BusinessJeeves.Com: Federal Reserve Monetary Policy Analysis

RECENT ECONOMIC DATA RELEASES (from old to newer data):

The Conference Board reported that the US Consumer Confidence Index for January 2001 dropped 14.2 points to 114.4, a much larger drop than economists were expecting, and the index is now at its lowest point in 4 years. All the indices that make up the main all declined or moved in a direction that showed a lack of confidence.
US Gross Domestic Product (GDP) grew a mere 1.4% in Q4 2000, the weakest growth since Q2 1995. The slowing growth is attributed to slowing consumer spending, business investment, and housing expenditure. The Implicit Price (Inflation) Deflator rose a modest 2.1%, but still its highest rise since Q1 1999.
US New Home Sales rose a surprising 975,000 units in December, due mostly to cheap fixed mortgage rates. The Midwest accounted for the growth.
Chicago Purchasing Managers reported that their PMI Index for January dropped to 40.2% - any point below 50% is a contraction. All the indices dropped, except the Prices paid Index, which rose to 62.9%.
The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending January 26th, US Crude Oil inventories dropped 3.6 million barrels and 5.6 million barrels respectively. Reuters Survey of analysts expected an increase of 500,000 barrels! The EIA and API reported that Distillates dropped 1.7 million barrels and 425,000 barrels respectively. Reuters survey expected a decrease of 1.3 million barrels.
US Jobless Claims for week ending January 27th. rose 32,000 to 346,000. The 4-week moving average dropped to 327,000.
The National Association of Purchasing Managers reported that its NAPM Index fell to 41.2% in January, the lowest levels since 1991 and the sixth straight monthly drop. Any figure below 50% is a contraction. All the other indices dropped except the Prices Paid Index, which rose to 65.7%.
US Personal Income grew 0.4% in December, 2 times what economists were expecting. Consumption grew 0.3%, while the savings rate improved 0.1% to 0.8%. The PCE Deflator held steady at 0.2%, while Wages and Salaries grew only 0.2%.
US Construction Spending rose a robust 0.6% in December to $811.5 billion, slightly higher than economists estimated. All sectors saw increases except Private Residential.
The US Unemployment Rate rose 0.2% in January to 4.2%, the highest unemployment levels since September 1999. On a good note, nonfarm payrolls (new jobs) rose 268,000 for the period - analysts were expecting an increase of only 80,000. The sharp increase in the Unemployment Rate has been blamed on the sharp rise in layoffs and normal seasonal trends.
The Economic Cycle Research Institute (ECRI) reported that, its Future Inflation Gauge (ECRI FIG) dropped 1.8% in January to 112.4, the 9th. straight monthly drop, and at the lowest levels in over a year.
US Vehicle Sales picked up to 17.2 million units sold in January, which is surprisingly higher than the December sales of 15.5 million units sold. Deep discounts and incentives are reportedly the reason behind the jump. GM performed better than the other big 3.
US Factory Orders rose 1.1% in December, thanks to Aircraft and electronic components orders. Computer Metalworking components orders had a sharp drop.
The National Association of Purchasing Managers (NAPM) reported that its NAPM Non-manufacturing Index dropped 11% in January to 50.1% - any point about 50% is an expansion. All indices came in lower except the Prices Index, which rose.
The Economy.Com/PC Data Index of Online Shopping dropped to 163.2 in January. Percent of daily users who buy also dropped to 1.30.
US productivity grew 2.4% in Q4 2000, the smallest growth since Q1 2000. Compensation per an hour rose an astonishing 6.6%, the highest rise in 2 years. Unit Labor Costs rose 4.1%, while Q3 figures were revised upward from 2.9% to 3.2% growth. For the whole year 2000, US productivity rose 4.3% - best levels since 1983, while unit labor costs rose a modest 0.7% - the smallest rise in about 4 years.
For week ending February 2nd., both the Energy Information Agency (EIA) and the American Petroleum Institute (API) reported an increase of 3 million barrels. Reuters Survey of analysts expected an increase of 2.1 million barrels. For Distillates, the EIA saw an increase of 800,000 barrels, while the API saw a decrease of 157,000 barrels. Reuters survey expected a decrease of 1.5 million barrels.
Semiconductor Billings worldwide dropped 2.1% in December to $17.89 billion.
US Consumer Credit grew only $3 billion in December, less than half what economists were expecting. Revolving credit rose only 3.6% to $2 billion, while non-revolving credit rose 1.5% to $1 billion.
US Jobless Claims for week ending February 3rd. rose 15,000 to 361,000. The 4-week moving average rose to 331,000.
US Wholesale Sales rose a stronger than expected 0.7% in December (analysts were expecting no growth). Wholesale Inventories were unchanged, while the Inventory/Sales ratio dropped to 1.30 - the first decline in a year.
US Chain Store Sales rose 4.8% in January, well higher than the combined December and November increases! Drug Stores sales led with an increase of 13.1%, well better than the December increase of 6.6%. Department Stores sales grew 0.9% from December's loss of 0.1%. Apparel Stores sales however, lost 1.2%, its second monthly lost.
US Retail Sales grew 0.7% in January, higher than what economists expected. The surprise increase was due to deep discounts (especially for autos) and the good weather.
The Richmond Fed Manufacturing Survey, a good measure of manufacturing activities in the district, dropped 12 points in January. This is the fourth straight monthly drop.
