Fed Calls U.S. Growth Ho-Hum
- Apr 18, 2013
On Wednesday, the Federal Reserve released the latest “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” better known among economy wonks as the Beige Book, and it called U.S. economic growth “moderate.” To be specific, even though the Fed is usually fairly vague, the report said that “reports from the 12 Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April.”
Manufacturing activity was up, according to the Fed, with particular strength in industries tied to residential construction and cars. At the same time, there was some weakness in defense-related sectors, which is probably fallout from the sequester. Consumer spending didn’t grow that much during the reporting period, with high gas prices, the payroll tax rise and late winter snowstorms probably inhibiting spending.
Home sales continued to rise in most districts, and so did new home construction did, but tight inventories are nevertheless driving residential prices up, the Fed reported, confirming commonly observed trends in those aspects of the U.S. housing market. The central bank also reported that CRE activity improved in most districts.
IMF growth forecast edges down
This week the International Monetary Fund forecast that global economic growth will end up at 3.3 percent in 2013, and 4 percent in 2014. That isn’t much of an improvement over the 3.2 percent growth seen by the entire world in 2012, and it’s 0.2 percentage points lower than the 2013 growth rate the organization predicted back in January.
Even though economic conditions in most parts of the world have improved in the last six months, the fund says the main reason behind this year’s broadly unchanged growth prospects is that advanced economies haven’t all benefited to the same extent from improved financial market conditions and confidence. “Fiscal brakes” in some countries were another important factor—austerity policies in Europe and sequestration in the United States, that is.
Still, the world’s advanced economies successfully dodged a couple of bullets for now, namely the threat of a euro-zone breakup and a sharp fiscal contraction in the United States associated (perhaps) with dysfunctional Congressional policies. Financial markets have rallied in response, and financial stability has improved, according to the IMF.
Demand for copper soft
The drop in the price of gold has been getting a lot of attention in recent days, but the drop in copper prices is probably more meaningful as an economic gauge. On Wednesday, the price of copper declined more than 3.5 percent to close at less than $3.20 a pound for the first time since late 2011. That’s a closely watched benchmark among commodity wonks, and it indicates that demand for copper—an important metal in construction and industry—is soft worldwide.
Wall Street yo-yoed back down again on Wednesday—it’s been that kind of week—f with the Dow Jones Industrial Average losing 138.19 points, or 0.94 percent. The S&P 500 was off 1.43 percent and the Nasdaq was negative by 1.99 percent.