Quarterly Economic Perspective

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Posted on April 3rd, 2012

  • The U.S. economy continued to recover. The Bureau of Economic Analysis said gross domestic product for 2011’s final quarter rose 3%; that’s sharply higher than the previous quarter’s 1.8% increase. However, China and Europe both showed signs that their economies might be faltering; China lowered its 2012 growth target to 7.5%, both the eurozone and the larger European Union saw a 0.3% contraction in their economies, and Germany and France reported weakness in their manufacturing sectors.
  • Unemployment continued to fall, ending the quarter at 8.3%, its lowest level in three years. Meanwhile, the number of new jobs added to the economy exceeded 220,000 for three straight months.
  • In the largest sovereign restructuring on record, 85% of Greek bondholders agreed to swap their holdings for bonds worth almost 54% less. The arrangement allowed Greece to impose the same terms on most of its remaining creditors, qualify for a second round of financial assistance, and make key bond payments. The restructuring meant that financial institutions had to pay off on roughly $3 billion worth of credit default swaps on Greek debt.
  • The leaders of all but two European Union countries signed a treaty designed to impose greater fiscal discipline in the EU, and European banks refinanced almost €530 billion with the European Central Bank to help maintain the financial system’s stability.
  • The Federal Reserve Open Market Committee said it plans to keep interest rates at “exceptionally low levels” through at least late 2014.
  • Despite dips in sales of both new and existing homes in February, both continued to be higher than the previous year (up 11.4% and 8.8% respectively). However, that didn’t translate into higher home prices; according to the S&P/Case-Shiller national index, home prices were at their lowest level since mid-2006. Housing starts also were down slightly in February, but both housing starts and building permits were up more than 34% from a year earlier.
  • Spiking gas prices translated into higher consumer inflation; a 6% jump in gas prices in February alone helped boost the inflation rate for the last 12 months to 2.9%. Retail sales also were up 6.3% from the previous year, though gas prices accounted for part of that increase as well. Meanwhile, wholesale inflation was up 3.3% (the smallest yearly increase since August 2010).
  • Fifteen large banks passed the Federal Reserve’s stress tests designed to gauge their ability to withstand a financial crisis, but four others must resubmit plans that show they have sufficient capital.

 

 

 

Source: Broadridge