in November, and unit labor costs were unchanged in the third quarter, following an upwardly revised second quarter estimate. In November, initial claims for unemployment insurance fell to their lowest monthly average since July 2008. Despite the drop, claims are still above a level more consistent with a healthy economy. Initial Claims Thousands of Units at Annual Rates Thousands of Units at Annual Rates 700 700 650 650 600 600 550 550 500 500 450 450 400 400 350 350 300 300 250 250 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Source: Department of Labor, Employment and Training Administration / Haver Analytics. Consumer attitudes improved in November, as both confidence and sentiment reached their highest levels since the second quarter. While consumers feel the recovery has gained some traction, the majority expect further improvements to be too small to impact their personal financial situations. Consumer Confidence Consumer Sentiment Index, 1966:Q1 = 100 Index, 1985 = 100 100 100 Consumer Expectations Current Conditions 90 80 80 60 70 40 60 Future Expectations 20 Present Situation 0 Nov-08 May-09 Nov-09 May-10 Nov-10 Nov-08 May-09 50 Consumer Sentiment Consumer Confidence Nov-09 May-10 40 Nov-10 Source: The University of Michigan / Haver Analytics. Source: The Conference Board / Haver Analytics. Total auto and light truck sales held steady in November. Manufacturers are on track to sell roughly 11.5 million vehicles in 2010, a marked improvement from the 2009 total of 10.3 million. The auto industry is still far from recovered, however, as sales averaged over 15 million per year during the 20 years preceding the recession. Total Auto and Light Truck Sales Millions of Units, Annualized Millions of Units, Annualized 25.0 25.0 20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 Nov-07 May-08 Feb-08 Nov-08 Aug-08 May-09 Feb-09 Source: Bureau of Economic Analysis / Haver Analytics. Nov-09 Aug-09 0.0 Nov-10 May-10 Feb-10 Aug-10 Consumption posted another moderate increase in October, aided by a rebound in personal incomes. Real Consumption and Real DPI Percent Change, Previous Month Percent Change, Previous Month 2.0 6.0 Real Disposable Income 4.0 1.0 2.0 0.0 0.0 -2.0 -1.0 Real Consumption -4.0 -2.0 Oct-07 Apr-08 Oct-08 Jan-08 Jul-08 Apr-09 Jan-09 Oct-09 Jul-09 -6.0 Oct-10 Apr-10 Jan-10 Jul-10 Source: Bureau of Economic Analysis / Haver Analytics. The housing market remained subdued in October. New home sales gave back most of the gain seen in September and were virtually unchanged from the sales pace seen back in the spring. Existing home sales also eased, and while safely above the record-low pace of July, remain historically low. New and Existing Home Sales Thousands of Units, Annualized Thousands of Units, Annualized 1000 7000 Existing Home Sales 800 New Home Sales 6500 6000 5500 600 5000 400 4500 4000 200 3500 0 Oct-07 Apr-08 Jan-08 Oct-08 Jul-08 Source: U.S. Census Bureau / Haver Analytics. Apr-09 Jan-09 Oct-09 Jul-09 3000 Oct-10 Apr-10 Jan-10 Jul-10 New residential construction data was disappointing in October, as both measures came in below expectations. What little momentum there was earlier in the year has been lost, with starts down nearly 25% since April and permits down almost 20% since March. Housing Starts and Building Permits Thousands of Units, Annualized Thousands of Units, Annualized 1500 1500 1250 1250 1000 1000 Building Permits 750 750 500 500 Housing Starts 250 250 0 0 Oct-07 Apr-08 Jan-08 Oct-08 Jul-08 Apr-09 Jan-09 Oct-09 Jul-09 Apr-10 Jan-10 Oct-10 Jul-10 Source: U.S. Census Bureau / Haver Analytics. Both the ISM manufacturing and employment indices were little changed in November, holding well above 50 and signaling further expansion in the manufacturing sector. ISM Index Index (50+ = Economic Expansion) Index (50+ = Economic Expansion) 70.0 70.0 ISM Index 60.0 60.0 50.0 50.0 40.0 40.0 Employment Index 30.0 30.0 20.0 20.0 Nov-07 May-08 Feb-08 Nov-08 Aug-08 May-09 Feb-09 Source: Institute for Supply Management / Haver Analytics. Nov-09 Aug-09 May-10 Feb-10 Nov-10 Aug-10 Industrial production was flat in October, following a small decline in September. Capacity utilization rose further in October, reaching a 26-month high. Industrial Production and Capacity Utilization Percent of Capacity Percent Change, Previous Month 3.0 85.0 Industrial Production 2.0 80.0 1.0 0.0 75.0 -1.0 70.0 -2.0 -3.0 65.0 Capacity Utilization (manufacturing) -4.0 -5.0 Oct-07 Apr-08 Jan-08 Oct-08 Jul-08 Apr-09 Jan-09 Oct-09 Jul-09 60.0 Oct-10 Apr-10 Jan-10 Jul-10 Source: Federal Reserve Board of Governors / Haver Analytics. Orders for both durable goods and nondefense capital goods excluding aircraft fell in October, offsetting much of the growth seen over the previous two months. But despite the declines, both series managed to post double-digit year-over-year increases. Durable Goods Orders Percent Change, Year-over-year Percent Change, Year-over-year 30.0 30.0 Percent change, previous month 20.0 Dur. Cap. 10.0 Jun-10 -0.15 3.58 Jul-10 1.23 -5.26 Aug-10 -0.77 5.10 Sep-10 4.99 1.87 Oct-10 -3.35 -4.47 20.0 10.0 0.0 0.0 -10.0 -10.0 -20.0 -20.0 Durable Goods, New Orders Capital Goods Nondefense, Excluding Aircraft -30.0 -30.0 -40.0 -40.0 Oct-07 Apr-08 Jan-08 Oct-08 Jul-08 Source: U.S. Census Bureau / Haver Analytics. Apr-09 Jan-09 Oct-09 Jul-09 Apr-10 Jan-10 Oct-10 Jul-10 In October, total consumer prices held mostly steady for a fourth consecutive month, but core prices slowed to