Plus: U.S. Economic Growth Slows, Durable Goods Orders on the Decline and Jobless Claims Fall at Modest Pace.
U.S. Economic Growth Slows in Q1
United States gross domestic product (GDP), the value of all goods and services, grew at a 2.2 percent annual rate in the first quarter of 2012, easing from the 3 percent pace registered in the prior three months, according to the U.S. Department of Commerce last week.
The median projection of economists surveyed by Bloomberg News called for a 2.5 percent gain.
GDP growth slowed despite a sizable pickup in consumer spending, which rose to its fastest pace in more than a year. The strength came from a second consecutive quarter of solid growth in automotive purchases.
The drop from January to March was largely due to a slump in government spending, which fell at an annual rate of 3 percent in the first quarter and shaved 0.6 points off the GDP, as well as declines in business investment. Corporate spending on equipment and software increased 1.7 percent after a 7.5 percent rise the prior period.
“While the drop in GDP growth appears worrisome, economists say the first quarter’s growth was, in some ways, healthier than the greater expansion in the prior period,” Forbes reports. “Consumer demand underpinned first-quarter GDP growth. But, in the fourth quarter, inventory building fueled expansion, as companies rushed to take advantage of an expiring tax credit.”
The Commerce Department’s GDP data underscore the view of Federal Reserve officials, who last week said they expect “moderate” growth this year, ranging between 2.4 percent to 2.9 percent.
Durable Goods Orders Fall in March
New orders for U.S. durable goods dropped 4.2 percent in March, following a revised 1.9 percent increase in February, according to a report from the U.S. Department of Commerce last week. Excluding the often volatile transportation category, new orders fell 1.1. percent.
The total value of durable goods orders last month decreased by $8.8 billion to $202.6 billion, the steepest single-month decline in nearly three years. The largest losses were in transportation equipment, which fell 12.5 percent largely due to massive declines in non-defense aircraft and parts, which plummeted 47.6 percent. There were few gains for the month, led by a 3.2 percent increase in orders for electrical equipment and appliances.
“The fall-off in orders in March was broad-based. Apart from transportation orders…the worst-performing segment was machinery orders, down 2.6 percent,” Agence-France Presse reports. “The disappointing March reading capped a wobbly first quarter for the manufacturing sector, a key pillar of the US economic recovery from a deep recession.”
Meanwhile, durable goods shipments, up three of the last four months, rose 1 percent to total $208.8 billion in March, following a 0.3 percent decrease in February.
Demand for non-defense capital goods also declined in March, with orders falling 10.5 percent to $73 billion. However, capital goods shipments rose 8.5 percent to $7.4 billion.
Global Skills Gap Leaves 10 Million Manufacturing Jobs Vacant
About 10 million manufacturing positions worldwide cannot be filled due to a growing skills gap, new findings claim.
According to a report published last week by the World Economic Forum in collaboration with Deloitte Touche Tohmatsu Limited, companies in developed economies are struggling to fill manufacturing jobs despite high unemployment rates, while emerging economies also need skilled workers to fuel their growth.
Manufacturers that can overcome the skilled-worker challenge will rise above their global competitors, the report, titled The Future of Manufacturing: Opportunities to Drive Economic Growth, states.
“In the race to future prosperity, nothing will matter more than talent,” Deloitte’s Craig Giffi, co-author of the report, said in an announcement of the findings. “The skills gap that exists today will not likely close in the near future, which means companies and countries that can attract, develop and retain the highest skilled talent — from scientists, researchers and engineers to technicians and skilled production workers — will come out on top.”
The research maintains that innovation and the strategic use of public policy will play key roles in determining which countries and companies succeed in global manufacturing over the next two decades.
Jobless Claims Edge Downward
New initial jobless claims fell slightly in the latest week reported, according to the U.S. Department of Labor. Seasonally adjusted unemployment claims for the week ending April 21 fell to 388,000, a decrease of 1,000 from the previous week. Meanwhile, the four-week moving average, which smoothes out short-term volatility, rose by 6,250 to a total of 381,750.
The latest weekly improvement came in below expectations, with economists polled by MarketWatch forecasting claims to fall to 375,000. Jobless claims must typically remain below 400,000 per week over a sustained period for labor market conditions to improve.
“It was the third straight week that the level topped 385,000. Claims haven’t stayed that consistently high since November. The larger number of layoffs is in line with other measures that suggest hiring is slowing after a strong start to the year. In March, U.S. employers added 120,000 nonfarm jobs, half of what they added in February,” the Wall Street Journal explains. “Other economists, however, don’t necessarily see employment gains retreating further when the government releases its April payroll report next week.”