Friday, January 30, 2015

No reason to worry over USA economy

USA Gross domestic product expanded in the last quarter of 2014 at a 2.6 percent annual pace after the third quarter's  5 percent rate.   The imputation of slower growth may not be substantiated by longer term trends:
'Labor markets are doing well. Employers added jobs at an average rate of 229,000 per month in the first 10 months of 2014, which is 18 percent higher than the rate in 2013,   This acceleration in job growth brought the unemployment rate down to 5.8 percent as of October 2013, compared with 7.2 percent one year ago.
Falling energy prices have improved consumer balance sheets . USA households are gradually regaining wealth they lost during the financial crisis.  
November 2014 reading from the Philadelphia Fed's Manufacturing Business Outlook Survey indicated strong growth in manufacturing activity.   The index had then been positive for nearly 18 consecutive months, with the only aberration in February 2014 during the depths of our severe winter weather.[1]

Measure called U6, which includes marginally attached workers and those working part time for economic reasons, has fallen from its peak of 17.2 percent to 11.5 percent.
The personal consumption expenditures, or PCE, price index, the measure of inflation preferred by the FOMC, registered a 1.4 percent increase over the 12 months through October.
It remains above the level that should stoke concerns of sustained deflation.
The core PCE index, which excludes food and energy, is a bit higher than the overall measure, increasing 1.6 percent over the 12 months through October.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 4.3 percent pace in the fourth quarter - the fastest since the first quarter of 2006 and an acceleration from the third quarter's 3.2 percent pace.'

 (Manufacturing Business Outlook Survey Charts could be seen at
http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/)
Views expressed without any risk or responsibility.



[1] Data from the speech of Mr Charles I Plosser, President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia, to the Charlotte Economics Club, Charlotte, North Carolina, 3 December 2014.


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