US Business Inventories grew a mere 0.1% in December, while the November growth was revised downward to a growth of 0.3%. December Inventory to Sales ratio were unchanged at 1.36.
The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending February 9th, US Crude Oil inventory grew 3.4 million barrels and 4.1 million barrels respectively. Reuters Survey of analysts expected an increase of 2.0 million barrels. For Distillates, The EIA and API saw increases of 800,000 barrels and 938,000 barrels respectively. Reuters survey expected a decrease of 900,000 barrels.
The National Association of Home Builders (NAHB) reported that its NAHB Housing Market Index for February rose 3 points to 58. Single family sales rose 2 points to 62, while the next 6 months outlook rose 6 points to 67.
US Jobless Claims for week ending February 10th dropped 11,000 to 352,000. The 4-week moving average rose to 345,000.
US Import Prices dropped 0.4% to 99.4 in January, thanks to lower crude oil prices. US Export Prices rose 0.2% in the same period, thanks to capital goods and agricultural commodities.
The Philadelphia Fed Index rose slightly to 30.5%, still a very weak figure.
US Housing Starts rose 5.3% to 1.65 million units in January, the strongest increase since April 2000, and well above economists' estimates. The Midwest and the South led in the strong growth.
US Producer Price Index (PPI) rose a strong 1.1% in January, while Core PPI grew 0.7% for the period. Both figures are well above what economists expected and they are discounting the PPI figures due to their overstatement (producers can't be increasing prices when there are no buyers).
US Industrial Production dropped 0.3%, well above estimates, in January. Auto production dropped 6.0%. Capacity Utilization is now at 80.2, the lowest level in over 2 quarters.
The Department of Commerce reported that, US e-commerce sales rose 36% from Q3 2000 to Q4 2000 to a value of $8.69 billion. Q4 2000 sales is a whopping 67% increase from Q4 1999. E-commerce as part of total retail sales also improved in Q4 2000 to 1.01%.
US Consumer Price Index (CPI), a good measure of consumer inflation, rose 0.6% in January, about twice what economists expected, and blamed on the rising energy costs. The Core CPI, which excludes the volatile energy and food section, rose 0.3%, again above expectations. The unexpected strong rise in Core CPI has been attributed to high tobacco, drug prescription, medical care, and services prices.
US Trade Deficit in December narrowed to $32.99 billion from the revised November figures of $33.1 billion. US Exports dropped $740 million, while Imports dropped $870 million.
US Semiconductor book-to-bill ratio dropped to 0.81 in January, due primarily to a massive drop in bookings. Shipments also dropped, but less drastic.
US Index of Leading Economic Indicators, a good measure of economic activity and outlook, rose 0.8% in January to 109.4 - the same level seen in October 2000. Coincident Index rose 0.2% to 116.6 - the same level seen in September 2000. Lagging Index rose 0.1% to 107.7.
US Jobless Claims for week ending February 17th rose 4,000 to 348,000. The 4-week moving average rose to 351,000.
The Conference Board reported that its Newspaper Help Wanted Index, a good measure of blue collar employment, dropped 3 points in January to 76. New England and the South Atlantic however, saw increases.
Economy.Com reported that its Online Help Wanted Index, a good measure of white collar employment, dropped in February. The 4 week moving average dropped to 112.1, while the 12 week moving average dropped to 113.3.
US Crude Oil inventory dropped in the week ending February 16th, according to the Energy Information Agency (EIA) and the American Petroleum Institute (API). The EIA and API reported that US crude oil inventories dropped 11.9 million barrels and 12.0 million barrels respectively. Reuters Survey of analysts expected an increase of 500,000 barrels. For distillates, EIA and the API reported increases of 1.6 million barrels and 2.5 million barrels respectively. Reuters survey expected a decrease of 800,000 barrels.
US Existing Home Sales dropped 6.6% in January to 4.65 million units sold - this was a bigger drop than analysts expected. All the 4 regions of the country had a drop.
The Conference Board reported that US Consumer Confidence dropped to 106.8 in February, a bigger drop than analysts forecasted, and at the lowest levels in 4 years. On the upside, consumers' plans to buy homes or cars in the next 6 months rose.
US New Home Sales dropped to 912,000 units sold in January, a slightly higher drop than economists were forecasting. All 4 regions of the country recorded a drop.
US Durable Goods Orders dropped 6.0% in January, a well higher drop than forecasted. Transportation equipment order accounted for almost all of the drop at a stunning 22% drop. On the upside, non defense capital goods (excluding Aircraft) orders rose an impressive 6.5%. Computer related orders also had a strong gain.
US Gross Domestic Product (GDP) for Q4 was revised downward to a 1.1% growth, the slowest growth since 1995. Consumer and Business expenditures, and Exports were weak.
The Chicago PMI Index for February rose 3 points to 43.2% - any point below 50% is a contraction. All indices closed lower except employment, which held steady.
For week ending February 23rd., the Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that, US crude oil inventories rose 2.9 million barrels and 2.2 million barrels respectively. Reuters Survey of leading analysts expected an increase of 5.2 million barrels. For Distillates, the EIA and the API reported decreases of 1.1 million barrels and 992,000 barrels respectively. Reuters expected a decrease of 300,000.
