U.S. Recovery May be Loosing Momentum

In the first two months of 2013, U.S. employment, retail sales and housing performed very well bringing the economic expansion to 2.5 percent in the first quarter. However, recent data suggest that in March and April the economy had been struggling.
Anna Fedec, anna@tradingeconomics.com 5/15/2013 2:21:05 PM

Indeed, although, in April the jobless rate declined to 7.5 percent and employment grew by 165 thousand, it may not be enough to keep the momentum in the labour market. In addition, in spite of low mortgage rates and lean inventories, the housing activity also seem to be going down. In fact, in March, construction spending declined to a seven-month low and new construction starts dropped. More importantly, the automatic spending cuts, making the government agencies to reduce their budgets by $85bn between March 2nd and October 1st in connection with an expiry of a payroll tax cut may be already dragging the consumption down. In fact, in March, retail sales fell 0.4 percent mom and rose only 2.8 percent yoy, the lowest level in more than 3 years. Also, the manufacturing sector seems to be deteriorating as The Institute for Supply Management index of national factory activity fell to 50.7 in April from 51.3 in March. On the positive side, on May 1st, the Federal Reserve reaffirmed its plan to buy $85 billion in bonds each month to push down borrowing costs and support the economy. Also, in April, Americans' confidence in the economy jumped, helped by a better outlook for the job market and expectations for higher pay.


In the first quarter, the GDP grew 2.5 percent as consumer spending increased 3.2 percent, the fastest since the fourth quarter of 2010.  On a year-over-year basis, the economy grew 1.8 percent.
In March, retail sales fell 0.4 percent from the previous month. However, the Conference Board Consumer Confidence Index jumped to 68.1 in April from 61.9 in March.

In April, the jobless rate decreased to 7.5 percent and the economy created 165 thousand jobs.
In April, the ISM Manufacturing PMI fell to 50.7 from 51.3 reported in the previous month. In April, industrial production expanded 1.9 percent yoy and contracted 0.5 percent mom.