Bizzy’s Business Briefs: Good and Not-So-Good Economic News off the Wires
Final GDP Growth for 2nd Quarter
After a first quarter of 3.8%, it came in at 3.3%, which is acceptable but not stunning.
This is not the kind of growth I would call overheated, which is why Don Luskin’s take on upcoming Fed rate hikes troubles me. He expects three more before Alan Greenspan retires on January 31, 2006. I don’t think any are needed, and that more than one would be unacceptable. Any “inflation” that is out there is in fuel only, and hasn’t spread around to the rest of the economy. Luskin points out that gold, which when rising has historically served as an inflation predictor, has been going up, but I sense that it will come back as soon as oil prices settle down to pre-hurricane levels, perhaps helped by cooler spending heads prevailing in Washington.
Jobless Claims Fall
This should mean that the worst of the hurricane employment dislocation is behind us.
Media Drives Consumer Sentiment and Confidence Down
That’s my interpretive headline combining this news and this news, and is consistent with my focus group post on September 20. With the Mainstream Media having just spent the previous week second-guessing itself about why they got it so wrong in exaggerating the Katrina death toll and the overall degree of the destruction, I suspect that more good news on top of the employment claims drop will bring confidence and sentiment back to pre-Katrina levels.
Midwest Activity Bounceback Bodes Well for Nation
Purchasing manager optimism, new orders and order backlong all went way up in September, indicating that “the storms’ impact was temporary, as the Fed and others had suggested…”
Consumer Spending Dips
You would expect that. I didn’t expect to read the following incoherent piece from AP that tries to make a doomsday scenario out of it:
Katrina Takes Toll, Consumer Spending Dips
Friday September 30, 10:28 PM EDTWASHINGTON (AP) — Hurricane Katrina has knocked the economy for a loop, and whether it revives or slips into recession depends on whether nervous consumers are willing to spend more.
New figures on Friday showed the storm caused incomes to fall in August, reflecting $100 billion in losses by people who didn’t have adequate insurance to cover damage to homes, businesses and vehicles.
The Commerce report showed that spending was on the skids even before Katrina struck. Soaring gasoline prices caused consumers to reduce spending by the largest amount since the September 2001 terrorist attacks.
The 1 percent drop, after adjusting for inflation, reflected not only the pain at the gas pump but a cutback in spending on new cars after two big sales months due to attractive incentives from automakers.
The recession fear seems silly to me when previous-quarter growth was over 3%, and may even be over 3% in the third quarter despite the hurricanes. The article goes on to describe a probable two months of “grim statistics,” but I’m not even convinced we’ll see that. A recession is normally considered to be two straight quarters of negative growth, which we are nowhere near. All in all, very sloppy work by AP, in my opinion.
