April 15, 2021

U.S. Economy Grew 1.7% During the 2nd Quarter, Topping Forecasts

The mixed picture facing the country was evident on Wednesday, as the Commerce Department reported that the economy, adjusted for inflation, expanded at a better-than-expected annual rate of 1.7 percent in the April-June quarter, even as inflation-adjusted growth in the first part of the year now appears slower than first thought. In a separate statement after a two-day meeting of policy makers at the Federal Reserve, the central bank said the economy was on a “modest” trajectory but gave no clue as to when it might start tapering back its huge stimulus efforts.

Like economists and traders, as well as the 12 million unemployed Americans looking for work, the Fed is struggling to gauge whether better growth does indeed lie ahead.

Optimists point to improved levels of job creation in recent months, a more robust housing sector and a surging stock market that has lifted the value of investment and retirement accounts for millions of consumers. Pessimists focus on the fact that the estimated economic growth rate of about 1.4 percent so far in 2013 is well below last year’s levels of 2.8 percent, even as automatic cuts in federal spending and higher taxes continue to bite.

There were pockets of strength in Wednesday’s data from the Bureau of Economic Analysis, all of which will be subject to further revision as the Commerce Department gathers more information about the economy. For example, residential fixed investment increased by 13.4 percent, a sign that housing continues to rebound. Personal consumption rose 1.8 percent, as consumers showed some resiliency, especially given the increase in payroll taxes at the beginning of 2013.

Additionally, government experts have introduced the first comprehensive change in four years in how the economy is measured. They revised figures all the way back to 1929, while also restating more recent data to show that the 2007-9 recession was slightly milder than originally estimated and growth in 2012 was a bit better.

Still, economists emphasized that although the economy’s performance in the second quarter was significantly stronger than had been feared — Wall Street experts forecast growth would come in at just under 1 percent — big challenges remain.

“The basic story of a deep recession followed by a lackluster recovery is essentially unchanged,” said Nariman Behravesh, chief economist at IHS. Growth in the current quarter, which wraps up at the end of next month, remains a wild card, he added. IHS and other companies do expect a pickup in the second half of 2013, but more fallout from the fiscal tightening in Washington could still be felt, he cautioned.

“So far the effects have been fairly muted,” Mr. Behravesh said. “We’re puzzling over that.”

Were it not for the federal cuts, growth would have been close to 2 percent in both the first and second quarters, said Steve Blitz, chief economist at ITG Investment Research. But that’s about the best Americans can hope for, he said, at least in 2013.

“I don’t see the economy breaking away from that 2 percent rate for now,” Mr. Blitz said. He is more optimistic about 2014, when he said he thought the annual rate of growth could rise to about 3.5 percent. “The economy will have adjusted to the downshift in federal spending by then, and Europe won’t be decelerating as rapidly, nor will China and Japan,” he said.

The pace at which spending by the federal government is dropping stabilized last quarter. It fell by 1.5 percent, compared with an 8.4 percent decrease in the first quarter of 2013 and a 13.9 percent plunge in the final quarter of 2012.

More clues about the economy’s performance will come on Friday, when the Labor Department reports on monthly job creation and the unemployment rate. Economists estimate the economy created 185,000 jobs in July, according to a Bloomberg survey, a bit below the 195,000 level in June, with the unemployment rate falling to 7.5 percent, from 7.6 percent.

Article source: http://www.nytimes.com/2013/08/01/business/economy/us-economy-grew-by-1-7-in-2nd-quarter-faster-than-expected.html?partner=rss&emc=rss

Business Confidence Sags in Japan

The data are a subset of a wider, closely watched business sentiment survey, the Tankan, which is conducted quarterly by the Bank of Japan and was released Friday. In an unusual step, the bank stripped out responses returned before the earthquake and tsunami that struck on March 11 from those received after that date, in an effort to gauge how sentiment had shifted in the wake of the twin disasters.

The post-quake Tankan results released Monday showed large manufacturers, who are most closely watched by economists and manufacturers, turning negative in their outlook for the next three months, with a reading of minus 2. Answers received from those who replied before the quake made for a reading of plus 3. A negative number means pessimists outnumber optimists.

Small and medium-size businesses, which tend to be more reliant on the domestic economy, had been negative even before the quake. They turned even more nervous after the disaster, the data released Monday showed.

Economists cautioned that the data probably underestimated the impact of the disasters, and of the nuclear crisis that has unfolded at the Fukushima Daiichi power plant since then. The Bank of Japan also stressed that the relatively small number of responses that came in after March 11 meant that the results probably did not fully reflect the shift in sentiment.

Still, the data give one of the clearest pictures available so far of the effect that the disasters have had on business confidence in what is the world’s third-largest economy.

Aside from the human toll and the damage directly caused by the quake and tsunami in the country’s northeast, the disasters have caused considerable disruption to businesses elsewhere in the country, by knocking out part of Japan’s power-generation capacity.

Numerous manufacturers have had to idle plants, both because of power cuts and because of disruption to supply chains, especially in the electronics and automobile sectors.

Many economists believe overall industrial production slumped by more than 10 percent in March, compared with February, and that the impact of the quake and power shortfalls is likely to be felt for several months. Much uncertainty remains, notably about the full measure of supply chain disruption and about the effect of the disasters on consumer spending in Japan.

Still, most economists expect a marked pickup later this year, as reconstruction activity kicks in. Although many have lowered their growth forecasts for the Japanese economy, most say the disaster will delay but not completely derail Japan’s gradual economic recovery.

HSBC, for example, lowered its forecasts for G.D.P. growth this year by 0.5 percentage point to 0.9 percent, but it forecasts 3.5 percent growth for next year. Economists at Société Générale lowered their forecast for 2011 from 2 percent to 1 percent in the wake of the quake, but they project that a rapid rebound will kick in as early as the current quarter. They forecast 3.9 percent growth for 2012.

Similarly, analysts at Nomura have lowered their full-year projection 0.7 percentage point to 0.8 percent growth but project expansion of 2.9 percent in 2012.

“We expect real G.D.P. to contract in both 2011 Q1 and Q2, pushing back Japan’s move out of its economic lull. We nonetheless look for real G.D.P. to return to growth in Q3 as supply chain problems ease, and for growth to accelerate sharply in Q4 on a marked increase in reconstruction demand,” the Nomura analysts wrote in a research note last week.

Article source: http://www.nytimes.com/2011/04/05/business/global/05yen.html?partner=rss&emc=rss