Growth Continues For Strong U.S. Economy
By Dr. Constantine G. Soras, Economics Editor
Consumer Prices Continue To Stay Strong As The Economy Enters Its Ninth Year Of Expansion
The U.S. economy is still running strong as it entered the ninth year of expansion. Real GDP
grew in the first quarter at a robust annual rate of 4.5 percent on top of 6.0-percent gain in the
Consumer spending, business investment in equipment and residential structures led the way. Consumer expenditures shot up 6.7 percent, business fixed investment expanded 7.6 percent, investment in business equipment rose 10.5 percent and spending on residential structures gained 15.6 percent.
The latest reports indicate that the U.S. economy is not on the verge of overheating. With part of the first quarter strength arising from a mild winter, growth in the second quarter can be expected to slow down. This is a positive development in light of the Federal Reserve’s concern about inflationary pressures.
The jobless rate was 4.3 percent only slightly up from the 30-year low rate of 4.2 percent in March. The producer price index for finished goods rose 0.5 percent in April.
Meanwhile, consumer prices shot up 0.7 percent in April after edging up 0.1 percent in March and being flat in February. Here again the sharp rise in oil and gasoline prices were a major factor. The core inflation was up 0.4 percent but only 2.2 percent from a year ago, remaining unchanged the previous two months.
Industrial Production Picks Up Speed; Housing Starts Fall; Business Sales Surge
Industrial production has picked up speed in the last two months after having been essentially
flat between October and February. Output grew 0.6 percent in April and gained 0.5 percent in
March. Factory output also rose 0.6 percent, the third consecutive monthly gain of nearly 0.5
percent. Utility output rose 0.7 percent following a 2.8 percent rebound in March. The capacity use
rate moved up to 80.6 percent from 80.4 percent in March.
Housing starts fell 10.1 percent in April to an annual rate of 1.574 million. Construction of single-family homes dropped 11 percent to 1.244 million.
Despite the drop, housing construction was 2.1 percent stronger than last year and will remain above the 1.5 million mark as job and income growth remain favorable.
The U.S. trade deficit widened in March to 19.70 billion from $19.15 billion in February. Exports rose 0.9 percent led by capital goods and industrial supplies, while imports rose 1.3 percent as oil prices surged.
Business sales surged 1.1 percent in March led by a 1.3 percent jump in non-durable goods sales, while inventories grew 0.5 percent. As a result, the ratio of inventories-to-sales fell to 1.35 from 1.36 before. This means inventories are well balanced and growth will continue.
Textile And Apparel Output Rebounds After A One Month Decline
Results for textiles and apparel were mixed. Textile output rebounded 2.7 percent in April after
tumbling 3.8 percent in March. The operating rate for textiles mirrored the output pattern rising
to 80.2 percent from 78.1 percent in March.
Sales by textile manufacturers took a 1.1 percent dive in March, while inventories rose 0.5 percent. Thus, the inventory-to-sales ratio climbed to 1.59 from 1.56 in February.
The industry’s payrolls slipped 0.5 percent in April. The jobless rate for textile mill workers fell to 3.6 percent from 4.3 percent in March.
Consumer spending slowed down in the last two months. Retail sales rose 0.1 percent in April matching March’s gain. The slowdown follows average increases of 1.4 percent in the previous three months. Growth was restrained by declines of 1 percent in automotive sales and a 0.4 percent drop in department stores.
Furniture stores took in 0.7 percent more than the month before. Apparel and accessory store sales jumped 0.9 percent in April after rising 0.2 percent in March.
Producer prices of textiles and apparel eased 0.1 percent in April. Prices moved up 0.2 percent only for finished fabrics and were unchanged for processed yarns and threads. Prices edged down 0.1 percent for synthetic fibers, eased 0.2 percent for home furnishings, declined 1.0 percent for carpets and dropped 1.5 percent for gray fabrics.