US Recovery Sends Conflicting Signals

30 May 2002

As the old Cockney adage has it: “Yer pays yer money and yer takes yer choice”. With the release of three conflicting sets of data, watchers of the US economic scene enjoy the same privilege.

According to the US Commerce Department, the pace of recovery in April faltered after a robust first quarter, rising 0.5% (0.2% adjusted for inflation), compared with 0.5% in March and 0.6% in February. Personal incomes rose 0.3%t in April, distorted by an increase in unemployment benefits. The wages and salaries income component rose only 0.1%.

Commented Maury Harris, chief US economist at UBS Warburg in New York: “Household-sector demand remains solid. That said, the data are consistent with our view that the job market will have to show more improvement soon to prevent spending from slipping.”

Data for the year to date, says Harris (in concert with other analysts), indicates an annualized growth rate of 5.6% in Q1 compared with a projected 3% to 3.5% for Q2.

But analysts elsewhere tuned their crystal balls to a different channel.

New York business research specialist, the Conference Board, reported a rise in its index of consumer confidence for April, up from 108.5 to 109.8. Regarding the labor market, 20.9% of responding consumers believed jobs were “plentiful” – holding steady at the same figure as March. Those believing the opposite fell from 22.7% in March to 21.9%. The public’s evaluation of the labor market is regarded by many entrail-rakers as a prime factor in their disposition to spend.

Better news yet from the National Association of Realtors, which posted sales of existing homes up by 7% in April. This equates to an annual figure of 5.79 million units – the third highest to date. The median price of homes changing hands rose to $153,300, 7.1% up year-on-year.

Data sourced from: The Washington Post Online; additional content by WARC staff