The National Association of Purchasing Managers reported that its NAPM Index for February rose slightly to 41.9%, which was slightly higher than what analysts forecasted - any point below 50% is a contraction. Imports, Employment, and Prices Paid indices all dropped.
US Jobless Claims for week ending February 24th. rose 39,000 to 372,000, while the week before figures were revised to 333,000. The 4 week moving average rose to 353,000.
US Personal Income rose 0.6% in January, which was slightly above what economists forecasted. US personal Consumption grew a strong 0.7%, thus forcing personal Savings to drop 1.0%. The PCE Deflator rose 0.5%.
US Construction Spending for January rose a strong 1.5%. All sectors of construction activity were strong.
US Vehicle Sales rose stronger than expected in February to 17.5 million units sold.
The National Association of Purchasing Managers (NAPM) reported that its NAPM Non-manufacturing Index rose 1.6% to 51.7% - any point above 50% is an expansion. All indices rose and were above 50%, except Imports and Inventory. Imports dropped to 46.8%, while Inventory rose, but still below the 50% mark.
US Existing Home Sales rose a stronger-than-expected 3.8% in January to 5.13 million, according to an upward revised data from the National Association of Realtors.
US Productivity growth for Q4 year 2000 was revised downward slightly to 2.2%. Cost of Labor was revised upward from 4.1% rise to a 4.3% rise.
US Factory Orders dropped a bigger-than-expected 3.8% in January, according to revised reports released today. Aircraft and Electronics sectors accounted for all the declines, while other sectors were flat.
The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending March 2nd, US Crude Oil inventory dropped 2.7 million barrels and 3.9 million barrels respectively. Reuters Survey of analysts expected an increase of 2.4 million barrels. For Distillates, the EIA and API saw saw decreases of 1 million barrels and 781,000 barrels respectively. Reuters Survey expected a decrease of 750,000 barrels.
US Consumer Credit Outstanding grew a whopping $16.1 billion in January to $1.549 billion, well above estimates and a 13% annualized growth. Both revolving and non-revolving credits also grew above expectations at 12.8% and 13.6% respectively.
US Chain Store Sales rose 2.8% in February. Discount, Drug, Electronics and Wholesale Clubs all saw increases, while Apparel, Department Stores, and Footwear stores saw decreases.
US Jobless Claims for week ending March 3 fell 4,000 to 370,000. The 4-week moving average rose slightly to 355,000.
US Employment rolls gained a stronger than expected with 135,000 new jobs in February. The monthly unemployment rate was steady at 4.2%. Average hourly earnings grew at a monthly rate of 0.5%, while the 12-month rate now stands at 4.1. Average workweek however, showed weakening numbers.
The Economic Cycle Research Institute (ECRI) reported that its monthly Future Inflation Gauge (ECRI FIG) dropped 1.0% in February to 111.3, while the over the year gauge has now dropped 8.7%.
US Wholesale Sales rose 0.2% in January, while inventories dropped 0.3% in the same period. The Inventory to Sales ratio also dropped to 1.29.
US Retail Sales dropped an unexpected 0.2% in February, while January figures were revised upwards to a 1.3% growth. Non-durable and durable goods (excluding automobile) both dropped 0.3% in February.
The Richmond Federal Reserve Survey of manufacturing for February showed improvements as shipments gained 14 points to post a positive 2 increase.
US Business Inventories increased 0.4% in January, slightly above estimates. Manufacturing inventories led with a whopping 0.7% increase. All sectors posted gains expect Wholesalers inventory, which dropped. The Inventory to Sales ratio rose up to 1.37.
For week ending March 19th, the Energy Information Agency (EIA) and the American Petroleum Institutes (API) announced that, US crude oil inventory rose 8 million barrels and 9.5 million barrels respectively. Reuters Survey of analysts expected a decrease of 1 million barrels. As for Distillates, the EIA and the API saw drops of 1.3 million barrels and 544,000 barrels respectively. Reuters survey expected a decrease of 600,000.
US Trade Deficit for Q4 2000 grew to a record $115.27 billion, but still slightly below analysts estimates.
The National Association of Home Builders (NAHB) reported that its NAHB Housing Market Index rose to 59 in March, a 2 points increase from previous month. Single Family homes rose a robust 6 points, and the 6-month outlook index rose 4 points. Traffic of Potential Buyers Index however, dropped 4 points.
US Jobless Claims for week ending March 10th. was unchanged, while the 4-week moving average rose to 364,000.
The Philadelphia Fed Survey Index, a good measure of manufacturing activity in the Federal Reserve district, rose back to 23.5% in march.
US Import Prices rose 0.1% in February, due mostly to increased energy prices, while the January data was revised to a fall of 0.1%. US Export prices dropped 0.2% for the same period, due to agricultural prices drop.
US Housing Starts dropped a modest 0.4% to 1.65 million units in February, which was below analysts' expectations. Multi-family units rose, while single-family units dropped. The Northeast had a 21% increase, followed by the South. The West and Midwest dropped.
US Industrial Production fell 0.6% in February, slightly higher than economists expected. Capacity Utilization eased down to 79.4%, due to a 0.4% drop in Manufacturing.
US Department of Labor reported that, the US Producer Price Index (PPI), a good measure of producer inflation, rose a modest 0.1% in February. The Core PPI, which excludes the volatile energy and food components, dropped 0.3%, its first drop since November, and the highest drop in 8 months.

