BusinessJeeves.Com: Federal Reserve Monetary Policy Analysis

US Initial Jobless Claims rose for week ending August 19 to 314,000. Jobless claims have now risen for 4 straight weeks. The August 12 data was revised to 310,000.
New Orders for Durable Goods dropped a record 12.4% in July. Electronics/Electrical equipment, and Transportation equipment had the highest declines.
US Existing Homes Sales dropped to 4.79 million units sold, a 10% drop, in July. June levels were revised upwards. The sharp increase in home prices in the South and the West are the reasons these 2 regions led in the sharp drop.
US Q2 2000 Gross Domestic Products (GDP), a measure of goods and services produced in the US, was revised upward to 3.5%, slightly lower than what economists were anticipating. Durable Goods were revised downward, while Non-PC technology spending for networks related equipment, PDAs, and Servers were revised upward.
US Personal Income rose 0.3% in July, in line with economists' forecasts, and 0.1% lower than the June growth rate. Consumer spending rose 0.6%, while June figures were revised downward to 0.4%. The Saving rate was negative (-0.2%), a record low. The Personal Consumption Expenditure deflator (PCE Deflator) rose only 0.2%, one basis point (0.1) below the June rate.
The Conference Board reported that US Consumer Confidence in August stood at 141.1, below the consensus estimate, and below the upward revised June figures of 143. Consumer Confidence for the Present Situation and Expectations of the future were all down for the month.
US New Home Sales for July posted a sharp increase to 944,000 units, well above the consensus estimates, and the highest monthly growth in over 7 years. The West recorded the sharpest jump, followed by the South and Midwest regions. The Northeast however, recorded a drop.
US Index of Leading Economic Indicators dropped (-0.1%) in July, and the June level was revised downward to a (-O.1%) loss. Orders for Consumer Goods and Materials led the decline, and Capital Goods (excluding defense) also dropped. Consumer Expectations and Average Weekly Manufacturing hours rose for the period. The Coincident (current economic activity) index was unchanged, while Lagging Economic Index lost (-0.1%).
The US Energy Information Administration (EIA), and the American Petroleum Institute (API) reported that US Crude Oil increased to 2 million & 5.3 million barrels respectively for period ending August 25.
The US Department of Commerce reported that Internet Retail Sales for Q2 2000 rose 5.3% to $5.518 billion, representing 0.68% of total retail sales. The Q1 2000 Internet Retail Sales data was revised downward to $5.240 billion, representing 0.70% of total retail sales.
The Conference Board reported that the US Help Wanted Advertisement Index for July rose moderately to 82 points, the same rate as it was in May, but well lower than the 89 points reported in April. An increasing help wanted index indicates an expansion, but in this case, the growth is negligible.
US Factory Orders dropped 7.5% in July (largest drop ever), due mostly to a sharp drop in Aircraft orders. Electronics and Electrical equipment orders dropped 17.2% for the period. Industrial equipment however, rose, with computer equipment leading the gains with a 7.9% increase. Semiconductor supply was also strong for the period.
US Chain Store Sales' year-to-year rose a mere 3.3% in August. Chain Store sales continue to slide with Department and Apparel stores leading the decline in August.
US Jobless Claims for week ending August 26 stood at 318,000, about 4,000 higher than the preceding week.
The Chicago Purchasing Managers Association reported that its Chicago PMI for August dropped to 46.50 which is an indication of manufacturing slowing in the Chicago area. A PMI above 50 is an indication of a expansion in the sector.
The Economic Cyclical Research Institute (ECRI) reported that its Future Inflation Gauge (FIG) for August was 121.1, the lowest levels in 5 months, and the fourth consecutive decline.
The US Unemployment rate edged up from 4.0% to 4.1% in August. Hourly earnings also eased to June levels. The earnings ease came mostly from construction and manufacturing sectors. Job claims rose 105,000 in the period.
The National Association of Purchasing Managers (NAPM) reported that its NAPM index dropped to 49.5% in August, the first time the index came below 50% since January 1999. The associate Employment and Production indexes all came in below 50%. The Price Index came at 56.2%, the lowest in a whole year. New Order declined slightly to close at 49.7%. Any close above 50% signify manufacturing growth.
US Construction spending dropped 1.6% in July, the fourth straight month. Public Projects and Retail Building Construction spending led the decline.
Semiconductors (chip) sales in July rose 4.02%, and 50% since July 1999. Strong demand was reported for telecommunications, Digital Signal Processors (DSP), and flash memory chips. PC chip sales is picking up, but slowly. Asia and the Americas (North and South) saw the strongest increase in demand, while European sales were unexpected sluggish.
The National Association of Purchasing Managers (NAPM) reported the NAPM Non-manufacturing Index for August at 60.0%, well above the July levels, but below the June levels. New orders rose 2.5% for the month. New export orders rose 3%. The Price index dropped 2.5% for the period to 59%.
US productivity for fiscal Q2 was revised upward to 5.7%, with durable goods manufacturing leading. The Unit Labor Cost drop was larger than previously stated. Unit Labor cost dropped 0.4%.
US Jobless Claims for week ending September 2 dropped to 316,000 - due primarily to the Verizon Communications strikers returning to work. US Continuing Claims edged up for the fourth straight week. The 4 week moving average moved up to 318,000 - above the all-critical 300,000 mark.
US Wholesale Trade dropped 0.3% in July, while the June data was revised upward to a 1.1% growth.
US Consumer Credit grew only $9.4 billion in July, while the already high June levels were revised upward to $14.7 billion. As consumer spending slows, so will consumer borrowing.
The Richmond Federal Reserve Manufacturing Index rose to 19 in August, a 16 points jump from the previous month. Backlog of Orders dropped by 5, the second straight month. Prices paid by manufacturers and the wage growth indexes all dropped.
