Better-than-expected economic indicators are pointing to an on-track US recovery, even as European debt concerns cast a shadow over the world’s largest economy.
Strong housing, manufacturing and consumer confidence data this week spurred hope about the fundamental strength of the US economy, despite investors’ concerns about Europe. The stream of positive data, combined with earlier numbers showing higher retail spending, came ahead of a government revision Thursday of economic growth numbers for the first quarter.
Most economists expect the government to revise growth upwards to 3.3 percent from the original 3.2 percent as the United States maintains its economic expansion since the middle of last year after a brutal recession. “Putting the pieces together, we expect to get a reading that the economic recovery, albeit slow, remains on track, but possibly not advancing at the pace some of the more optimistic economists have been expecting,” said Frederic Dickson, chief market strategist for D.A. Davidson & Co.
Positive government figures Wednesday for housing — the sector at the epicenter of the financial crisis that drove the economy into recession — and new orders for big-ticket US manufactured goods astounded most economists. Analysts at Societe Generale said the housing and durable goods data as well as consumer confidence exceeded expectations “by a margin that is increasing, not decreasing, as might be feared as the crisis in Europe hits the US financial markets.”
Even the dollar’s rise against the embattled euro appeared not to hurt the competitiveness of US exports. The crisis has caused the dollar to appreciate by close to 20 percent against the euro since November but the greenback has also depreciated against the currencies of key emerging countries, Societe Generale’s Anet Markowska told AFP.
She noted that while US equity markets keep falling due to the European turmoil, gas prices and home mortgage rates have also dropped, benefiting the average American consumer. Despite the mostly rosy economic data, Americans remain pessimistic about President Barack Obama’s efforts to turn the US economy around after one of the worst downturns in a generation, according to a new Quinnipiac University poll.
Although Americans gave a general thumbs up to Obama’s performance, they disapproved — by a 50-44 margin — of how he has handled the economy, the poll showed. Latest data showed the economy had “solid momentum” before this month’s financial turbulence, said Aaron Smith, senior economist for Moody’s Economy.com, which revised upwards its first quarter GDP growth to 3.5 percent.
New orders in April for manufactured durable goods — items such as planes, cars, refrigerators and computers — increased 2.9 percent, soundly beating economists’ forecast of a 1.5 percent rise. It was the fourth increase in the last five months.
Thanks to state tax credits, April new home sales also jumped by 65,000 units to 504,000 units — the highest level in nearly two years. It is “a sign that many new homes are being bought by people who want to live in newhomes, not by individuals looking to take advantage of a tax credit,” said Patrick Newport, US economist with IHS Global Insight. Earlier this week, the National Association of Realtors reported that sales of existing US homes rose by a more-than-expected 7.6 percent to 5.77 million units in April. Retail sales also climbed higher than expected in April, the seventh straight month of increases, data showed two weeks ago.
US consumer confidence improved for the third straight month in May as Americans saw a rosier outlook for jobs and businesses, according to private research firm The Conference Board. But unemployment remains a thorn to recovery, with the jobless rate at nearly 10 percent. Weekly initial jobless insurance claims are still above the 400,000 level.
Latest data showed claims rising for the first time in five weeks in the week ending May 15 to 471,000. “Sustained strong growth will remain elusive if the pace of layoffs does not decline markedly,” warned Ian Shepherdsen, chief US economist with High Frequency Economics.
Washington, May 26, 2010 (AFP)
