Economy Slows After Strong First Quarter
Dr. Constantine G. Soras, Economics Editor
Inflation Remains Low As The Economy Moves Into Its Second Half
The latest economic reports indicate that the U.S. economy is slowing down from a booming 4.3
percent pace in the first quarter. Nevertheless, jobs are plentiful, consumers and businesses
continue to spend freely and inflation is very low.
With the civilian jobless rate edging up to 4.3 percent in June, and no signs of acceleration in the average wage rate, there would be no need for the Federal Reserve to push short-term interest rates further up for now.
The creation of 268,000 payroll jobs in June is a clear sign of a healthy economy. Factory jobs fell by 35,000 in June, bringing the total loss to nearly a half a million since it peaked in March 1998.
During the first half of 1999, job growth of 202,000 per month was slower than last year’s 238,000 gain over the same period.
The Producer Price Index (PPI) eased down 0.1 percent in June, after rising 0.2 percent in May and 0.5 percent in April. Consumer prices were unchanged in June, for the second month in a row, following a sharp rise of 0.7 percent in April.
Energy prices, after surging 6.1 percent in April, fell 1.2 percent in June and 1.3 percent in May.
In the first half of 1999, consumer prices moved up 2.2 percent at an annual rate, up from 1.6 percent for all of 1998, as energy prices turned up sharply.
The first half core rate-which excludes food and energy-slowed down to a 1.8-percent rise from 2.4 percent in all of 1998.
Industrial Production Increases Again; Operating Rate At A Fiver Year Low
Industrial output rose 0.2 percent for the second month in a row. Growth in factory output slowed down to 0.1 percent after rising 0.3 percent in May and 0.4 percent in April.
The weakness was in the production of nondurables.
Led by autos and computer related products, industrial output grew at a healthy annual rate of 3.9 percent in the second quarter.
The operating rate edged down to 80.3 percent in June from 80.4 percent in May. This was the lowest level in five years.
Housing starts led by single-family units dropped 5.7 percent in June to 1.571 million units. Multi-family units grew 10 percent, while single family units dropped 8.7 percent.
The nation’s trade deficit in goods and services ballooned to another record $21.335 billion in May, from $18.591 billion in April. U.S. exports fell 0.8 percent to $77.605 billion after rising 1.5 percent in April.
Imports, led by autos, petroleum and capital goods, rose 2.2 percent to $98.941 billion, the largest since a 2.8-percent gain in March 1988.
Business sales shot up 1.2 percent in May, while business inventories rose only 0.3 percent. As a result, the inventory-to-sales ratio fell to 1.34 in May from 1.36 in April. This means that inventories are relatively low, which bodes well for growth.
Results For Textile Industry Mixed; Retail Sales See Significant Increase
Results for textiles and apparel were disappointing. The industry’s payrolls eased down 0.2
percent in June, while the average weekly hours worked was unchanged.
The industry’s jobless rate dipped to 3.6 percent from 4.7 percent in May. Shipments by textile producers dropped 3.0 percent in May. Textile production came down 1.0 percent in June following a small gain of 0.2 percent in May.
Nevertheless, textile output rose 2.0 percent at annual rate in the second quarter, after falling 1.9 percent in the first quarter.
Meanwhile, the June operating rate for textiles dropped to 81.4 percent from 82.2 percent in May. Consumer spending rose 0.1 percent in June after surging 1.2 percent in May.
Sales at apparel and accessory stores were up 0.2 percent in June and 0.3 percent in May. The gains in retail sales point to a real growth in consumer spending of 3.8 percent to 4.2 percent in the second quarter.
Producer prices of textiles and apparel declined 0.2 percent in June. Prices jumped 1.0 percent for carpets, gained 0.3 percent for synthetic fibers and rose 0.2 percent for finished fabrics.
Prices were unchanged for home furnishings, processed yarns and threads. Prices for gray fabrics went down 1.0 percent.