Economic Week in Review: February 19-23, 2001
Suddenly, the issue of whether the Federal Reserve Board should again
cut short-term interest rates looks more complicated. Faced with
mounting evidence of a serious economic slowdown--and comfortable that
inflation was not a big threat--the Fed lowered its target for the
federal funds rate twice last month. But economic reports issued this
week showed that the production of goods and services may already be
recovering, while consumer prices are rising. The stock market did not
take the news well. The S&P 500 Index declined 4.4% during the
holiday-shortened trading week to about 1,245, while the yield of the
10-year U.S. Treasury note fell 1 basis point to 5.10% (as of 4:30 p.m.
Friday).
The index of leading economic indicators--a composite of ten signposts
that's designed to predict turning points in the economy--rose sharply
in January, the Conference Board said Thursday. The levels of
manufacturing hours, building permits, initial claims for unemployment
insurance, and the money supply were the largest contributors to the
0.8% increase, which was the first in four months. A more modest
turnabout had been expected. "The pace of economic activity is
moderating, with no clear sign of a recession looming on the horizon,"
the Conference Board concluded.
The consumer price index jumped 0.6% in January, its biggest increase
since March 2000. Analysts had expected prices to rise half as much.
Excluding the volatile food and energy sectors, the cost of living rose
0.3%, according to the Labor Department. Over the past 12 months, the
overall rate of increase in consumer prices was 3.7%. The effect of
rising energy prices is evident in the lower rate of "core" inflation,
which increased 2.6% during the same period.
Economic observers will have much more data to consider next week.
Among the reports scheduled for release are existing-home sales
(Monday), consumer confidence and new-home sales (both on Tuesday),
fourth-quarter gross domestic product (Wednesday), and the purchasing
managers' index and personal income and spending (both on Thursday).
Summary of Major Economic Reports: February 19-23, 2001
-----------------------------------------------------------------------
|Date Report Actual Expected 10-Year S&P 500 |
| Value Value Note Yield Index |
|---------------------------------------------------------------------|
|February 19 Presidents' |
| Day--U.S. |
| financial |
| markets closed. |
|---------------------------------------------------------------------|
|February 20 -2 bp -1.7% |
|---------------------------------------------------------------------|
|February 21 Consumer +0.6% +0.3% |
| Price Index |
| (January) |
|---------------------------------------------------------------------|
| CPI, except +0.3% +0.2% |
| food and |
| energy (January) |
|---------------------------------------------------------------------|
| U.S. Trade -$33.0 -$32.0 +3 bp -1.9% |
| Balance (December) billion billion |
|---------------------------------------------------------------------|
|February 22 Initial Jobless 348,000 360,000 |
| Claims (2/17) |
|---------------------------------------------------------------------|
| Leading +0.8% +0.4% +3 bp -0.2% |
| Economic |
| Indicators |
| (January) |
|---------------------------------------------------------------------|
|February 23 -5 bp -0.6% |
|---------------------------------------------------------------------|
| Weekly -1 bp -4.4% |
| Change |
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bp = basis points.
Note: The economic statistics presented in this report are subject to
revision by the agencies that issue them.
"Standard & Poor's(r)," "S&P(r)," "S&P 500(r)," "Standard & Poor's
500," and "500" are trademarks of The McGraw-Hill Companies, Inc.
(c) 2001 Vanguard Marketing Corporation, Distributor |
