Global Economic Watch


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  • Retail Sales Continue 2014 Rise

    Retail sales rose again in May, increasing 0.3 percent over April sales. All in all, the last three months have seen a welcome boost for retailers, with the Commerce Department sharing revised numbers for April showing 0.5% growth that month. From the Census Bureau : Nonetheless, Bloomberg 's Jeanna Smialek reports that the retail data came in below expectations . So we'll file this under, "watch this space" for now. Read the release here .
  • Gallup: Standard of Living Index Reaches New High

    Americans are living better than they have in years, according to the results of a Gallup survey. Gallup started tracking the U.S. Survey of Living Index in January 2008. Never before has it reached the heights it is at now. The vast majority (80%) of those surveyed are "satisfied with their standard of living" according to Gallup. We are struck more by how optimistic Americans seem to be about their future quality of life: Read the release here .
  • Personal Income Still Rising, But Consumer Spending Dropped in April

    Personal income rose again in April, though not at the rate of previous months this year, while consumer spending dropped for the first time in 2014, according to the Commerce Department . Real disposable personal income continued its steady climb rising 0.3%. Real consumer spending dropped 0.3%. The savings rate and prices also rose in April. From the Bureau of Economic Analysis release: Private wages and salaries increased $16.9 billion in April, compared with an increase of $44.6 billion in March. Goods producing industries' payrolls decreased $0.1 billion, in contrast to an increase of $10.2 billion; manufacturing payrolls decreased $1.2 billion, in contrast to an increase of $7.8 billion. Services-producing industries' payrolls increased $16.9 billion, compared with an increase of $34.5 billion. Government wages and salaries increased $1.4 billion, compared with an increase of $0.9 billion. Read the BEA's full report here .
  • Existing Home Sales Rose in April

    For the first time this year, existing-home sales have increased. Sales rose 1.3% in April, according to the National Association of Realtors . Monthly sales were still 6.8% lower than April 2013. From the release: Lawrence Yun , NAR chief economist, expected the improvement. “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point,” he said. “Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.” Total housing inventory2 at the end of April jumped 16.8 percent to 2.29 million existing homes available for sale, which represents a 5.9-month supply at the current sales pace, up from 5.1 months in March. Unsold inventory is 6.5 percent higher than a year ago, when there was a 5.2-month supply. “We’ll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough sellers in many areas. More inventory and increased new-home construction will help to foster healthy market conditions,” Yun added. The median existing-home price3 for all housing types in April was $201,700, which is 5.2 percent above April 2013; in the first quarter the median price was 8.6 percent above a year earlier. “Current price data suggests a trend of slower growth, which bodes well for preserving favorable affordability conditions in much of the country,” Yun said. Sales may be flat, but that means prices continue to rise. Read the full release here .
  • Economic Letter: Weakness in Recovery of Housing Market

    The economy may not be recovering at enough of a pace to please everybody, but it has been steadily getting better in most areas. But over the last nine months or so, the housing market has been bucking the trend--in a bad way. We'll get updated existing home sales data tomorrow, and perhaps we'll see a turn. But that seems unlikely. In a new Economic Letter , San Francisco Fed senior economist John Krainer shares some key data about home sales, and observes that investors, "may be pulling back as house values have increased in comparison with rental prices." Many indicators of housing market activity stalled over the second half of 2013, but the weakness is most evident in existing home sales. Sales of existing single-family homes reached a recent peak of 4.75 million units in July 2013, compared with the year before and adjusted for seasonal trends. Sales have fallen ever since. Figure 1 shows that the pattern of declining home sales has been broadly similar across different regions of the country. Sales in these regions all reached their peaks in July 2013 and then fell about 10% through October; the figure shows the regions indexed to 100 in July for comparison. The fact that home sales in different parts of the country peaked and fell together suggests that some common underlying factors were at play. One such factor that could account for the decline in home sales is rising mortgage interest rates. Starting in May 2013, financial market participants became increasingly convinced that the Federal Reserve would soon taper its long-term asset purchases, and interest rates moved up. Mortgage rates in particular rose by nearly a full percentage point. Higher mortgage rates generally have a direct dampening effect on home sales, as buyers face constraints on the size of loans they can secure and on loan payments relative to their incomes. Since individual incomes likely did not rise over this short period, and house prices continued to grow in most regions, the rise in mortgage rates was expected to have an unambiguous negative impact on sales. To gauge the effects of higher mortgage rates on home sales over time, I use a simple statistical model that relates existing home sales to past sales, past mortgage rates, and house price appreciation. I include past values of single-family construction permits to control for conditions in the market for new homes—a substitute for existing homes. Figure 2 shows both actual data and dynamic simulations of existing home sales during the period of interest. The model simulations use seasonally adjusted monthly data through March 2013. Beyond that date, I use actual mortgage rates, house price appreciation, and building permits to predict sales of existing homes. This simulation is dynamic in the sense that the model predictions are based on past values of home sales, which themselves are predictions from early periods in the simulation. In the figure, the solid blue line shows the actual path of existing single-family home sales, and the dashed red line is the simulated path from the model. The dashed green line offers another simulation of what sales would have been if mortgage rates had remained at the low levels observed in April 2013. Read The Slowdown in Existing Home Sales here .
  • CPI Rose in April, Has Grown 2% Over Last Year

