27 May 2005

Posted at 16:06h in The Friday Brief by
The economy is neither too hot nor too cold, according to the government’s announced revision yesterday of the U.S. Gross Domestic Product.  Continued steady consumer spending and a narrowing trade deficit prompted the government to raise its estimate of the economy’s first quarter growth from 3.1% to 3.5%, which exceeds the ten-year average of 3.3%.  Many had feared that higher energy prices would dampen consumer spending more dramatically than it has so far.  Offsetting the higher costs have been wages and salaries.  They expanded considerably more in the final quarter of 2004 than the government first reported. 

20 May 2005

Posted at 16:08h in The Friday Brief by
Recent economic signs point to the fact that the Fed may be close to accomplishing its goal to slow the economy enough to keep inflation under control.  There are also signs in the bond markets to indicate that investors think rates are high enough.  Don Hays observes that the short-term money markets (the 90-day T-bills) have consistently anticipated the Fed’s rate hikes for the past year as they hovered just above the Fed Funds rate (set by the Federal Reserve policy board).  In the last few weeks, however, the T-Bill has resisted following the Fed Funds rate higher.  As pointed out last in last week’s Brief, commodity prices have shown signs of topping out.  Money supply growth is slow, industrial production lately weaker, and regional Fed manufacturing surveys are showing weaker activity.

13 May 2005

Posted at 16:27h in The Friday Brief by
Evidence of short term price pressures continue to arise here and there.  The government reported this morning that imported goods rose in April at twice the expected rate, led by higher costs of automobiles, oils, and steel.  The increase follows a gain of 2% in March, the largest in 14 years.  Most of the rise was in the goods used to make other goods.  But, as we mentioned last week, commodity prices (used to make other goods) are showing signs of peaking.  Import prices for consumer and capital goods actually fell during the month of April.

06 May 2005

Posted at 16:28h in The Friday Brief by
This week the markets have fared far better than last.  The S&P 500 is up almost 1% as of this morning and the NASDAQ is up over 2%.  Bonds have had a good week as well with the Lehman 1-3 Year and 7-10 Year Treasury Indexes rising .2% and .4% respectively.