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
PRESIDENT'S REPORT TO THE BOARD OF DIRECTORS, FEDERAL RESERVE BANK OF BOSTON Current Economic Developments - October 9, 2003 Data released since your last Directors' meeting tell a similar story to last month. The economy seems to be picking up, but the labor market remains weak. September's employment report showed some improvement in the labor market, as payrolls posted their first rise in eight months and job losses in August were revised upward. Still the unemployment rate was unchanged and the latest four-week moving average of initial claims continued to hover above 400,000. The weak labor market pushed consumer attitudes down in September. Yet, consumption remained strong as consumers continue to spend, especially on durable goods. Auto sales slowed in September, compared to August, but sales rates remain strong. Despite August's drop in housing starts, the housing market remains in good shape, as the level of housing starts remain high. Building permits grew in August, as did new and existing home sales. The manufacturing sector has shown some signs of improvement, but conditions have yet to pick up, especially in the labor market. Nonfarm payroll employment rose in September for the first time in eight months, while September's unemployment rate was unchanged. Nonfarm Payroll Employment Unemployment Rate Change from Previous Month 300 Nonfarm Payroll Employment 200 Percent 6.5 6.4 6.3 100 0 6.2 6.1 6.0 -100 5.9 -200 3-Month Moving Average -300 5.8 5.7 5.6 -400 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Source: Bureau of Labor Statistics. 5.5 Sep-02 Mar-03 Sep-03 Dec-02 Jun-03 The latest four-week moving average of initial claims continued to hover above 400,000. Initial Claims for Unemployment Insurance Thousands of Units at Annual Rates 500 Four-Week Moving Average Ending September 27th, 403,500 450 400 350 300 250 200 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Source: Department of Labor, Employment and Training Administration. And the help wanted index edged downward in August. Help Wanted Index Index, 1978 = 100 90.0 80.0 70.0 60.0 50.0 40.0 30.0 Aug-00 Dec-00 Apr-01 Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Oct-00 Feb-01 Jun-01 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Source: The Conference Board. Consumer sentiment, from the Michigan survey, fell in September, along with a drop in expectations. Consumer Sentiment Index, 1966:Q1 = 100 120 110 Consumer Sentiment 100 Consumer Expectations 90 80 70 60 Sep-00 Mar-01 Dec-00 Sep-01 Jun-01 Mar-02 Dec-01 Sep-02 Jun-02 Mar-03 Dec-02 Sep-03 Jun-03 Source: University of Michigan. And the Conference Board's survey of consumer attitudes showed decreases in confidence and expectations in September, reversing the rises seen in August. Consumer Confidence and Expectations Index, 1985 = 100 120 110 Consumer Expectations 100 90 80 70 Consumer Confidence 60 50 Dec-01 Mar-02 Source: The Conference Board. Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Real consumption rose at a slower pace in August than in July, yet continues to grow as consumers keep purchasing durable goods. Real Consumption Percent Change, Previous Month Percent Change, Previous Month 1.5 15.0 Durable Goods Real Consumption 1.0 10.0 0.5 5.0 0.0 0.0 -0.5 -5.0 -1.0 -10.0 Dec-01 Apr-02 Feb-02 Aug-02 Jun-02 Dec-02 Oct-02 Apr-03 Feb-03 Aug-03 Jun-03 Source: Bureau of Economic Analysis. Autos and light truck sales in September slowed from August's quick pace, but remain strong. Auto and Light Truck Sales Millions of Units, Annualized 20.0 19.0 18.0 17.0 16.0 15.0 14.0 Sep-02 Nov-02 Oct-02 Jan-03 Dec-02 Source: Federal Reserve Baord of Governors. Mar-03 Feb-03 May-03 Apr-03 Jul-03 Jun-03 Sep-03 Aug-03 Housing starts fell in August, compared to July, but