    The Consumer Price Index for All Urban Consumers rose 0.3% in April, according to the Bureau of Labor Statistics . The CPI-U has grown in eleven of the last twelve months (in October it came in at 0.0). The all items index has grown 2.0% over the last 12 months. From the Bureau of Labor Statistics release: The indexes for gasoline, shelter, and food all rose in April and contributed to the seasonally adjusted all items increase. The gasoline index rose 2.3 percent; this led to the first increase in the energy index since January, despite declines in the electricity and fuel oil indexes. The food index rose 0.4 percent for the third month in a row, as the index for meats rose sharply. The index for all items less food and energy rose 0.2 percent in April, with most of its major components posting increases, including shelter, medical care, airline fares, new vehicles, used cars and trucks, and recreation. The indexes for apparel, household furnishings and operations, and personal care were all unchanged in April. The all items index increased 2.0 percent over the last 12 months; this compares to a 1.5 percent increase for the 12 months ending March, and is the largest 12-month increase since July. The index for all items less food and energy has increased 1.8 percent over the last 12 months. The energy index has risen 3.3 percent, and the food index has advanced 1.9 percent over the span. Here's a look at the CPI for All Urban Consumers over the last year: Read the full release here .
  • Existing Home Sales Flat in March

    Your neighborhood realtor may not be too thrilled these days. The seasonally adjusted annual rate of sales for the month was 4.59 million, down just slightly from February's disappointing figure of 4.60 million, according to the National Association of Realtors . NAR's chief economist, Lawrence Yun , says “There really should be stronger levels of home sales given our population growth.” Yun expects some improvement in the months ahead. “With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly.” The median existing-home price2 for all housing types in March was $198,500, up 7.9 percent from March 2013. Distressed homes3 – foreclosures and short sales – accounted for 14 percent of March sales, down from 16 percent in February and 21 percent in March 2013. “With rising home equity, we expect distressed homes to decline to a single-digit market share later this year,” Yun said. Ten percent of March sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in March, while short sales were discounted 12 percent. Total housing inventory4 at the end of March rose 4.7 percent to 1.99 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace, up from 5.0 months in February. Unsold inventory is 3.1 percent above a year ago, when there was a 4.7-month supply. Sales may be flat, but that means prices continue to rise. Read the full release here .
  • L.A. Times: Would-Be Home Buyers Held Back By Student Debt

    We'll be seeing some new data sets on home buying this week, and we'll spend a lot of air and cyber-ink trying to make links between home buying and overall economic growth. One of the factors that does not show up in the data: why people don't buy homes. One of the reasons is surely existing debt. And for a lot of would-be first-time home buyers, that existing debt is left over from college. L.A. Times reporter Tim Logan : The amount owed on student loans has tripled in a decade, to nearly $1.1 trillion, according to the Federal Reserve Bank of New York. People in their 20s and 30s — often the best-educated and highest-earning among them — owe most of that tab. That is keeping a crucial segment of home buyers on the sidelines, deferring one of the traditional markers of adult success. The National Assn. of Realtors recently identified student debt as a key factor in soft demand for home-buying this spring. A recent study by the trade group identified student loans as the top reason many home buyers delayed their purchase. Many more didn't buy at all. Surveys show today's adults value homeownership just as much as their parents did. But the shaky job market, higher debt loads, and the roller-coaster market of recent years is keeping many from pulling the trigger, said Selma Hepp, senior economist with the California Assn. of Realtors. "They're just postponing," she said. "It's the economy and the recession and what that generation has gone through." The share of buyers who are first-timers has dropped well below historical averages — 28% of California buyers last year, compared with 38% typically, according to CAR surveys. The absence of a new generation of customers could become a long-term problem for the industry, said Dustin Hobbs, spokesman for the California Mortgage Bankers Assn. Read Student debt holds back many would-be home buyers here
  • Gallup: Americans Regaining Confidence in Real Estate