US Import prices rose slightly in August by 0.2%, due mostly to increases in petroleum prices. Although this is than the flat growth experienced the month before, it is still well below the 1.2% growth recorded in June. Export prices were down a higher than anticipated 0.3% in the same period, with Agriculture recording the highest drop. No export prices component rose for the period.
The US Trade deficit for Q2 2000 was at a record $106.1 billion, slightly lower than what economists forecasted, but still a new record though. The services sector continue to have more more surpluses - this time, $20.96 billion. The goods sector however, had a record deficit of $110.2 billion.
The Energy Intelligence Agency (EIA) and the American Petroleum Institute (API) reported that as of week ending September 8, US crude oil stockpile dropped 1 and 1.9 million barrels respectively. Reuters reported that the Markets were expecting only a 600,000 drop. Refined products like heating oil however, increased in the period.
US Jobless Claims for week ending September 9th. rose to 324,000 - about 8,000 higher than the previous week's rise.
US Producer Price Index (PPI), a good measure of inflation in the manufacturing sector, dropped 0.2% in August. The Core PPI, which excludes Volatile Energy & Food Sectors, rose a mere 0.1% in August, due largely to high capacity utilization.
US Retail Sales lost 0.2% in August, in line with estimates. The July figures were revised upward to a 0.9% increase. None-durable retail sales rose modestly, while back to school sales started weaker than anticipated.
The US Consumer Price Index (CPI), a good measure of consumer inflation, fell 0.1% in August, due mostly to lower oil prices. Because of increased oil prices in recent days, the September CPI is expected to be higher. The Core CPI, which excludes Volatile Energy & Food Sectors, rose 0.2%, in line with expectations, and has held the same growth rate in 4 months now.
US Industrial Production grew 0.3% in August, slightly higher than expected. The July 0.4% growth was revised downward to a flat growth rate. Capacity utilization rose 0.1% to 82.3%, while manufacturing output rose only 0.1%, the same growth rate as in July, but well lower than the high increases in the first 6 months of the year.
US Business Inventories grew only 0.2% in July, but well lower than estimated. Business sales declined 0.4%, but retail sales rose 0.9%. The inventory to sales ratio rose to 1.33%, an indication that inventory accumulation is decreasing with decreased sales.
The National Association of Home Builders (NAHB) reported that the US Housing Market Index was unchanged in September at 61. The Single Family Sales dropped 1 point to 66, traffic of potential buyers also dropped 1 point. Builders' optimism for the next 6 months rose to 72, the highest level in 4 months.
US Housing Starts rose 0.3% in August, slightly above expectations. The July levels were revised upwards to 1.526 million units from 1.512 million units. Single Family units rose about 59,000 units, while Multi-Family units declined by about 51,000 units.
The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week-ending September 15th, US Crude stockpile dropped 2.4 million and 2.0 million barrels respectively, well above the Reuters' analysts Survey of a 1.5 million barrels decrease. The two groups reported that gasoline inventories fell 4.2 million and 21,000 barrels respectively - Reuters' Survey estimated an increase of 1.3 million barrels!
The US Trade Deficit in July rose to $31.89 billion (a new record). Exports dropped $1.3 billion, while imports rose about $1 billion. The US Trade Deficit is running about 47% above last year's levels.
US Jobless Claim for weekending September 15 dropped 308,000 - slightly higher than expected. Initial Jobless Claims has been above the all-important 300,000 mark for 6 weeks.
US Existing Home Sales rose 9% in August to 5.27 million units, well stronger than anticipated.
The Conference Board reported that US Consumer Confidence rose to 141.9. Both present and future expectations all rose.
US Orders for Durable Goods rose 2.9% in August. Transportation and Equipment rose significantly, with Industrial and Equipment orders rising 1.5%. Economists are not concerned about this data because it it significantly well lower the unexpected 13.1% drop experienced in July.
The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending September 22, US Crude Oil dropped 500,000 and 2.2 million barrels respectively. Reuters' Survey of analysts expected a drop of 770,000 barrels for the period. The EIA and API also reported that distilled products dropped 1 million and 761,000 respectively. Reuters' survey of analysts expected an increase of 1.6 million barrels.
The Second quarter GDP of the US was revised upward to 5.6%, due to net exports and higher consumer spending. Business spending for industrial equipment and inflation services was strong.
US Jobless Claims for week ending September 23rd. dropped to 287,000 - the first time it has dropped lower than 300,000 in 8 weeks. This is a strong sign that labor supply is still very tight.
The Conference Board reported that its Help Wanted Index for August dropped to 78, the lowest level in 6 years. The plains, Midwest, Mid-Atlantic and the Southeastern states led in the decline.
Economy.Com, an online economic analysis portal, reported that its Online Help Wanted Index, which tracks white collar help wanted advertisements, eased a little to 132.0 for week ending September 23rd.
US Personal Income for August rose 0.4%, slightly higher than forecasted. Spending took a big chunk of that, as consumer spending rose 0.6%, well higher than forecasted, while personal savings dropped to an all time low 0.4%. The Personal Consumption Expenditures (PCE) Deflator, a good measure of how consumer spending influences inflation, was unchanged for the period - a sign the strong growth in spending is not causing inflationary pressure.
Chicago Purchasing Managers Association reported that its its Chicago PMI Index rose in September to 51.4%. The Production, New Orders, and Price Paid indices all rose above 50% for the period. An index above 50% means the sector is expanding.
The National Association of Purchasing Managers reported that, its NAPM Index for September rose slightly to 49.9%. Economists have expected a higher number. The New Orders and Backlog Orders indices declined again and closed below the 50% mark. The Production index rose to 52.1%. A figure above 50% indicates growth in the sector.
Construction Spending rose 1.4% in August, well above forecast. The booming public buildings construction sector pushed construction spending to its first gain in 4 months.

