Quarterly Economic Perspective

By
Posted on October 4th, 2012

  • It was Spain’s turn to become the focus of concerns about eurozone financial stability as interest rates briefly topped 7% once again. Investors were relieved when a German court cleared the way for implementation of the eurozone’s bailout fund. However, by the end of the quarter, protests against fresh austerity measures and tax increases coupled with worry about a potential downgrade of Spain’s credit rating weighed on global equities.
  • U.S. economic growth continued to slow; the Commerce Department said gross domestic product rose only 1.3% in the second quarter compared to Q1’s 2% rate. Meanwhile, the Bureau of Labor Statistics said the unemployment rate remained stalled at 8.1% in August as increases in corporate jobs were partly offset by cuts in government payrolls.
  • There was some encouraging news in the housing market. The S&P/Case-Shiller index of home prices saw three straight months of increases during the quarter, and by quarter’s end were at their highest level in nearly two years. Meanwhile, the National Association of Realtors® said home resales were 9.3% higher than a year ago. And although sales of new single-family homes fell 0.3% during August, the Commerce Department said they were still almost 28% higher than the previous August, and the median home price of $256,900 was the highest it’s been since March 2007. Finally, housing starts were almost 30% higher than a year earlier.
  • The Federal Open Market Committee launched QE3, a new $40 billion bond-buying program that represents the third round of quantitative easing designed to help stimulate the economy, and set no time frame for the purchases to end. The Fed also said it now anticipates keeping its target interest rate at its current low level until mid-2015.
  • U.S. manufacturing data was mixed. Hurricane Isaac helped cut the Fed’s measure of industrial production by 1.7%, and a sharp drop in orders for commercial aircraft helped take durable goods orders down by 13.2% in August. Meanwhile, the Commerce Department said retail sales in August were 4.7% higher than a year ago, while the Bureau of Labor Statistics’ yearly snapshot of consumer expenditures showed the first yearly increase in consumer spending in three years.
  • In China–the world’s third largest economy behind the United States and the eurozone–economic growth continued to slow in the second quarter, hitting a three-year low of 7.6%. While robust by U.S. standards, it’s still a far cry from the 11.9% seen at the beginning of 2010.

Eye on the Month Ahead

Key dates and data releases: U.S. manufacturing, construction spending (10/1); auto sales (10/2); U.S. services sector (10/3); U.S. factory orders, FOMC minutes (10/4); unemployment/payrolls (10/5); balance of trade (10/11); wholesale inflation (10/12); retail sales, business inventories, Empire State manufacturing survey (10/15); consumer inflation, industrial production, international capital flows (10/16); housing starts (10/17); Philadelphia Fed manufacturing survey (10/18); home resales, options expiration (10/19); new home sales, FOMC announcement (10/24); durable goods orders (10/25); initial estimate of Q4 gross domestic product (10/16); personal income/outlays (10/29); home prices (10/31).

 

 

 

Source: Broadridge