To All: Economic Week in Review: September 27-October 1, 1999
The stock and bond markets were choppy amid a barrage of economic
reports and the usual suspense over next week's meeting of Federal
Reserve policymakers. For the week, the yield of the 30-year U.S.
Treasury bond, which moves in the opposite direction from its price,
rose 17 basis points to 6.13% (as of 4:30 p.m. Friday). The S&P 500
Index edged up 0.4%.
Sales of new single-family homes jumped 2.9% in August, as consumers
shrugged off higher mortgage rates and home prices, according to a
Census Bureau report on Thursday. The annual rate of new-home sales
increased to 983,000 units from a revised 955,000 in July (initially
reported as 980,000). The report surprised analysts, who had expected
new-home sales to decline, as have sales of existing homes.
The U.S. economy expanded at an inflation-adjusted annual rate of 1.6%
from April through June, the Commerce Department reported Thursday in
its final estimate of second-quarter gross domestic product (GDP). The
growth rate of the economy's output was the slowest in four years and
down sharply from the 4.3% rate during the first three months of this
year. The report may have underestimated the momentum of the economy
because inventory growth was very low in the quarter. But given that
consumer demand remained strong, the inventory figures could indicate a
need for greater production to replenish store shelves, warehouses, and
car-sales lots; some analysts thus expect figures for third-quarter
economic growth to be back in the 4% range. The GDP price deflator--the
broadest measure of inflation--showed second-quarter prices rising at
an annual rate of only 1.3%, down slightly from previous estimates.
Consumer confidence dipped in September, but remained at historically
high levels, according to the Conference Board, a business research
organization. While people's faith in current economic stability rose,
their expectations of what is coming over the next several months were
less positive. The survey, released Tuesday, is considered an indicator
of consumer spending, which accounts for two-thirds of U.S. economic
activity.
Personal spending rose 0.9% during August, outstripping a 0.5% increase
in personal income, the Commerce Department reported Friday. The
national savings rate--savings as a percentage of after-tax income--was
-1.5%, meaning that Americans were not only spending all they made, but
also taking on debt or dipping into savings to pay for purchases.
New claims for unemployment compensation increased to 299,000 for the
week ended September 25 from a revised 274,000 the previous week, the
Labor Department reported Thursday. It was the tenth consecutive week
in which initial jobless claims were below 300,000.
The manufacturing sector expanded in September for the eighth month in
a row, according to the National Association of Purchasing Management's
monthly survey. The group said its activity index was 57.8, compared
with 54.2 in August. Any reading higher than 50 indicates the sector is
expanding.
Orders to factories for durable goods--products such as cars and
machinery, which are expected to last three years or more--rose 0.9% in
August. Increased orders were received by auto and airplane factories,
while orders for steel, electronics, and industrial equipment declined.
All eyes will be on the Federal Reserve's Open Market Committee on
Tuesday, October 5, when it will decide whether to increase short-term
interest rates. Among the key reports due during the week are those on
leading economic indicators (Tuesday), factory orders (Wednesday),
consumer credit (Thursday), and September unemployment (Friday).
vanguard.com
Regards,
JM |