BEIGE BOOK (12 DISTRICTS) REPORT OF JANUARY 17TH. 2001

The US economy had "sluggish to moderate" growth, with St. Louis showing the slowest growth.
New England Districts (First & Second Districts) The First District (Boston) reported that the economy is growing slightly. Electronics, computers and construction materials sales snapped back in the first 2 months of 2001. The Second district (New York) Reported a tight labor market, especially in financial services. Manufacturing and high-tech have eased off. Retail sales rebounded in the first 2 months of 2001.
Third district (Philadelphia) reported that the economy was showing mixed signals with manufacturing weakening, auto sales held steady, while retail sales started picking up.
Fourth district (Cleveland) reported that the economy was showing mixed signals as heavy industries like steel and equipment seemed weaker, while retail sales and residential construction were beginning to pick up.
The Mid-Atlantic Fifth District (Richmond) reported that retail sales was weak, while manufacturing and new orders picked up in February. Big ticket items continue to be hurt by the low consumer confidence.
Southeastern Sixth District (Atlanta) reported that residential construction is picking up, thanks to lower mortgages. Retail sales is up, but below last year's levels about this time of the year. Industrial construction continue to be weak.
Midwestern "plains" districts (Seventh, Eight, Ninth & Tenth) The Ninth District (Minneapolis) reported a strong tourism, commercial real estate, and energy sectors, while manufacturing, mining and farming are struggling. Retail sales have seen a modest increase. The Seventh (Chicago) reported that a contracting economy has kept manufacturing and heavy industries weak. While consumer spending is lower than the national average, labor markets continue to be tight in Indiana and Michigan. The Eighth district (St Louis) reported that the economy has "slowed noticeably" as energy prices together with the weak manufacturing sector takes its toll. The bad weather has also increased problems as an increase in personal bankruptcies, especially from western Tennessee, due layoffs, poor crops, etc. Tenth District (Kansas City) reported that economic activities have all declined significantly. Yet, the labor market still remains tight.
Western districts (Eleventh & Twelfth) The Twelfth District (San Francisco) reported a modest economic growth as layoffs from dot coms eases the once tight labor market. Gone are the bonuses which were a must have to attract workers. The region also reported a weakening auto sales, especially in Utah and Idaho, as people find lower priced vehicles appealing again. The Eleventh District (Dallas) reported that the economy is generally slowing down. Big ticket retail items were up, but consumers are weary to spend on other things.

HUMPHREY-HAWKINS (CONGRESSIONAL TESTIMONY) REPORT OF FEBRUARY 13th., 28th. and March 2nd. 2001

The economy in the last 2 months is not as weak as the end of 2000, and there seems to be no further need to cut interest rates BEFORE its March 20th. meeting.
The US economy is "at the moment" not in a recession.
The poor economic conditions at the last weeks of year 2000 are improving.
The major goal now is "inventory rebalancing". That is, the bank will follow policies that will help businesses sell their excess inventories by stimulating consumer confidence and purchasing.
Interest Rates will be lowered again in March, IF NEED BE.

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