    Does the bursting of the housing bubble seem like ages ago to you? It doesn't to us. Middle class families across the U.S. saw their primary investment channels--their homes and real estate in general--depreciate. And yet, when Gallup asked Americans where they feel most confident putting their money, real estate topped the list. These results are from Gallup's April 3-6 Economy and Personal Finances poll that asked Americans to choose the best option for long-term investments: real estate, stocks and mutual funds, gold, savings accounts and CDs, or bonds. Prior to 2011, Gallup asked the same question, but did not include gold as an option. Gold was the most popular long-term investment among Americans in 2011 -- a time when gold was at its highest market price and real estate and stock values were lower than they are today. Gold prices dropped significantly after that and it lost favor with Americans. The 24% of Americans who currently name gold as the best long-term investment ties with the 24% who choose stocks. Bonds have been Americans' least favored investment option for as long as Gallup has been asking the question. Savings accounts and CDs, on the other hand, have been more popular in the past. In September 2008, before gold was an option and at a time when the real estate and stock markets were tanking, savings accounts were the most popular long-term investment among Americans. This year, the housing market has been improving across the U.S., and home prices have recently been rising after a steep drop in 2007 during the subprime mortgage crisis. This current improvement in prices may be why more Americans now consider real estate the best option for long-term investments. In 2002, during the real estate boom that preceded the mortgage crisis and before gold was offered as an option in the question, half of Americans said real estate was the best investment choice. Read more from the survey results here .
  • Consumer Price Index On The Rise

    The Consumer Price Index for All Urban Consumers rose 0.2% in March, according to the Bureau of Labor Statistics . 0.2 doesn't look so big, but the news comes after two straight months of 0.1% growth.The CPI-U has grown in ten of the last eleven months. The all items index has grown 1.5% over the last 12 months. From the Bureau of Labor Statistics release: Increases in the shelter and food indexes accounted for most of the seasonally adjusted all items increase. The food index increased 0.4 percent in March, with several major grocery store food groups increasing notably. The energy index, in contrast, declined slightly in March as decreases in the gasoline and fuel oil indexes more than offset increases in the indexes for electricity and natural gas. The index for all items less food and energy also rose 0.2 percent in March. Besides the 0.3 percent increase in the shelter index, the indexes for medical care, for apparel, for used cars and trucks, and for airline fares also increased. The indexes for household furnishings and operations and for recreation both declined in March. The all items index increased 1.5 percent over the last 12 months; this compares to a 1.1 percent increase for the 12 months ending February. The index for all items less food and energy has increased 1.7 percent over the last 12 months, as has the food index. The energy index has risen slightly over the span, advancing 0.4 percent. Here's a look at the CPI for All Urban Consumers over the last year: Read the full release here .
  • A New Primer on China From McKinsey

    Do you have an hour for China? That is, do you have an hour you can spare to understand the leading economic story of the century? McKinsey's Jeffrey Towson and Jonathan Woetzel have written The One Hour China Book in an effort to bring us all up to speed on the key pieces to understanding what is happening in the world's most populous country and the impact of activity there on life everywhere. If you can't spare an hour just yet, here are the "six big trends" from the book, as shared at McKinsey Insights : Here's a little more on trend number 3: The American middle class was the world economy’s growth engine throughout the 20th century. Now, the engine is the Asia–Pacific region, which will account for two-thirds of the world’s middle class by 2030. While Chinese consumers’ focus on “value for money” has driven the rise of companies such as apartment builder China Vanke and Tingyi Holding Company—the business behind China’s dominant instant-noodle brand—buying habits are changing. As urbanization accelerates, consumer spending is becoming more like that of the West’s middle class. Urban Chinese are shopping to meet emotional needs, driving a skyrocketing demand for middle-class goods, food, and entertainment. As an example, China consumed more than 13 million tons of chicken in 2012—more than the United States. Tyson Foods’s China operations has facilities able to process more than three million chickens per week, and Chinese chicken consumption, which grew by 54 percent from 2005 to 2010, is expected to grow an additional 18 percent annually during the next five years. For additional evidence, look no further than the fact that the largest Chinese acquisition of a US company had nothing to do with technology, cars, or energy. In 2013, Chinese Shuanghui International spent $7.1 billion to buy American Smithfield, the world’s largest pork producer and processor. It’s not surprising, then, that agribusiness is one of China’s hottest new industries. Almost every aspect needs to be improved, from land and water use to logistics and retail. Legend Holdings, the parent company of Lenovo, now lists modern agriculture as one of its five core areas, with a portfolio that includes kiwi and blueberry farming. Read All you need to know about business in China here .
  • Zachary Karabell on Making Statistics More Meaningful

