In February, an appreciating dollar impacted returns from international stocks and bonds when viewed from a US currency standpoint. Conversely, US equities and bonds performed well during the month, though these domestic gains were not sufficient to counterbalance the losses from foreign markets in dollar terms for those with a globally diversified portfolio. Consequently, the Global Market Index (GMI) registered a slight decline of 0.1% last month, although it remains up an impressive 2.4% for the year up to the end of February.
The projected rise in personal consumption spending for January is estimated at 0.4%, according to The Capital Spectator’s average econometric forecast. This increase is an improvement over the previously reported 0.2% rise in December. However, three consensus forecasts gathered from economists suggest a smaller increase of just 0.2% for January.
The second estimate of the US GDP for the fourth quarter indicates a modest growth of 0.1% for the economy in the final quarter of 2012. This marks a slight improvement from the previously reported 0.1% decline. However, this revision is almost negligible. In contrast, the weekly jobless claims update offers a more positive outlook, providing an immediate gauge of macroeconomic trends for the near term.
The ISM Manufacturing Index is expected to increase to 53.7 in the upcoming February update, according to The Capital Spectator’s average econometric forecast. This figure reflects a modest rise from January’s reading of 53.1. However, consensus predictions from three surveys of economists forecast a slight decline for the February report.
The latest durable goods report reveals a mixed economic outcome. While the overall durable goods orders fell last month, marking the largest drop since August, the segment of business investment—comprising capital goods orders excluding aircraft and defense—saw a robust increase in January. Depending on one’s perspective, the economic outlook can appear either optimistic or pessimistic.
According to The Capital Spectator’s latest update, US GDP is projected to achieve a growth rate of 2.0% in the first quarter of 2013. This is a slight increase from the previous forecast of 1.9% for Q1, as published on February 5. This updated projection incorporates recent data adjustments for various indicators utilized in estimating the figures. The official Q1 statistics will be released on April 26 by the Bureau of Economic Analysis, providing the preliminary GDP estimate for the first three months of 2013. (Changes in GDP percentages are reported as real seasonally adjusted annual rates.)
The Chicago Fed National Activity Index (CFNAI) fell to -0.32 in January, down from +0.25 in December, as reported by the Chicago Fed . Despite this drop, the three-month average reading (CFNAI-3MO) increased to +0.30 from an upwardly revised +0.23 in December, suggesting that recession risks were low last month. Although growth slowed at the beginning of the year, the three-month average in January remained well above the critical -0.70 threshold commonly associated with the onset of recessions. (CFNAI is a weighted average of 85 indicators designed to reflect broad US economic activity.)
● Sand in the Gears: How Public Policy Has Crippled American Manufacturing
By Andrew Smith
Summary via publisher, Potomac Books
The decline of American manufacturing has persisted for at least two generations, an evident reality for anyone observing the Rust Belt in the Midwest, where steel mills and automobile factories have left behind ghost towns. This trend is similarly visible in the silent textile mills of New England, whose production first shifted to lower-cost facilities in the Southeast, which later succumbed to overseas competition. Andrew Smith argues that the loss of manufacturing cannot solely be attributed to external forces like globalization or cheaper foreign labor, but is largely due to poorly conceived policies that can be reformed to revitalize the manufacturing sector.
The three-month average of the Chicago Fed National Activity Index (CFNAI) is anticipated to show a modest uptick to 0.03 in the January update, based on The Capital Spectator’s average econometric forecast. This figure represents an improvement from December’s average of -0.13. A reading below -0.70 suggests an “increasing likelihood” that a recession has commenced, as indicated by the Chicago Fed . The January report is set for release on Monday, February 25, at 08:30 am eastern.
This week’s updates on consumer inflation and residential building permits for January provide three additional indicators complementing The Capital Spectator’s Economic Trend & Momentum indices (CS-ETI and CS-EMI). All three indicators align with growth prospects, bolstering the case that January 2013 is likely to be recorded as a recession-free month in NBER’s macro history.