Looks like no one trusts what the spin-meisters have to say anymore, be they from Wall Street or the Govt, they are all full of hot-air.
Cracks me up!
U.S. Economy: Confidence Falls, Production Slows (Update2)
By Carlos Torres, Siobhan Hughes and Monee Fields-White
Washington, June 14 (Bloomberg) -- Consumer confidence had its biggest drop in June since the terrorist attacks, and industrial production slowed in May as the economic recovery faltered.
``People had been saying it's just a matter of time before things get better,'' said James Paulsen, chief investment officer at Wells Capital Management in Minneapolis, which has $75 billion in assets under management. ``Well, the lag is too long now.''
The University of Michigan's June consumer sentiment index fell to 90.8 from 96.9 in May. That's the largest decline since a 9.7-point decrease in September. Production at factories, utilities and mines rose 0.2 percent last month after a 0.3 percent gain in April, the Federal Reserve said.
Flagging confidence and production follow a larger-than- expected decline in retail sales last month and add to a picture of slowing growth. The economy probably expanded at a 2.9 percent annual pace in the second quarter, which ends this month, about half the 5.6 percent rate of the first, according to the Blue Chip Economic Indicators survey released this week.
This week's declines retail sales and confidence followed a series of reports last week showing a boost in May to employment and increased business at manufacturers and service companies.
``We've got some headwinds now, so economic growth has slowed considerably, perhaps a lot more than we anticipated,'' said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis.
Consumer Spending
Consumer spending, which accounts for two-thirds of the economy, probably will rise at a 2.6 percent annual pace this quarter, down from a 3.2 percent rate from January to March, according to the latest Blue Chip Economic Indicators survey, released this week.
The drop in confidence ``is a soft patch which will not last,'' Sohn said. ``We will get back onto firm ground once we get through the second quarter.''
The Dow Jones Industrial Average fell 22 points, or 0.2 percent. The Standard & Poor's 500 stock index fell 1 point, or 0.1 percent. The Nasdaq Composite Index rose 10 points, or 0.7 percent.
The Treasury's 4 7/8 note that matures in February 2012 rose 21/32 point, pushing down its yield 9 basis points to 4.81 percent. A basis point is 0.01 percentage point.
Economists had expected the Michigan index, which is based on a phone survey of about 500 households, to fall to 96.5, according to the median estimate of 47 forecasts in a Bloomberg News survey.
Expectations Index
The university's separate index of expectations, based on optimism about the next one to five years, dropped to the lowest level since December.
Concerns about the threat of more terrorist attacks and a lack of faith in corporate accountability that has sent stock prices tumbling may prompt consumers to rein in spending and slow the economy's rebound, economists said. That may help explain declines in sales at retailers such as May Department Stores Co. and Federated Department Stores Inc.
Retail sales last month fell 0.9 percent, three times the drop economists expected and the biggest decline in six months, according to a report yesterday from the Commerce Department.
The economy is expected to cool to a 2.9 percent annual growth rate in the quarter that ends this month, after expanding at a 5.6 percent pace in the first three months of the year, according to the Blue Chip survey.
Fed Policy
With growth slowing, Fed policy makers may wait for several months to raise the benchmark overnight bank lending rate, economists say. At 1.75 percent, the rate is the lowest in four decades.
A slowdown in automaking and utility output contributed to the smaller gain in industrial production last month. Economists had expected a 0.3 percent increase for May.
Still, May's increase marked the fifth straight rise in industrial production, which hasn't happened in almost two years. Manufacturing is rising because inventories have fallen below levels needed to keep meeting demand. Production of semiconductors and office equipment rose.
``These numbers are entirely consistent with the theme of a steady but slow recovery,'' said Vincent Boberski, a senior economist at RBC Dain Rauscher Inc. in Chicago. ``A good deal of the drag in manufacturing appears to be due to the natural slowdown in auto production after a frenetic six months.''
A separate report today from the Commerce Department showed that business inventories fell 0.2 percent in April, the 15th straight decline. The drop brought inventories to the lowest level in 2 1/2 years.
``Inventory-to-sales ratios are now extremely low,'' said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd. in Valhalla, New York. ``Companies do need to rebuild stocks.''
The amount of capacity in use rose last month to 75.5 percent, the highest since September. The plant-use rate had fallen to an almost 19-year low of 74.4 percent in December and is still well below the average 81.8 percent rate during the record expansion from March 1991 to March 2001. |
