U.S. Economic News

U.S. Economic News

August 26, 2016

U.S. Economic Indicators

The second estimate of Q2 GDP indicates that the U.S. economy expanded at an annualized rate of 1.1%, in line with expectations and down from the initial estimate of 1.2%.  BEA

The University of Michigan Consumer Sentiment Index dipped 0.2 point to 89.8 in August and is down 2.3 points on the year.  The index for current economic conditions fell 2.0 points and the index for consumer expectations rose 0.9 point.  Report

U.S. Economic News

While overall healthcare spending is slowing, the share paid by middle class families was 25% higher in 2014 than in 2007 and now makes up the largest share of this demographic’s expenditures.  Increasing out-of-pocket costs, slow economic growth, and lukewarm wage growth have fueled rising costs and have restricted other components of consumer spending. WSJ

Robert Gordon argues in a Financial Times op-ed that presidential candidates on both sides of the political aisle should focus their economic agendas on the need for capital formation.  Gordon highlights the importance of a reformed corporate tax code to encourage business investment and capital accumulation. FT

U.S. Economic News

U.S. Economic News

August 25, 2016

U.S. Economic Indicators

New orders of manufactured durable goods increased 4.4% in July after declining 4.2% in June, but are down 0.9% year-over-year.  Excluding transportation, new orders rose 1.5% (down 1.4% Y/Y).  Census Bureau Report

Jobless claims decreased 1,000 to 261,000 last week.  The four-week moving average declined 1,250 to 264,000.  DOL Report

U.S. Economic News

Greg Ip of the Wall Street Journal argues that the largest challenge facing the Federal Reserve right now is staying relevant in a time of sluggish global growth and systemically low interest rates.  Ip says that the Fed can either accept the status quo, fix the growth problem via private investment, or change its inflation target to leave more room for accommodative monetary policy during recessions.  WSJ

Federal Reserve Chairwoman Janet Yellen and three other Fed governors recently called for more infrastructure spending to boost lagging growth, productivity, and business investment.  While the central bank has no authority over fiscal policy, the message sends a strong signal to the next president and Congress regarding what is needed to improve the economy’s prospects.  Reuters

U.S. Economic News

U.S. Economic News

August 24, 2016

U.S. Economic Indicators

The FHFA House Price Index shows that U.S. house prices rose 1.2% in the second quarter of 2016 and are up 5.6% on the year.  House prices increased 0.2% in April, May, and June — a modest pace of acceleration, which may reflect accumulated pressures from significantly reduced home affordability. Report

Existing home sales fell 3.2% to a seasonally adjusted annual rate of 5.39 million in July and are down 1.6% on the year.  This marks the first year-over-year decline since November 2015.  NAR attributes the drop to severely restrained inventory, which has made housing less affordable.  NAR Report

U.S. Economic News

Sebastian Mallaby asserts in the Washington Post that the Federal Reserve’s 2% inflation target is completely arbitrary.  Mallaby argues that a higher inflation target would easily give the central bank more room to fight recessions, but that deviating from the internationally celebrated 2% target could potentially harm its credibility.  WaPo

According to a new CBO report the U.S. federal budget deficit will widen this year for the first time since 2009, expanding from $438 billion to $549 billionHowever, in the long-term, CBO predicts that savings from low borrowing costs will offset slowdowns in growth, reducing the deficit by $400 billion between now and 2026. WSJ

U.S. Economic News

U.S. Economic News

August 23, 2016

U.S. Economic Indicators

New home sales rose 12.4% to a seasonally adjusted annual pace of 654,000 in July, the highest level since 2007 and 31.3% above year-ago levels.  The median sales price fell from $310,500 in June (revised) to $294,600 in July, while the inventory of new homes fell from 4.9 months (revised) to 4.3 months at the current sales rate.  Census Bureau Report, WSJ

U.S. Economic News

Pay for Americans in the bottom quartile of the income scale is rising at the fastest rate since the recession.  The gains are fueled by competitive labor markets, minimum wage increases, and initiatives from major corporations to boost the wages of their lowest-income workers.  WSJ

Catherine Rampell of the Washington Post argues that the declining homeownership rate among millennials is a good thingWhile 93% of 25-34 year-olds who currently rent want to own a house in the future, factors such as large down payments, low returns on investment, and less flexibility to relocate mean that homeownership is not rational for them at the moment.  WaPo

In a Financial Times op-ed, Adam Posen argues that negative interest rates are not scary, rather just unconventional.  Posen believes that most financial decisions will not respond significantly to shifts in government borrowing costs and that the political atmosphere in a country must be considered in any negative interest rate discussion.  FT

U.S. Economic News

U.S. Economic News

August 22, 2016

U.S. Economic News

The Wall Street Journal’s Greg Ip writes that the Federal Reserve should seriously consider raising its inflation target to give the central bank more room to cut interest rates during recessions.  Ip argues that the risk of impotent monetary policy in a time of low inflation is more serious than the effects of higher inflation on price levels or market expectations.  WSJ

Stanley Fischer, vice-chairman of the Federal Reserve’s Board of Governors, said that the central bank is close to meeting its policy targets of 2% inflation and maximum employment.  However, noting that the U.S. has weathered a number of financial and economic storms since the last recession, Fischer cautioned that output could be adversely affected if the recent trend of slower productivity growth persists.  FT

Reuters reports that US banks are slowly making the transition to digital banking while consumers are still reliant on brick-and-mortar branches.  While physical branches help add new customers and clear checks, they are expensive to operate and take time to achieve full profitability.  Reuters

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