Friday Economic Snapshot: America gets building
Happy August! No really, last week I proclaimed that we were in the dog days of the summer and the economy was sluggish. This week, however, the calendar has flipped and so too has the economic sentiment, as shown by a handful of positive indicators released this week.
What do we have to be so pleased about? We’ve seen new data showing that manufacturing expand throughout July, unemployment claims fell by a solid margin (paired by a welcome increase in private employment), serious mortgage delinquencies are at the lowest level since 2008, real GDP shot up 0.6 percent and auto sales are moving at the best annual clip since July of 2006.
You see, there really are some good nuggets in this week’s news, so let’s jump in.
The Institute for Supply Management’s July 2013 Manufacturing ISM Report on Business says that “economic activity in the manufacturing sector expanded in July for the second consecutive month, and the overall economy grew for the 50th consecutive month.” It doesn’t get more patriotic than that.
ISM’s New Orders index increased by 6.4 percentage points for the month, while the Production Index edged up 11.6 percentage points. Raw materials prices were also down, so this taken together points to healthy demand and continually healthier business conditions.
If this trend continues, we could see serious economic growth in the near future. Manufacturing puts a lot of money into the hands of middle class Americans, and the materials and transport required throughout spread money into many diverse sectors of the economy.
Build, baby, build!
Gross Domestic Product
Always one of the most important indicators for the economy, the Department of Commerce’s Bureau of Economic Analysis reports that the real gross domestic product increased at an annual rate of 1.7 percent in Q2.
Compared to the regular GDP, the real GDP is defined as the output of goods and services produced by labor and property located in the United States, and it accounts for price changes caused by inflation.
While data that’s further refined will be released at the end of August, this 0.6 percent increase is primarily due to increased nonresidential investment and exports, as well as a smaller decrease in spending by the federal government — a real drag on the economy so far in 2013.
Everyone’s favorite lady in Washington, Fannie Mae reported that the conventional single-family serious delinquency rate fell by six basis points to 2.77 in June. This is down from 2.83 percent the previous month, and the lowest level on record since December 2008. Freddie Mac has reported similar numbers and, given the behemoth’s combined size, it’s an excellent indicator of the state of mortgages nationwide.
Delinquencies, defined by those that are 90 or more days in foreclosure, spiked massively throughout 2008 and 2009, and have been on the decline since early 2010. While the improvements — if you can call them that at the peaks of the recession — were steepest at first, the rate of declines in delinquent loans has accelerated throughout 2013.
At this rate, it may take until 2015-2016 range until we get back to pre-recessions levels, but we’re making major progress.
Riding an especially potent wave before market close EOD Thursday, the Dow Jones Industrial Average has done very well this week, gaining more than 200 pounds since the depths mid-day last Friday.
With unemployment claims declining to 326,000, we’ve kicked the 4-week average down 4,500 to 341,250. Looking at a graph showing data back through 2000, we’re not far off the levels seen after 2004 that hovered around 300,000. This is the kind of news a lot of talking heads and business leaders have been waiting for, so it’s bound to create some positive spinoff effects in the coming weeks.
Sure, GDP could be better, auto sales haven’t risen into the stratosphere (or are we already there?) and public construction is down, but the big numbers are looking good and that’s something to celebrate.