Plus: Durable Goods Orders Edge Down and Jobless Claims Plummet.
U.S. Economy Grows Slightly
The United States economy grew slightly faster in the spring than previously estimated, helped by exports and spending on services, according to the U.S. Department of Commerce last week. Gross domestic product (GDP) rose at an annual rate of 1.3 percent in the April-June quarter, up from the 1 percent gain calculated last month.
This is the third and final revision in the government’s estimate of Q2 growth in goods and services. The median forecast of economists surveyed by Bloomberg News was 1.2 percent, following a 0.4 percent increase in the first three months of the year.
The revision reflected a faster pace of investment in non-residential construction projects as well as a slight improvement in consumer spending. Consumer spending rose at a 0.7 percent annual rate in the three months through June, up from the prior estimate of a 0.4 percent gain. Household purchases in the first quarter climbed at a 2.1 percent annual pace. Business investment in equipment and software rose at a 6.2 percent annual rate compared with a previous estimate of 7.9 percent and following an 8.7 percent pace in the first three months of the year.
With the economy growing only at a 0.4 percent pace in the first three months of the year, the growth rate for the first half of the year amounted to a dismal 0.9 percent rate.
“Though most economists don’t expect another recession, they don’t see growth accelerating enough to lower the unemployment rate, which was 9.1 percent in August,” the Associated Press reports. “Many predict a rebound to growth of between 2 percent and 2.5 percent in the current quarter.”
In the Business Roundtable’s latest CEO Economic Outlook, also released last week, chief executives forecast real U.S. GDP to rise 1.8 percent this year, sharply lower than the 2.8 percent growth forecast in March.
Orders for Durable Goods Edge Down
New orders for U.S. durable goods decreased 0.1 percent in August, following a revised 4.1 percent increase in July, according to the Commerce Department last week. The decline stood at 0.1 percent even excluding the often-volatile transportation sector.
The value of durable goods orders in August fell $0.2 billion to $201.8 billion, marking the second decline in the past three months. Primary metals posted the largest drop in new orders, falling 0.8 percent to $24.2 billion, followed by fabricated metal products, which decreased 0.5 percent to $25.4 billion, and transportation equipment, which fell 0.3 percent to $53.1 billion.
“Most of the decline was centered on autos and large defense products excluding aircraft, but those orders often swing sharply from one month to the next, and they are not viewed as good indicators of future trends,” MarketWatch notes.
Within the transportation sector, orders for motor vehicles and parts fell 8.5 percent to $29.2 billion. However, there were positive signs in capital goods demand, which economists use as an indication of business confidence. Capital goods orders rose 4.2 percent from July and 11.5 percent year-over-year, led by a 5.2 percent monthly gain in non-defense capital goods orders.
“It was especially encouraging to see at least a modest degree of energy in capital investment during a month that featured many assaults on business and consumer confidence, from a debilitating debate on the U.S. debt ceiling to suggestions that the Eurozone sovereign debt quagmire was spinning out of policymakers’ control,” Cliff Waldman, an economist for the Manufacturers Alliance/MAPI, wrote in an analysis of the report.
Meanwhile, durable goods shipments, after being up for three consecutive months, fell $0.2 percent to $201 billion in August. This followed a 2.1 percent gain in July. Transportation equipment posted the largest decline, with shipments dropping 4.6 percent to $47.1 billion.
Jobless Claims Plunge
New initial jobless claims fell sharply in the latest week reported, indicating that labor conditions are gradually improving after a series of unexpected rises in weekly jobless figures last month. According to the U.S. Department of Labor, seasonally adjusted unemployment claims dropped by 37,000 for the week ending September 24, bringing the total to 391,000, the lowest level in five months. The four-week moving average declined by 5,250 to total 422,250.
“Though that could be an encouraging sign for the nation’s ailing economy and its soaring unemployment rate, a Labor Department spokesman cautioned that some of the upturn may be a result of technical challenges associated with the seasonal adjustment of the data,” the Washington Post’s Political Economy blog explains. “Still, the numbers exceeded analyst expectations.”
Economists polled by MarketWatch expected jobless claims to fall to 417,000 for the week, while a Reuters poll had forecast a decrease down to 420,000. Generally, claims must drop below 400,000 to indicate healthy job growth and stronger hiring conditions.
Despite the positive data, the state of the overall U.S. economy and conditions in international markets may hamper potential jobs growth.
“The pace of firings has remained little changed this year while companies are reluctant to hire at a time when the economy is slowing and concerns of a European default rise,” Bloomberg BusinessWeek reports. “Federal Reserve policymakers last week announced more unconventional measures to boost jobs and the economy.”