U.S. Economy Sends Mixed Signals

After a meager growth in the last quarter of 2012, the U.S. economy seems to be gaining momentum at the beginning of 2013. Indeed, following a timid expansion of 0.4% in Q4 of 2012, the U.S. economy grew 2.5% in the first quarter of 2013.
Anna Fedec, anna@tradingeconomics.com 5/1/2013 3:08:35 PM

Additionally, in March, the unemployment rate declined to 7.6 percent, its lowest since late 2008, despite a weaker-than-expected non-farm payrolls rise of 88 thousand jobs. In addition, the housing recovery is gaining traction as new-home building drove gains in construction sector in March. In fact, housing starts rose 7.0 percent to the highest level since 2008, driven by growing demand and record-low mortgage rates. Also, on March 20th, Fed officials reinforced their plan to keep short-term interest rates at very low levels at least until unemployment falls to 6.5 percent. Yet, the automatic spending cuts, making the government agencies to reduce their budgets by $85bn between March 2nd and October 1st, may drag the consumption down. In fact, in March, retail sales fell 0.4 percent mom and rose 2.8 percent yoy, the lowest level in more than 3 years. Also, the manufacturing sector seems to be slowing down as The Institute for Supply Management’s index of national factory activity fell to 50.7 in April from 51.3 in March.


In the first quarter, GDP grew 2.5 percent as consumer spending, which accounts for more than two-thirds of economic activity, increased at 3.2 percent pace, the fastest since the fourth quarter of 2010.  On a year-over-year basis, the economy grew 1.8 percent, up from 1.7 percent expansion recorded in the previous three months.
In March, retail sales fell 0.4 percent from the previous month. However, in April, the Conference Board Consumer Confidence Index jumped to 68.1 from 61.9 in March.

In March, the jobless rate decreased to 7.6 percent as employment increased in professional and business services, construction, and health care. However, the economy created only 88 thousand jobs, down from 268 thousand a month earlier.
In April, the ISM Manufacturing PMI fell to 50.7 from 51.3 reported in the previous month. However, in March, industrial production expanded more than expected: 3.5 percent yoy and 0.4 percent mom.