Economic Week in Review: December 20-24, 1999
Citing its interest in ensuring smooth sailing during the Year 2000
computer systems change, the Federal Reserve Board's Open Market
Committee held short-term interest rates steady this week. But Fed
policymakers also issued a caution about inflationary signs--in
particular, that demand for goods and services continues to grow at a
faster pace than potential supply. Bond yields, which move in the
opposite direction from prices, reached their highest levels in two
years after the Fed's statement on Tuesday. As of the close of trading
Thursday, the yield of the 30-year U.S. Treasury bond was 6.48%, up 10
basis points for the holiday-shortened week. Gains in technology stocks
propelled stock markets into record territory, and the S&P 500 Index
climbed 2.6% for the week.
The U.S. economy expanded at an inflation-adjusted annual rate of 5.7%
from July through September, the Commerce Department reported Wednesday
in its final estimate of third-quarter gross domestic product (GDP).
The estimate of growth in the economy's total output of goods and
services was up from the previous figure of 5.5%. A buildup of
inventories primarily accounted for the sharp rise over the second
quarter's 1.9% growth pace, the Commerce Department said. The third-
quarter expansion was much faster than the 3% rate that the Fed
considers sustainable, fueling speculation that the Fed will boost
short-term interest rates in early February. Yet, the GDP price
deflator--the broadest measure of inflation--estimated that prices rose
during the third quarter at an annual rate of just 1.1%.
Personal income rose 0.4% during November, while personal spending rose
0.5%, the Commerce Department said Thursday. Although the increase in
personal income was the slowest since August, it was higher than
expected. The spending figure, which was in line with expectations, is
closely watched because consumers fuel two-thirds of the U.S. economy
through purchases of goods and services. Americans saved only 2.2% of
their after-tax income during the month, down from 2.3% in October.
Orders for durable goods--big-ticket items such as cars, airplanes, and
washing machines that are expected to last three years or more--
reversed two monthly declines to rise 1.2% during November, the
Commerce Department reported Thursday. A sharp increase in orders for
electronic and electrical equipment accounted for much of the change.
The Labor Department said the number of people filing new claims for
unemployment compensation increased to 281,000 during the week ended
December 18 from a revised 267,000 the preceding week. The four-week
moving average, a more reliable indicator of employment trends, rose to
283,750 from a revised 282,250 the previous week.
Few economic reports are due the final week of 1999. They include an
estimate of existing-home sales and a survey of consumer confidence
(both on Tuesday) and the index of leading economic indicators
(Wednesday). Markets will close at 1 p.m. Eastern time, Friday,
December 31.
Summary of Major Economic Reports: December 20-24, 1999
-----------------------------------------------------------------------
|Date Report Actual Expected 30-Year S&P 500 |
| Value Value Bond Yield Index |
|---------------------------------------------------------------------|
|December 20 +5 bp -0.2% |
|---------------------------------------------------------------------|
|December 21 FOMC meeting +2 bp +1.1% |
| ends with |
| no change |
| in short-term |
| interest |
| rates. |
|---------------------------------------------------------------------|
|December 22 Real Gross +5.7% +5.5% No change +0.2 |
| Domestic |
| Product (Q3, |
| annual rate) |
|---------------------------------------------------------------------|
|December 23 Personal +0.4% +0.2% |
| Income (November) |
|---------------------------------------------------------------------|
| Personal +0.5% +0.5% |
| Spending |
| (November) |
|---------------------------------------------------------------------|
| Durable-Goods +1.2% +1.1% |
| Orders (November) |
|---------------------------------------------------------------------|
| Initial Jobless 281,000 280,000 +3 bp +1.6% |
| Claims (12/18) |
|---------------------------------------------------------------------|
|December 24 Christmas -- -- |
| Eve--U.S. |
| financial |
| markets closed. |
|---------------------------------------------------------------------|
| Weekly +10 bp +2.6% |
| Change |
-----------------------------------------------------------------------
bp = basis points.
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