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Weekly Economic Data Review
Overall it was another week of generally solid economic data, but with some troubling signs as well that indicate we may not yet by headed for faster economic growth.
Personal income and spending both increased 0.4%, which is what analysts were expecting. That’s actually very impressive given that, despite what many people think, US household debt/disposable income is at its lowest level since 1953. This indicates that Americans are continuing to deleverage which goes a long way to explaining why our consumer spending driven economy is growing so slowly. While that may be bad in the short-term its also necessary to eventually restore long-term growth.
Now to be fair corporate debt as a percentage of revenue is at it’s highest ever level, which explains why, despite the lowest interest rates in history, companies haven’t been investing. The deleveraging of consumers means not enough demand to justify capital expenditures which should pick up once consumer deleveraging finishes.
Given the large amount of Baby Boomers retiring, this may go on for awhile, but eventually both consumer demand and corporate capital investment should rebound, and economic growth with it.
In the meantime the Industrial ISM index came in at a higher than expected 54.9 and Chicago’s PMI hit its highest level in 2.5 years. This tells us that the US industrial sector continues to grow, though not quickly. That makes sense given the weaker (but still growing) consumer spending/corporate capital investment patterns mentioned above.
On the down side pending home sales declined for the second straight month. Given that national home prices are rising about three times the rate of inflation that isn’t surprising. After all, today’s home buyers have to put up 20% down payments and with housing costs continuing to rise amashing that kind of small fortune is tough for many people.
Of course the most important news was the jobs numbers, which came in at 138,000. That was below expectations of 185,000 and disappointing given that ADP’s private sector report the day before showed 253,000 jobs created in the private sector.