Series of economic reports bring mixed message
September 1, 2005
A series of economic reports were released in the United States on Thursday.
According to the US Commerce Department on Thursday, consumer spending was up by 1 percent in July, while incomes rose by only 0.3 percent during the month.
At the same time, personal savings rates fell to negative 0.6 percent, meaning that consumers were actually dipping into savings to finance their increased spending.
Chain stores reported that consumer sales was up significantly in August despite rising oil prices.
In a separate government report, figures showed that spending for construction was flat in July after a decline in June, an indication that the sector is beginning to slow down due to rising interest rates.
Analysts had expected construction activity to increase in July. The largest drop was 0.8 percent, in public construction, while private construction grew by 0.2 percent in the month.
Meanwhile, the Institute of Supply Management released figures showing that while manufacturing continued to expand in August, it grew at a slower rate than analysts had predicted.
The ISM’s manufacturing index was down from 56.6 in July to 53.6 in August, causing some analysts to worry about the future of the manufacturing sector.
Also on Thursday, the Labor Department released employment data that showed the number of first-time filings for unemployment benefits grew by 3,000 last week to 320,000, a seven week high. Those figures are expected to rise sharply in the next few weeks as those put out of work by Hurricane Katrina begin to file unemployment claims.
Based on this information, and on the disruptions caused by Katrina as well as taking into consideration higher oil prices, analysts have begun to lower their expectations for US economic growth in the third quarter, cutting their previous estimates of 4.5 percent growth in the economy in that quarter by 1 percent or more.
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