July 5, 2020

Consumer Spending Jumped in July

WASHINGTON (Reuters) — Consumer spending rose at its fastest rate in five months in July, easing concerns that the economy was falling back into recession.

Consumer spending increased 0.8 percent on strong demand for motor vehicles as Japan-related supply restraints faded, a Commerce Department report showed Monday. Spending slipped 0.1 percent in June.

The size of the increase in spending beat economists’ forecasts for a 0.5 percent advance. When adjusted for inflation, spending was up 0.5 percent last month, the largest gain in 1 1/2 years and the first increase since April.

“It’s a little far-fetched to truly believe that we are headed into another recession. This data doesn’t support that view at all,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

The spending data was the latest to suggest the economy started the third quarter with some strength after growth slowed to a near halt in the first half of the year.

But the risks of a new recession have risen this month as stock prices plunged and consumer sentiment eroded.

The spending report showed inflation-adjusted after-tax incomes fell in July, while data from the Dallas Federal Reserve Bank indicated factory output in Texas ground to a near halt this month.

The Texas factory index dropped to 1.1 from 10.8 in July, while a business confidence gauge slid to –11.4 from –2.0. The decline in sentiment was in line with other recent regional manufacturing surveys. In those indexes, zero is the dividing line between growth and contraction.

Separately, the number of contracts signed for purchases of previously owned homes fell 1.3 percent last month, according to the National Association of Realtors.

Pending home sales usually lead existing home sales by a month or two, and the decline in signed contracts pointed to a fall in August sales.

So far data from industrial production to retail sales and employment has been consistent with a slow-growth situation rather than an outright contraction in economic output. Data for August will give an idea of how much damage the stock market turmoil inflicted on the already wounded economy.

The economy grew at a tepid 1 percent annual rate in the second quarter, with consumer spending rising at its weakest pace since the fourth quarter of 2009. The economy expanded 0.4 percent in the first three months of the year

The Fed chairman, Ben S. Bernanke, left the door open for further monetary stimulus in a speech on Friday in which he said bringing down the high level of joblessness was crucial to ensuring the economy’s long-term health.

Although the spending report showed core inflation moving higher, analysts did not think this would tie the central bank’s hands.

The core personal consumption expenditures price index — which strips out food and energy costs — rose 0.2 percent for a second straight month, taking the year-on-year reading to 1.6 percent, the highest since May 2010, from 1.4 percent in June.

Over all, inflation jumped 0.4 percent in July after dropping 0.1 percent in June.

“This does not rule out additional Fed stimulus when policy makers meet in September. But it doesn’t exactly rule it in,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Article source: http://feeds.nytimes.com/click.phdo?i=6cfe8cef48b854f3c466130bcb876043

Chinese Manufacturing Index Indicates First Contraction in a Year

Opinion »

Disunion: Where Ignorant Armies Clash

A play-by-play of Bull Run, the first major battle of the Civil War, by Gary Gallagher.

Article source: http://www.nytimes.com/2011/07/22/business/global/chinese-manufacturing-index-indicates-first-contraction-in-a-year.html?partner=rss&emc=rss

Germany and France Surprise With Strong Growth

PARIS — The euro area’s two largest economies, Germany and France, showed surprising strength in the first quarter of the year, helping lift the entire continent’s performance despite sharp pain along the edges.

The Federal Statistics Office in Germany reported on Friday that gross domestic product grew 1.5 percent over the previous quarter, when harsh winter weather had held growth to just 0.4 percent.

The figure was well above analyst estimates and showed that Germany’s economy had recovered fully from its worst recession since World War II. “The pre-crisis level of early 2008 has been exceeded,” the office said.

France, too, surpassed expectations with growth of 1 percent, the steepest increase since spring 2006, according to the statistics office Insee in Paris. That compared to an increase of just 0.3 percent in the last quarter of 2010, and a median forecast of economists surveyed by Reuters and Bloomberg News of 0.6 percent.

Overall, the 17-nation euro area saw G.D.P. grow 0.8 percent compared to the previous quarter, according to the European Union’s statistics office. Germany and France account for nearly half of the region’s economic output.

The strains of austerity measures to rein in gaping deficts were more evident elsewhere.

Spain’s G.D.P. grew only 0.3 percent from the previous quarter, according to the National Statistics Institute in Madrid. That was slightly better than expected, but largely due to exports amid weak domestic demand and high unemployment. Portugal saw its second quarter of contraction, dropping 0.7 percent, according to Eurostat.

Greece, however, saw its first quarter of growth since 2008. Output grew 0.8 percent in the first quarter, according to Eurostat, compared to a decline of 2.8 percent in the final quarter of last year.

European stock markets and the euro were both up slightly in early trading. Economists called the reports encouraging, especially for Germany and France. But they warned that keeping up the momentum would be difficult.

“Looking forward, we expect growth to slow down to more moderate rates, as world trade growth loses some momentum and fiscal policy tightening and higher oil prices kick in,” Aline Schuiling, senior economist at ABN AMRO Bank in Amsterdam, wrote in a note. “Nevertheless, the German economy should continue to outperform the eurozone average by a wide margin.”

Oscar Bernal, an economist at ING Bank in Brussels, said that the pickup in industrial activity in France in particular “might just be a catch-up” after the year-end lull.

“All in all, we believe that the first quarter G.D.P. growth acceleration will only be temporary,” he said, adding that the French government would still face difficulties meeting its budget-deficit reduction targets.

Strong demand for exports such as automobiles has fueled the recovery in Germany, as in past recoveries. Domestic demand has typically trailed, leading to criticism from Germany’s trading partners. However, German consumers seem to be gaining confidence this time as unemployment falls sharply.

The German statistics office noted that, compared with the last quarter of 2010, domestic consumption was up “markedly,” along with investment by businesses in machinery and equipment and construction.

“The growth of exports and imports continued, too,” it said. “However, the balance of exports and imports had a smaller share in the strong G.D.P. growth than domestic uses.”

In Paris, the statistics office noted that manufacturing production soared 3.7 percent in the first quarter, the strongest growth for at least 30 years. Household consumption was also up, but only slightly. Imports grew more rapidly than exports, weighing on the overall growth figure.

Figures for the euro zone as a whole were due out later Friday.

Article source: http://www.nytimes.com/2011/05/14/business/global/14euecon.html?partner=rss&emc=rss