Weekly Industry Crib Sheet: U.S. First-Quarter GDP Revised Down
July 1, 2013
After an initial positive assessment, U.S. economic growth was found to have grown less than expected in the January-March quarter. The downward revision, which occurred across all categories, is largely being attributed to consumers spending less than previously thought.
The U.S. Commerce Department revised its estimate of economic growth down from a 2.4 percent annual rate to 1.8 percent. The rate is still higher than the fourth-quarter 2012 growth of 0.4 percent. Income grew at 2.5 percent in the first quarter, slower than the 5.5 percent rate in Q4.
First-quarter consumer spending, which accounts for two-thirds of U.S. economic activity, increased at 2.6 percent, falling short of the 3.4 percent initially expected. The Associated Press said the change “reflected a lower estimate for spending on services such travel, legal services, health care, and utilities.”
Exports contracted at 1.1 percent, causing the total gross domestic product (GDP) to shrink by 0.15 percentage point.
The announcement will likely hamper plans to taper the U.S. central bank’s bond-buying stimulus. Federal Reserve Chairman Ben Bernanke said last week that the Fed would likely start to cut back bond purchases, which have helped keep interest rates low, later this year.
The Fed expects growth in the April-June quarter to reach 2 percent. Even if this happens, it will be difficult to meet the Fed’s forecast of 2.3 percent to 2.6 percent growth for 2013.
Orders for U.S. manufactured durable goods rose more than expected, increasing 3.6 percent in May, according to the Commerce Department last week. A gauge of business investment plans also rose for a third straight month, which may signal a pickup of U.S. manufacturing during the latter part of 2013.
Economists had expected orders to increase 3.0 percent, but a 10.2 percent surge in orders for transportation equipment, largely for civilian aircraft and parts, added to the overall rise in goods orders. Boeing reported a substantial uptick in orders for commercial aircraft, which increased from 51 to 232 in May. Excluded from the increase were motor vehicle orders, which dipped by 1.2 percent in May after a 2.4 increase in April, Reuters reported. The overall demand for durable goods rose to a seasonally adjusted $231 billion in May, reflecting a 7.7 percent boost over a year ago.
The pickup in orders came unexpectedly as economists predicted that businesses, affected by economic weakness, and cuts across federal spending, would slow demand. Yet the rise in demand for orders, which also included communications equipment (up by 12.6 percent), computers (1 percent), heavy machinery (1.2 percent) and primary metals such as steel (0.9 percent) may equate to stronger economic growth during the July through September quarter, according to USA Today.
Steel and aluminum shipments experienced modest increases in May but remain well behind 2012’s performance rate, according to a new report from the Metals Service Center Institute (MSCI).
The MSCI May Monthly Activities Report revealed that steel shipments in the U.S. totaled 3,657,600 tons in May, a 0.7 percent rise from April, but 4.8 percent lower than May 2012. Daily shipments ticked up to 166,300 tons per day, 300 tons higher than the April figures, but well below the 174,600 tons-per-day rate in May 2012. Year-to-date shipments totaled 17,726,300 million, a drop of 4.6 percent from the same period the year before.
Aluminum product shipments rose to 132,400 tons in May, a 3.8 percent increase over April’s 127,500 figure, but a 2.7 percent decline from the 136,100 tons of May 2012, the Monthly Activities Report showed. The daily shipment rate also fell from last year, with May 2012 seeing a rate of 6.0 tons per day, down from 6.2 tons per day a year ago. Aluminum product service centers logged 617,200 tons of aluminum from January to May, a year-to-date drop of 7.1 percent during the same period in 2012.
The Conference Board’s Consumer Confidence Index rose by 7.1 points to 81.4 this month. It’s the second month in a row that saw a rise in positive sentiment.
Other indices measured by The Conference Board also grew this month. The Present Situation Index reached 69.2 in June, up from 64.8 last month, while the Expectations Index jumped to 89.5 from 80.6 in May.
Lynn Franco, director of economic indicators at The Conference Board, said in a statement that the figures were the highest since January 2008, when they stood at 87.3. “Consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year. Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short-term, and may even moderately pick up,” she said.
Business conditions were also perceived more positively. Perception that business conditions are “good” remained unchanged at 19.1 percent. But those saying conditions were “bad” fell slightly to 24.9 percent. Short-term outlook for business improved as well, with 20.3 percent expecting business conditions to improve over the next six months, an increase from 18.7 percent in May.
The number of Americans seeking unemployment benefits fell 9,000 to a seasonally adjusted 346,000 in the week ending June 20, according to the U.S. Dept. of Labor. The four-week moving average declined by 2,750 to 345,750.
The positive news provides a sigh of relief after the U.S. Commerce Department revised down its assessment of economic growth to 1.8 percent, due largely to low consumer spending.
The unemployment rate ticked up one-tenth of a percent to 7.6 percent last month after employers added a disappointing 175,000 jobs. However, Jacob Oubina, senior economist for RBC Capital Markets LLC told Bloomberg that, “The broad trend [for jobless claims] remains lower. That’s going to continue to support net payroll gains.”