Spending and Income Data Confirms Fed Economic Outlook

There is good news for consumers because the latest consumer spending and income report should attribute to holding the interest rates. Contrary to this expectation, Ben S. Bernanke, the Fed’s chairman warns that inflation is continuing to remain “uncomfortably high.” He further claims that if anything, inflation will continue to escalate rather than decrease. Further going against Bernanke’s opinion, personal spending advanced far more than expected last month. There was an overall rise in spending for the year of 5%. What seems to be contributing to the discrepancy between the two opinions is that people’s spending is much too difficult to predict. Shoppers to tend to indulge when it comes to the high sales days. But it does not mean that people are overall purchasing more and instead it seems people may be more prudent with their spending this year. Also with the housing market continuing to decrease this year, shopping will need to compensate for the loss. In my opinion, shoppers will get carried away with spending as they usually do which will then compensate for the housing sales loss, and will ultimately prevent inflation from increasing.

The New York Times, Jeremy W. Peters Friday, December 1, 2006

Price Index Drops 0.5% a 2nd Time

There was a .5 percent drop in consumer prices for October. The same things occurred in the month of September. This trend suggests that declining energy prices and a slowing economy is containing inflation. The primary factor driving the prices index was given to energy prices, from fuel price to the gas bill. The drop assisted in validating the Federal Reserve to cease in raising interest rates since June. Industrial production, including the output of manufacturers, mines, and utilities, also contributed to the inflation data, contrary to what the economists expected. It is unlikely that the Federal Reserve will need to increase interest rates to keep inflation under control any time soon. Blue and white-collar’s hourly wages will reflect the price index drop as well. The is the first substantial boost for workers in years. Energy seems to be the factor driving the increase in the last year and decrease in the past few months. It may have sparked a trend in that clothing costs, the price of used cars, hotel rooms, and airline fares have also decreased.

I think this decrease is exactly what everyone deserves at this point in time. I know that the sudden increase last year was more than some people could handle. It affected everyone and it is pleasant to finally have some relief, especially during the holidays.

The New York Times, Eduardo Porter and Jeremy W. Peters Friday, November 17, 2006

Declining Bill for Oil Imports Improves U.S. Trade Balance

Due to Americans importing less oil, the gaping trade deficit shrank in September. There was a 6.8% decline from August to September for the imbalance of exports and imports. This decline in the steepest that has taken place in nearly two years. However, due to high oil prices in August the decline appears to be greater than it actually was. The Unites States trade situation continues to be imbalanced. As most people are familiar with, trade with China accounts for the greater portion of the deficit. China accounted for a total of $23 billion on an unadjusted basis. The number is so high from China imports that it contributes to about a fourth of the trade deficit. On a positive note, the imbalances of trade with Europe, Africa, and South America have narrowed in recent months.

It is expected that global growth will remain strong and serve as an ongoing support for the U.S. economy, said the chief of the United States economy. Assuming that there will be no world wars anytime soon , depending on other countries for economic support seems to be working well thus far for the U.S. It seems slightly unstable to be so dependent, but I guess it balances out in that they are dependent on us as well.

The New York Times, Jeremy W. Peters Friday, November 10, 2006

Fearing Slow Holiday Sales, Wal-Mart Cuts Prices

Holiday shopping is starting sooner every year. One of the contributors to this commencement is Wal-mart’s reduction in prices. In attempt to counteract the slow sales this season, Wal-mart has already greatly decreased many electronic prices. This presents much more competition for rivals such as target, best buy, and circuit city. The sharp price-cuts were officially announced today. Even though this may seem like a good move for Wal-mart, they are practically forfeiting billions of dollars in holiday sales compared to previous years. A positive aspect for Wal-mart is that they will far exceed their competitors. The idea is to attract customers to their store prior to the day after Thanksgiving sales, which could make them lose money to their competitors. This shift for Wal-mart to focus back on it’s pricing has to do with the failure to persuade it’s customers to purchase more clothing and furniture. Target dominates the market in this area.

After learning about the Wal-mart sweatshops in class, I almost cringe at reading this article. Wal-mart has more money than countries and they are still trying to aim higher. What it also sad is that many people are oblivious of the sweatshops and will continue to shop there. In many lower-income families, it is necessary for them to shop there, because it’s what they can afford.

The New York Times, Michael Barbaro Friday, November 3, 2006

U.S. Economic Growth Slowed in 3rd Quarter

The deflation of the housing market is holding the economy back. The growth is slower than it was since 2003. Economists were not even expecting for the growth to be this slow. The commerce department’s report shows that the small growth is indeed a substantial one, mostly due to the slump in housing. Residential construction had it’s biggest decline in fifteen years. With the economy’s shift into low gear, it is unlikely that the federal reserve will resume raising interest rates any time soon. A positive aspect of the slowed growth is that it will hinder inflation. Falling fuel prices are continuing to aid the economy’s growth. The Bush administration is claiming that the economy is resilient to slowdown because of the lower inflation as well as consumer spending. Democrats are saying that the low percentage growth is fact and that the president cannot just assume the economy is in good standing when in fact it is not.

The weakness in housing seems to be an effect of the baby boomers. Many of those in the baby boomer cohort are now beginning to retire. Within the next few years, many will be selling their houses to live in retirement homes. It seems that there is not a high enough replacement level to compensate for this. Therefore, I would not doubt if the housing market continued to hold the economy back for years to come.

The New York Times, Jeremy W. Peters Friday, October 27, 2006

Oil Falls to New '06 Lows on Doubts About OPEC Cut

Today oil prices dropped to one of the lowest in 2006 at only fifty-seven dollars a barrel compared to July records of seventy-eight dollars and forty cents a barrel. OPEC (Organization of Petroleum Exporting Countries) ministers have agreed to reduce output by 1.2 million barrels per day. The change is expected to result in about a half million barrels per day of production taken out of the market. What concerns the OPEC ministers is high fuel stocks in consumer countries, particularly the United States. Also the demand for OPEC oil could drop in 2007 as their competition is brought online. The drop in prices in recent months has positively impacted consumer attitudes as well as spending in the United States. Businesses will benefit over the holidays with consumers focus not being on the money they are spending on gas.

Regardless of the current status, it seems to me that within the next few years, prices will inevitably increase again. It’s great that things are all “hunky dory” right now, but I think it would be prudent to put some money aside incase there was a sudden spike again.

The New York Times, Reuters Friday, October 20, 2006

Fed Reports Resilience in Economy

The article begins by stating the improvement in the economy in the past month or so. People are being affected by this improvement in different ways. A few being at the gas pump, which is leaving everyone with some more money in their pockets, and in the stock market. It was also reported that even though it appears there is moderating growth in the economy, things are relatively stable at this point. Also a positive note, price inflation and decrease in consumer spending does not seem to be an issue in most parts of the country. In the next trade deficit report the falling fuel prices should greatly impact it, considering that this was one of the major reasons for the widening trade gap in August. Trade imbalance with China specifically was another aspect in the trade deficit.

What seems to be the case to me is that in order to prevent inflation from occurring again in the future, America needs to find a way to stop being so dependent on imports. Being so dependent on others provides an opportunity for them to be put in control. Clearly I am not an expert and have no idea what it would take to reach a point where our dependence could be lowered. However, in the article it stated how our exports have grown, but not enough to compensate for the import growth. So it seems that we need to increase our exporting in order to counterbalance the import inflation.

The New York Times, Jeremy W. Peters Thursday, October 13, 2006