    Zachary Karabell is on a quest. He wants us to have a healthier relationship with economic statistics. And that means not placing too much pressure on those statistics to tell us more than they are designed to. In his latest book, The Leading Indicators: A Short History of the Numbers That Rule Our World , Karabell knocks some of the magic shine off of GDP and other key data that we follow closely. He recently spoke about GDP, income per capita, and other headline stats at the Carnegie Council . Here is an excerpt: For more information on the event, and to listen to the full talk, click here .
  • Personal Income and Spending Continue to Climb

    Personal income is steadily rising, according to the Commerce Department . Income and disposable personal income both rose by 0.3 percent in February, after rising 0.2% in January. Spending is just a step behind income (perhaps as it should be). Real consumer spending rose 0.2% after rising 0.1% in January. Take a look at the monthly change: From the Bureau of Economic Analysis release: Private wages and salaries increased $13.0 billion in February, compared with an increase of $17.2 billion in January. Goods producing industries' payrolls increased $5.2 billion in February and were unchanged in January; manufacturing payrolls decreased $0.3 billion in February, compared with a decrease of $2.8 billion in January. Services-producing industries' payrolls increased $7.8 billion, compared with an increase of $17.3 billion. Government wages and salaries increased $2.0 billion, compared with an increase of $1.2 billion. Read the BEA's full report here .
  • Charities Aid Foundation Ranks U.S. As Most Charitable Nation

    Ted Hart , the CEO of the the American branch of the Charities Aid Foundation , recently heralded the giving record of Americans in an article for the Stanford Social Innovation Review . "Americans give more to charity, both overall, and per capita, than any other nation," Hart writes. He goes on to note that Americans are also more engaged in charitable activity than people in any other country, based on CAF's measurements, which you can find at the end of the CAF's World Giving Index . One has to be careful not to equate charitable giving with caring for others, as the different social spending records of countries based on their tax structures surely has to be considered, but that should not take away the value of watching the trends within countries. And it appears the recovery in giving in the U.S. has outpaced GDP growth post-recession. You can read the full report here . Many of the key findings are in this infographic:
  • Pew: Americans Remain Bearish About the Economy

    Americans don't seem to be letting traditional economic indicators get in the way of their feelings about the economy. Andrew Kohut --Founding Director of the Pew Research Center --looks at some of the latest survey data he and his team has gathered, and calls citizens' "bearish" views of the economy as a big puzzle. As the new year began, the Associated Press summed up the optimistic outlook of experts succinctly: “Consumers will spend more. Government will cut less. Business will invest more. And more companies will hire.” In that regard, the Bureau of Labor Statistics first report of the year showed that the unemployment rate fell to a five-year low of 6.7 percent, and essentially remained at that level in February. But even so, much of the American public is still not over the Great Recession. And the factors that drive economic pessimism are not easily mitigated. Surveys show that a complex combination of partisanship and widening socio-economic gaps are in play, undermining chances of an improvement in the public mood any time soon. At the outset of what appeared to be a brightening economic climate, the Pew Research Center’s January national survey found just 16% of the public rating the national economy as excellent or good while a whopping 83% rated it as only fair or poor. This is little different than a year earlier when the survey found 12% giving the economy a positive rating and 86% rating it negatively. In fact, this is only modestly better than at any point since the onset of the Great Recession. The same pattern is seen in how Americans size up their personal finances. While Americans have a better opinion of their own finances than of the national economy, ratings of personal financial well-being remain well below what they were pre-recession. In 2007, and for much of the decade before it, about half of Americans rated their finances as excellent or good. Today, just 39% do. While there is a significant split on Americans' views about the economy based on political party affiliation, the split on personal finance issues is based on what Pew terms an education gap: Read the full article here .
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