remain at high levels. Building permits rose in August, as did new and existing homes sales. In fact, existing home sales posted a record high. New and Existing Home Sales Housing Starts and Building Permits Thousands of Units, Annualized Thousands of Units, Annualized 6500 2000 Thousands of Units, Annualized 1200 Building Permits 1900 6250 1800 6000 1700 5750 New Homes 1100 1000 5500 1600 Housing Starts 900 Existing Homes 3 A ug -0 b- 03 2 Fe A ug -0 02 bFe A ug -0 1 ug A Fe b01 0 800 -0 3 A ug -0 Fe b- 03 2 A ug -0 02 bFe A ug -0 A ug -0 1 5000 Fe b01 1400 0 1500 5250 Source: U.S. Census Bureau (Starts, Permits, and New Homes) and National Association of Realtors (Existing Homes). The index of leading indicators rose for a fourth consecutive month in August. Index of Leading Indicators Percent Change, Previous Month 1.5 1.0 0.5 0.0 -0.5 D ec -0 Ja 1 n0 Fe 2 b02 M ar -0 2 A pr -0 2 M ay -0 Ju 2 n02 Ju l-0 2 A ug -0 Se 2 p02 O ct -0 2 N ov -0 2 D ec -0 Ja 2 n0 Fe 3 b03 M ar -0 3 A pr -0 3 M ay -0 Ju 3 n03 Ju l-0 3 A ug -0 3 -1.0 Source: The Conference Board. Industrial production posted a modest gain in August, while capacity utilization was flat. Both new orders for durable goods and capital goods, excluding aircrafts, fell in August. Industrial Production and Capacity Utilization Percent Change, Previous Month Percent of Capacity 1.0 84.0 Industrial Production 82.0 0.5 80.0 0.0 78.0 76.0 -0.5 74.0 Capacity Utilization -1.0 72.0 Aug-00 Nov-00 Feb-01 May-01 Aug-01 Nov-01 Feb-02 May-02 Aug-02 Nov-02 Feb-03 May-03 Aug-03 Capital Goods Orders Percent Change, Previous Month 10.0 Capital Goods Nondefense Excluding Aircraft 5.0 0.0 -5.0 New Orders, Durable Goods -10.0 Aug-00 Nov-00 Feb-01 May-01 Aug-01 Nov-01 Feb-02 May-02 Aug-02 Nov-02 Feb-03 May-03 Aug-03 Source: Federal Reserve Board of Governors (Production) and U.S. Census Bureau (Orders). The ISM index edged slightly downward in September, compared to August, but September's estimate marked the third consecutive month above 50. The employment index continues to show job losses in manufacturing. ISM Index Index (50+ = Economic Expansion) 60.0 ISM Index Employment Index 55.0 50.0 45.0 40.0 35.0 Sep-00 Mar-01 Dec-00 Sep-01 Jun-01 Source: Institute for Supply Management. Mar-02 Dec-01 Sep-02 Jun-02 Mar-03 Dec-02 Sep-03 Jun-03 Real GDP was revised upward in the second quarter, led by greater inventory investment, residential construction, and imports. Real GDP 6.0 4.0 2.0 0.0 -2.0 00:Q2 00:Q4 01:Q2 01:Q4 02:Q2 02:Q4 03:Q2 Revisions to Second Quarter Real GDP Description Real GDP Preliminary Revised 3.1 3.3 Consumption 3.8 3.8 Business Investment 8.0 7.3 Residential Investment 4.5 6.6 Government 8.2 8.5 Exports -1.2 -1.0 Imports 7.9 8.8 Final Sales 4.0 4.0 Source: Bureau of Economic Analysis. Increases in both core consumer and core prodcuer prices remain modest. Consumer Prices Percent Change, Year-to-Year 3.5 3.0 2.5 2.0 Consumer Price Index 1.5 1.0 0.5 0.0 Aug-01 Oct-01 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Consumer Price Index, excluding food and energy Producer Prices Percent Change, Year-to-Year Producer Price Index 4.0 2.0 0.0 Producer Price Index, excluding food and energy -2.0 -4.0 Aug-01 Oct-01 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Source: Bureau of Labor Statistics. Overall, the economy is picking up steam; however, the labor market remains weak and the manufacturing sector still shows room for improvement. Percent Short-Term Interest Rates 1.9 1.8 1.7 1.6 Discount Window Primary Credit 1.5 1.4 1.3 1.2 1.1 1.0 May-03 2.25 Jun-03 2.20 Jul-03 2.00 Aug-03 2.00 Federal Funds Rate (effective rate) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 0.9 Dec-0 Feb-02 Apr-02 Jun-02 Source: Federal Reserve Board of Governors. Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03