The Districts reported mixed economic activity from moderate growth to a slow down. There were only pockets of growth (and decline) that can be categorized as above the norm.
New England Districts (First & Second Districts) The First District (Boston) reported that the economy is still strong, with little price changes. Retail and Manufacturing sectors saw pay increases of up to 5%. Revenue are up in semiconductors, drugs, aircraft parts and furniture manufacturing as much as 15% over the year. The Second district (New York) Reported a moderately "brisk'' economic growth. Goods and Services prices are still stable even with higher energy and wages. Labor and commercial real estate remains tight, but residential construction is slowing. Bankers reported a weakening credit demand market, but Retail sales started picking up in September.
Third district (Philadelphia) reported a moderating economic activity, especially in manufacturing. Retail sales are still lukewarm despite the back-to-school sales season.
Fourth district (Cleveland) reported moderate economic growth. Labor markets are still tight, but prices have not nudged up, except of course for fuel. The high fuel cost has dampened the demand for heavy trucks and and trucking services. Agriculture has been hampered not by adverse weather, but low commodity prices for regional products like corn and soybeans.
The Mid-Atlantic Fifth District (Richmond) reported an increasing economic activity in Industrial Machinery, Tobacco, Food, and Furniture manufacturers. Retailers are upbeat about September sales. Although Manufacturing was strong, new orders (a good indicator of future manufacturing activity), was sluggish.
Southeastern Sixth District (Atlanta) reported one of the major slowdown in economic activity, due primarily in the regional drought which has caused crop losses of up to 50% in certain commodities. Skilled labor availability is still tight. Construction, Retail and Automobile sales all dropped for the period.
Midwestern "plains" districts (Seventh, Eight, Ninth & Tenth) The Ninth District (Minneapolis), Once the hottest growth district among the 12, this time reported that construction, manufacturing, and tourism are all slowing. As with other agricultural districts, the harvest will be good, but not profitable due to the depressed commodity prices. Labor markets remain very tight with wage increases being up to 6%. Mining and the Energy sectors continue to be strong. The Seventh (Chicago) reported a slowing economy for the second report in a row. Manufacturing however, remains strong. Skilled labor is still very tight to the point that a local gathering at a chamber of commerce broke out into a fracas about stealing other companies' employees. Consumer spending picked up in September and Retailers are getting optimistic again. The Eighth district (St Louis) reported that its economy is slowing, after posting a faster growth rate in the last report. Construction, Residential Homes, Retail, Loans and Bank deposits have all declined. Tenth District (Kansas City) reported a solid economy despite a slowing Construction and an easing in both labor markets and wage pressures. Residential Real Estate sales is slowing, while manufacturing holds stable. Retail Sales have picked up recently.
Western districts (Eleventh & Twelfth) The Twelfth District (San Francisco) reported a ''solid" economic "performance'' as services companies, manufacturing, retailers, ports and shipping businesses see an increase in business. Manufacturers reported increased production costs primarily in labor and energy, but most are not passing on the cost to consumers in fear of competitors offering a better deal - as such, most enterprises are bracing for lower profit margins. The Eleventh District (Dallas) reported a mixed economic activity. Construction, Oil field related activities, Real Estate, and demand for loans was strong. The dry hot weather spell is hurting farmers. Prices have have held either steady or dropped (except of course fuel prices), and retail sales continue to slow.

HUMPHREY-HAWKINS (CONGRESSIONAL) REPORT OF JULY 20th. 2000

The US economy still needs to be slowed down.
It is too early to declare victory in the inflation fight..
Costs held in check by productivity gains.
Energy prices are a threat to containing inflation.
Spending on consumer goods and housing has come down a "several notches"..
Fiscal discipline stressed so as to keep up on government surpluses.

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