Economic Roundup: Latest readings point to continued slump
Economists say the U.S. economy will continue to contract
By Tom Stundza -- Purchasing, 12/1/2008 2:25:00 PM
From an economic standpoint, there wasn't much good news during Thanksgiving week. Third quarter gross domestic product (GDP) was revised down to -0.5% from -0.3%, durable orders slumped 6.2%, existing home sales fell 3.1%, new home sales dropped 5.3%, personal spending declined 1.0%, and weekly initial unemployment claims, while improved from the prior week, continued to register a reading above 500,000.
The Commerce Department says its initial take on U.S. economic growth in the third quarter underestimated the contraction, and that GDP during those three months had fallen at an annual rate of 0.5%. The revisions reflect larger declines in consumer and business spending. That’s important since consumer spending accounts for 70% of economic activity. So, “the U.S. recession is set to get worse--a lot worse—in the next couple of quarters,” says IHS Global Insight chief economist Nariman Behravesh in a note to clients. “Bottom line: We are in the early stages of one of the worst recessions in the post-war period, even factoring in a massive stimulus program.” And remember that tax rebates earlier this year triggered only a short burst of spending.
Here are some of the latest key economic indicators released lately:
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The consumer confidence report, remarkably, showed an increase in November from the prior month as falling gas prices helped sentiment, yet the confidence reading remained at historically depressed levels. The Conference Board’s index of consumer confidence climbed to 44.9, the second-lowest reading since 1974, from 38.8 the prior month.
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Consumers cut spending at the sharpest rate in seven years in October. Commerce Department reports that consumer spending fell 1% in October from the month before, the sharpest decline in seven years, as durable-goods orders decreased by 6.2%, its biggest spill in two years.
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Orders for durable goods decreased by 6.2% in October, in another sign tight credit conditions and rising pessimism over the economy are leading firms to put off capital spending.
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Sales of single-family homes decreased 5.3% to the lowest level in 17 years in October, while prices kept retreating. New-home sales in September, meanwhile, were revised to a 0.7% increase; originally, the government said September sales climbed 2.7%. The median price of a new home fell 7% to $218,000 in October, down from $234,300 in October 2007.
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Existing-home sales resumed falling in October, while the median price suffered its largest drop on record. Home resales fell to a 4.98 million annual rate, a 3.1% decrease from September's pace and down 1.6% from a year earlier, the National Association of Realtors says. The median home price was $183,300 in October, down 11.3% from $206,700 in October 2007. The price was the lowest since $183,200 in March 2004.
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Unemployment across the U.S. is accelerating. Bureau of Labor Statistics says 12 states, including Florida, Idaho, North Carolina and Illinois, reported a rise of at least two percentage points in unemployment rates over the past year. For many states, the pace of decline is more severe than during the 2001 recession. Job losses have spread beyond construction and manufacturing to service sectors such as tourism, hospitality and professional and business services.
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