By 21 January, 2014
Last week: The polar vortex in the first half of January may turn out to be the biggest economic event of the month. In December, retail sales rose by 0.2 percent while industrial production increased by 0.3 percent. And there was already a large overhang of inventory. The cold January weather in the Northeast and Midwest likely kept shoppers at home and curtailed some industrial activity. If buying and producing slowed, does it follow that hiring was impacted? And if so, the question then becomes how much activity will shift to February.
10:00am The Conference Board Leading Economic Index® for the U.S.
The Coincident Economic Index, which tells us where the economy is right now, continued to rise slowly through November. The Leading Economic Index for the U.S. has been consistently suggesting there could be a little more punch going forward. Was that still the signal in December?
FACT OF THE WEEK2.83 percent
The yield on a 10-year U.S. Treasury bond was 2.83 percent in January, more than a full point higher than it was at this time last year. Further, the expectation is that it might rise by another 50 to 75 basis points between now and January 2015. Will this have a dampening impact on economic growth? Of course, raising the cost of capital dampens demand for it. But consumers have spent much of the past five years deleveraging (paying off debt). How likely are they to go right back to adding debt? Business is even less likely, given how slow capital investment has been as well as the amount of cash (over $2 trillion) on hand. And public debt is limited by continued attempts at austerity - at the national, state and local levels.
FACT OF THE WEEK II2.7 percent
The U.S. has been running a large budget deficit for decades. The U.S. has also been importing much more than it exports for a long time. Both the budget and trade deficits, however, have been sharply reduced. The current account (which includes both trade in goods and services as well as capital flows) had run a deficit as high as 5.8 percent (of GDP) in 2006. Since then, it has shrunk by almost half (down to only 2.7 percent).
The U.S. is not the only country to achieve more balance. China's current-account surplus was as high as 10 percent in 2007, but has since been whittled to only 2.5 percent (of national income). Not every country, however, has achieved success recently. Due in no small part to the economic problems in the Euro-zone, Germany still has a 6 percent ratio. Still, greater balance across the globe reduces the risk of exacerbating problems in the financial sector - stemming from trying to finance large and growing imbalances. In short, the economic world is in a better place today, better able to absorb economic shocks for one thing, because balances are no longer as high, and even in Germany no longer rising. At least not right now.
For further information contact:
Kenneth Goldstein
+1 (212) 339 0331
ken.goldstein@conference-board.org
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