Spending provides cheer on US economy

[JeffWartman]

Spending provides cheer on US economy
By Daniel Pimlott in New York

Published: August 31 2006 17:27 | Last updated: August 31 2006 17:27

US consumers delivered good news to the economy on Thursday, as data for July showed spending on goods and services was growing more quickly than at any time this year.

Meanwhile, tame inflation over the month made an interest rate increase by the Federal Reserve in September increasingly unlikely.

Personal spending rose by 0.8 per cent last month, twice the June rate, a report published by the Commerce Deparment said, boosted by incentives for car sales. Personal income grew by 0.5 per cent, with disposable income up 0.7 per cent. Inflation rose by a smaller-than-expected 0.1 per cent, or an annualised 2.4 per cent.

At its current rate, inflation exceeds the Fed’s imposed limits of 1-2 per cent. However, the July rise, the smallest this year, combined with signs of weakness in residential housing, supports the view that the Fed is unlikely to raise rates in the immediate future.

“The chances of a September rate hike continue to recede - although that doesn’t mean that we can yet declare that the Fed is done hiking for good,” said Nigel Gault, US economist at Global Insight.

The data drove some analysts to bump up their economic growth and consumption expectations for the rest of the year, although most were still forecasting a slowing in the economy in the longer term. Recent data have shown consumers’ confidence in the strength of the economy waning.

“Today’s solid income and consumption figures through July ... continue to buck forecasts of a broad slowdown in the US economy, though a modest slowdown in growth remains a best guess,” said Mike Englund, an analyst at Action Economics.

Retail sales for August showed some evidence of weakness, with discretionary spending down slightly, but were robust overall.

(http://www.ft.com/cms/s/d35dc740-390b-11db-a21d-0000779e2340.html)

It seems like our economic status isn't perfect or outstanding, but it's definately not as bad as the Liberal fearmongers will lead you to believe.

 

[BaronVonBigmeat]

I wouldn't put too much faith in government numbers, they are grossly understated. Even aside from excluding energy, food, and housing they are understating both inflation and unemployment compared with how they used to be measured. Economist John Williams even has a subscription-based website dedicated solely to providing investors with more accurate macroeconomic stats:

http://www.shadowstats.com/