their lowest year-over-year growth rate ever. Total producer prices accelerated in October while the core index was mostly flat. Consumer Price Index Percent Change, Year-Over-Year 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 Oct-07 Percent Change, Year-Over-Year Consumer Price Index, excluding food and energy Consumer Price Index Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 Oct-10 Producer Price Index Percent Change, Year-Over-Year 12.0 9.0 6.0 3.0 0.0 -3.0 -6.0 -9.0 Oct-07 Percent Change, Year-Over-Year Producer Price Index, excluding food and energy Producer Price Index Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 12.0 9.0 6.0 3.0 0.0 -3.0 -6.0 -9.0 Oct-10 Source: Bureau of Labor Statistics / Haver Analytics. Oil prices increased slightly in November, to their highest monthly average since April. Prices peaked close to $88 per barrel in the middle of the month before falling back to the low- to mid-$80s by the end of the month. Domestic Spot Oil Price Dollasr per Barrel Dollars per Barrel 160.0 160.0 140.0 140.0 120.0 120.0 100.0 100.0 80.0 80.0 60.0 60.0 40.0 40.0 20.0 20.0 Nov-07 May-08 Feb-08 Nov-08 Aug-08 Source: Wall Street Journal / Haver Analytics. May-09 Feb-09 Nov-09 Aug-09 May-10 Feb-10 Nov-10 Aug-10 Productivity was revised a bit higher in the third quarter, more than offsetting the decrease seen in the second quarter. Significant upward revisions were made to costs in the second quarter, with compensation per hour having risen 2.9% (up from a 0.6% decline) and unit labor costs having risen 4.9% (up from 1.3%). Productivity and Costs Percent Change, Previous Quarter Percent Change, Previous Quarter 12.0 12.0 Compensation Per Hour 9.0 Output Per Hour 9.0 6.0 6.0 3.0 3.0 0.0 0.0 -3.0 -3.0 -6.0 -6.0 Unit Labor Costs -9.0 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 -9.0 10:Q3 10:Q1 Source: Bureau of Labor Statistics / Haver Analytics. Real GDP growth in the third quarter was stronger than originally thought. The upward adjustment primarily reflected an upward revision to personal consumption expenditures, exports and state and local government spending. These effects were partly offset by a downward revision to private inventory investment. Revisions to Third Quarter Real GDP Description Real GDP Advance Preliminary 2.0 2.5 Personal Consumption 2.6 2.8 Business Investment 9.7 10.3 Equipment and Software 12.0 16.8 -29.1 -27.5 Government 3.4 4.0 Exports 5.0 6.3 Imports 17.4 16.8 Final Sales 0.6 1.2 Residential Investment Real GDP 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 Source: Bureau of Economic Analysis / Haver Analytics. Overall, data released since your last Directors' meeting show the economy grew in the third quarter at a higher rate than first estimated and also suggest fourth quarter growth is likely to be in line with the growth seen over the previous six months. General areas of strength and weakness remain mostly the same as over the past few months. More positive data has come from initial claims for unemployment insurance and consumer attitudes, while house prices have started to fall again and business investment has slowed a bit. Overall, the recovery is continuing at the expected, slow pace. Percent Short-Term Interest Rates 0.4 Discount Window Primary Credit 0.3 0.75 0.75 0.75 0.75 1.50 1.00 0.75 0.50 Federal Funds Rate (effective rate) 0.00 0.2 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 0.1 0.0 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Source: Federal Reserve Board of Governors / Haver Analytics. Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 PRESIDENT'S REPORT TO THE BOARD OF DIRECTORS, FEDERAL RESERVE BANK OF BOSTON December 9, 2010 Current Economic Developments - Addendum: Data released in the past week Payroll employment rose by only 39,000 in November, far below expectations. The unemployment rate also rose two-tenths of a percentage point to 9.8%, its highest level since April. The higher unemployment rate primarily reflected a 173,000 decrease in civilian employment, which outpaced a 103,000 increase in the labor force. In October, manufacturers' orders fell 0.9% while total shipments rose 0.3%. However, shipments of nondefense capital goods excluding aircraft fell 1.3%, their first decrease since January. In November, the ISM nonmanufacturing index improved to 55.0 and the employment index rose to 52.7, a three year high. Redbook sales rose 0.6% through the first week of December, compared to November. Sales in the week ending December 4th were 3.8% higher than during the same period last year. Oil prices rose during the past week, averaging $88.4 per barrel compared to the previous week's average of $83.7, and threatened to rise above $90.0 per barrel for the first time since October 2008. In November, nonfarm payrolls added 39,000 jobs but the unemployment rate rose to 9.8%. Over the previous two month, payrolls were revised higher by 38,000 jobs, due almost entirely to revisions to government payrolls. Earlier estimates saw these payrolls down by 156,000 jobs in October and September, while updated data show a drop of 124,000. Private payrolls were revised up by 6,000 over the same period. Nonfarm Payroll Employment Unemployment Rate Change from Previous Month Rate 600 12.0 11.0 300 10.0 0 -300 9.0 8.0 7.0 -600 6.0 -900 Nov-08 May-09 Nov-09 May-10 Nov-10 Feb-09 Aug-09 Feb-10 Aug-10 Source: Bureau of Labor Statistics. 5.0 Nov-08 May-09 Nov-09 May-10 Nov-10 Feb-09 Aug-09 Feb-10 Aug-10