GDP up in US in fourth quarter
January 31, 2007
New data released on Wednesday showed that the gross domestic product in the US was 3.5 percent higher in the final quarter of 2006, following on a gain of 2 percent in the third quarter. However, the rise in core prices were up at rate of 2.1 percent after growing by 2.2 percent in the previous quarter. Most of the growth was said to be linked to a 4.4 percent rise in personal consumption during the quarter.
The new data did not have much influence on the Federal Reserve’s latest interest rate decision. The Fed left interest rates at their current 5.25 percent. Most analysts believe that the Fed is more likely to raise than to lower rates later in the year. Still, most expect that rates will neither rise nor fall either today or later in the year even though many analysts still see a moderate risk for inflation.
Where the new GDP figures did have an effect was in currency and government bonds markets. The dollar was higher versus both the yen and the euro. In addition, yields on US Treasury bonds rose, with ten-year issues yielding 4.9 percent and yields on 30-year paper up to 5 percent. After the Fed announced its interest rate decision, leaving the rate at 5.25 percent for the fifth meeting in a row, yields on 10-year bond dropped to 4.84 percent.
US Consumer Confidence up slightly in January
January 30, 2007
US consumer confidence was a bit higher in January, according to the Conference Board’s Consumer Confidence Index. New data released Tuesday showed that the index was at 110.3 in January, up from a revised 110.0 in December. The reading was in line with expectations, which were pegged at between 110.0 and 110.5. The new reading was the highest the index has climbed in five years.
The director of the Board’s consumer research center said that the new, higher figure depended heavily on a better job market and warned that consumers are still concerned about economic conditions. The Present Situation Index, which measures how consumers feel about the state of the economy as it stands now, was up to 133.9 in January from 130.5 in December. However the Expectations Index, which allows consumers to voice how they feel about economic conditions in the next six months, dropped from 96.3 in December to 94.5 in January, showing that consumers are worried that current conditions will not hold.
Asked if they expect business conditions to get better or worse, 8 percent of respondents said they anticipated a worsening of conditions in the next six months, higher than the 7.8 percent of respondents in December who saw things getting worse. Those saying that they think business conditions to get better dropped from 16.7 percent in December to 16.2 percent in January. 19.8 percent of respondents said in the January survey that they expect their incomes to rise, down from 21.4 percent in December.
The Conference Board’s Consumer Confidence index is based on a survey of 5,000 households.