Jones Lang LaSalle
Economic reports a mixed bag
Wednesday, March 1, 2006
By JEANNINE AVERSA
ASSOCIATED PRESS
WASHINGTON -- The economy, which stubbed its toe in the final quarter of 2005, is probably back on firm footing in the opening quarter of this year despite a cooling housing market and somewhat skittish consumers.
After digesting the latest batch of economic reports, released Tuesday, analysts predicted that economic activity is rebounding nicely in the January-to-March quarter and will grow by at least a 4.5 percent rate. For all of 2006, the economy will log another year of solid -- though slower -- growth, they said.
"The economy is doing pretty well now in terms of momentum," said Brian Bethune, economist at Global Insight.
But on Wall Street, the economic news unnerved investors and sent stocks tumbling. The Dow Jones industrials lost 104.14 points to close at 10,993.41.
The economy ended 2005 on wobbly footing, expanding at an annual rate of just 1.6 percent in the October-to-December quarter, the worst showing in three years, the Commerce Department said.
While slightly better than the first estimate of a 1.1 percent growth rate for the quarter, the new figure still showed a loss of momentum from the third quarter's brisk 4.1 percent pace. The slowdown was blamed on lingering fallout from the Gulf Coast hurricanes and the toll of lofty energy prices, which especially caused consumers to tighten their belts.
Another report provided further evidence that the housing market, which posted record- high sales five years in a row, has lost its sizzle.
Sales of previously owned homes dropped 2.8 percent in January to a rate of 6.56 million units, the slowest pace in two years, according to the National Association of Realtors.
A third report showed consumers' confidence in the economy dipped in February to 101.7, from 106.8 in January, the Conference Board said. People are anxious about economic conditions over the next six months, the report showed. Their assessment of current conditions, however, held steady at a 4½-year high.
"Consumers remained optimistic about their present situation, but going forward, sentiment is a bit shaky," said Sherry Cooper, chief economist at BMO Nesbitt Burns.
Other recent economic barometers -- including retail sales and jobs -- suggested the economy did start bouncing back at the beginning of this year.
The nation's unemployment rate dropped to 4.7 percent in January, the lowest in 4½ years.
But that hasn't helped President Bush's standing with the public. The president's job approval rating sank to 34 percent, the lowest since he took office in 2001, according to a CBS News poll conducted last week.
Businesses investment in equipment and software, export growth and inventory building by companies all turned out to be better than first estimated, leading to the higher reading on gross domestic product in the final quarter of 2005. Less deep cuts in government spending also contributed to the upgraded GDP reading.
GDP measures the value of all goods and services produced within the United States and is the best measure of the country's economic fitness.
Consumer spending -- usually a main force of economic activity -- rose at a rate of just 1.2 percent in the final quarter of 2005, the slowest since the second quarter of 2001. Analysts predict consumer spending is reviving in the current quarter.
But for all of 2006, they believe consumer spending won't be as strong as it was last year. The cooling housing market and the expectation that owners won't be seeing huge gains in the value of their homes figure prominently in this scenario of a more subdued consumer. The toll of rising interest rates and elevated energy costs also play roles.
Any moderation in consumer spending in 2006 as a whole, however, is expected to be offset by stronger business investment and growth in other parts of the economy, analysts said.
The economy is expected to grow by a respectable 3.3 percent this year, slightly below last year's 3.5 percent gain.
To keep the economy and inflation on an even keel, Federal Reserve Chairman Ben Bernanke will probably boost interest rates on March 28 and perhaps again on May 10, analysts said.
Economists believe the Fed's nearly two-year-long credit tightening campaign will come to an end this year.
Copyright © 2006 North Jersey Media Group Inc.
Economic reports a mixed bag
Wednesday, March 1, 2006
By JEANNINE AVERSA
ASSOCIATED PRESS
WASHINGTON -- The economy, which stubbed its toe in the final quarter of 2005, is probably back on firm footing in the opening quarter of this year despite a cooling housing market and somewhat skittish consumers.
After digesting the latest batch of economic reports, released Tuesday, analysts predicted that economic activity is rebounding nicely in the January-to-March quarter and will grow by at least a 4.5 percent rate. For all of 2006, the economy will log another year of solid -- though slower -- growth, they said.
"The economy is doing pretty well now in terms of momentum," said Brian Bethune, economist at Global Insight.
But on Wall Street, the economic news unnerved investors and sent stocks tumbling. The Dow Jones industrials lost 104.14 points to close at 10,993.41.
The economy ended 2005 on wobbly footing, expanding at an annual rate of just 1.6 percent in the October-to-December quarter, the worst showing in three years, the Commerce Department said.
While slightly better than the first estimate of a 1.1 percent growth rate for the quarter, the new figure still showed a loss of momentum from the third quarter's brisk 4.1 percent pace. The slowdown was blamed on lingering fallout from the Gulf Coast hurricanes and the toll of lofty energy prices, which especially caused consumers to tighten their belts.
Another report provided further evidence that the housing market, which posted record- high sales five years in a row, has lost its sizzle.
Sales of previously owned homes dropped 2.8 percent in January to a rate of 6.56 million units, the slowest pace in two years, according to the National Association of Realtors.
A third report showed consumers' confidence in the economy dipped in February to 101.7, from 106.8 in January, the Conference Board said. People are anxious about economic conditions over the next six months, the report showed. Their assessment of current conditions, however, held steady at a 4½-year high.
"Consumers remained optimistic about their present situation, but going forward, sentiment is a bit shaky," said Sherry Cooper, chief economist at BMO Nesbitt Burns.
Other recent economic barometers -- including retail sales and jobs -- suggested the economy did start bouncing back at the beginning of this year.
The nation's unemployment rate dropped to 4.7 percent in January, the lowest in 4½ years.
But that hasn't helped President Bush's standing with the public. The president's job approval rating sank to 34 percent, the lowest since he took office in 2001, according to a CBS News poll conducted last week.
Businesses investment in equipment and software, export growth and inventory building by companies all turned out to be better than first estimated, leading to the higher reading on gross domestic product in the final quarter of 2005. Less deep cuts in government spending also contributed to the upgraded GDP reading.
GDP measures the value of all goods and services produced within the United States and is the best measure of the country's economic fitness.
Consumer spending -- usually a main force of economic activity -- rose at a rate of just 1.2 percent in the final quarter of 2005, the slowest since the second quarter of 2001. Analysts predict consumer spending is reviving in the current quarter.
But for all of 2006, they believe consumer spending won't be as strong as it was last year. The cooling housing market and the expectation that owners won't be seeing huge gains in the value of their homes figure prominently in this scenario of a more subdued consumer. The toll of rising interest rates and elevated energy costs also play roles.
Any moderation in consumer spending in 2006 as a whole, however, is expected to be offset by stronger business investment and growth in other parts of the economy, analysts said.
The economy is expected to grow by a respectable 3.3 percent this year, slightly below last year's 3.5 percent gain.
To keep the economy and inflation on an even keel, Federal Reserve Chairman Ben Bernanke will probably boost interest rates on March 28 and perhaps again on May 10, analysts said.
Economists believe the Fed's nearly two-year-long credit tightening campaign will come to an end this year.
Copyright © 2006 North Jersey Media Group Inc.
posted by Jones Lang LaSalle NJ News Blog at 11:05 AM
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