Holy Mackerel! Where'd all the foolish statistics come from?
Over the course of the morning new reports were issued on the Gross Domestic Product, Corporate Profits, New Home Sales, the Chicago Purchasing Managers Index, and the University of Michigan Consumer Sentiment Survey.
Let's get started with the Gross Domestic Product (GPD). This is the definitive indicator of the state of the national economy. The Commerce Department's Bureau of Economic Analysis describes the GDP as, "The output of goods and services produced by labor and property located in the United States." If Saddam Hussein was the Secretary of Commerce he'd probably call it the Mother of All Indicators. This morning's release reported that the GDP for the second quarter of this year had increased at an annualized rate of 1.3%. This was the final figure for the quarter. Two months ago this number was estimated to be 0.5%, and one month ago it was revised upward to 1.1%.
For the past five quarters, the annualized percent changes were +4.1, +4.0, +5.1, +2.7, and +1.3. Thus, in the past half-year, the GDP growth rate has been halved and then halved again. Allegedly all of this is according to plan and what we're seeing here is the much-advertised soft landing being piloted by the Fed. Can the Fed pull out of this 45-degree glidepath as planned? Only time will tell. In the meantime we'll be monitoring things closely here at Today's Economy.
Along with the GDP report, the Bureau of Economic Analysis released its revised estimate of Corporate Profits for the second quarter. Current-production cash flow (net cash flow with inventory valuation and capital consumption adjustments) - the internal funds available to corporations for investment - increased $17.6 billion in the second quarter, compared with an increase of $9.1 billion in the first. In the fourth quarter of 1994 the change in this parameter was -$3.3 billion. So, over the past couple quarters, profits have been accelerating. Can the nation's businesses maintain this torrid pace? Again, only time will tell. We'll be watching.
Moving right along, the Bureau of the Census reported that sales of new one-family houses in August were at a seasonally adjusted annual rate of 710,000. This is 9.6% below the revised July rate of 785,000. This is not all that unusual. Last October the rate dropped 9.2% and in February of this year it dropped 10.6%. For the past year the rate is up 5.7%. For the year to date the rate is up 13.2%. So, it appears that this month's drop could just be a temporary pause in a generally upward trend. An upward trend in sales of new homes is bullish for the economy, reflecting the confluence of comparitively low mortgage rates and a growing willingness by families to commit to what, for many of them, will be the biggest investment they will ever make.
In other news, the Chicago Purchasing Management Association reported the September value for their Index to be 49.0. This is down from the August reading of 49.3 which, in turn, is down from the July reading of 49.7. A reading above 50 signifies that the manufacturing sector of the economy is expanding. Readings between 44 and 50 are interpreted to mean that the manufacturing sector is slipping, but the overall economy is increasing. Readings below 44 signify recession. Even though the index has slipped a little recently, its still a lot closer to 50 than it is to 44. So, for now, this indicator shouldn't cause any concern.
Finally, the University of Michigan released updates on its Consumer Sentiment readings for August and September. The August number was revised downward from 96.5 to 91.7 and the September number was left unchanged at 88.9. Now, instead of a nearly 8% drop from August to September, as reported two weeks ago, we have a net two-month drop of 5.8% from the July value of 94.4. It seems that these folks are just as worried as they were two weeks ago. But, it took them four times as long to get themselves into that state of mind.
It looks like the markets accentuated whatever positives they found in this mass of data. At 2:30, as I was wrapping this up, the 30-year T-Bond was up a full point and the DJIA had advanced by 17.70.
Transmitted: 95-09-29