Another mixed, but not bad week for economic news.

The first of several estimates for first quarter 2012 GDP came out at +2.2%, which was slightly weaker than the +2.5% growth rate expected by consensus.  The composition of the report was not especially robust, as inventory buildup contributed more to the growth number than expected, as compared to final sales, and business fixed investments and government expenditures (mostly defense spending) declined.  However, consumer spending as a component of the report was solid and was much better than first thought, and residential investment increased dramatically.  What does this mean?  Not a lot yet.  These numbers are early estimates, and subject to revision, but, at the same time, demonstrate that the economy is still in fragile footing but just plugging along fast enough to avoid the +2% ‘stall speed.’  The 2.0-3.0% is a wide but anticipated range for GDP for most of 2012 and we seem to be right within that band. Read more

It was a somewhat quiet ‘in-between’ week for economic news, as most of the focus was on markets and an upcoming earnings season.

The Small Business Optimism Index, while not always in the news, became a catalyst for market activity early in the week, as it fell from 94.3 to 92.5 for March.

Import prices were higher than expected in March at +1.3% (although February’s gain was revised down to a negative number)—mostly due to oil and raw materials being priced higher.  Other prices carried through and were higher as well, such as vehicles and vehicle parts and other finished consumer goods.  The year-over-year increase was +3.4%, which ties into broader inflation readings. Read more

The closely-watched ISM manufacturing index number came in slightly better than expected, at a one-point increase from 52.4 to 53.4 for March.  The production and employment components rose, while new orders fell back a bit.  Improvement here is tempered, but steady.

The ISM non-manufacturing index, which was released a few days later, declined a bit from 57.3 to 56.0, which was slightly larger than anticipated.  Components were mixed as new orders and general business activity were down, but employment improved and remains robust under this particular index’s measure. Read more

The final estimate for the Q4 2011 real GDP was released last week, and stood unchanged at +3.0%.  Personal consumption was flat, goods spending was revised upward a bit, and services consumption was revised down slightly—nothing too significant overall.  More importantly, gross domestic income was revised up to +5.2%, which is the same level realized in Q3.  Looking at the GDI’s rate of growth can be somewhat helpful from the standpoint of the economy’s momentum.  While it’s interesting and informative to see the economy’s path of growth in the last several quarters, this is now old news and doesn’t matter much anymore—three months into the next quarter.  It is really just a reflection on how right or wrong the initial estimates were and how adjustments might be made that could affect the current quarter’s growth pace.  Preliminary estimates place 2012 Q1 real GDP at anywhere from +2.0% to +3.0%, although predictions differ for the year as a whole.  Several firms just raised their 2012 projections for the U.S. and world by a quarter percent or so. Read more

The ISM Non-Manufacturing index increased in February from 56.8 to 57.3, which was somewhat of a surprise as consensus estimates assumed a small to modest decline.  It reflected solid strength in service sector activity, as new orders and general business activity were both up at the highest levels since early 2011.

Factory orders fell -1.0% for the month, which was slightly less than expected, and some of the components were positive for the near-term.  Core durable goods orders were revised upward, as were core shipments.  Non-durable goods inventories were also up a bit. Read more

The revised GDP number for the 4th Quarter 2011 as moved upward from an annualized 2.8% to 3.0%, which reflected better consumption and business investment/capex spending.  The one potential negative is, since inventory buildup played such a big role in last quarter’s GDP, this quarter may not have the same effect as some of that inventory is drawn down and used.

The Fed’s Beige Book, which is an account of economic conditions containing anecdotes submitted by various Fed district banks, generally referred to economic activity expanding at a ‘modest to moderate pace’ for January and early February.  This is similar to how conditions from late November and early December were described in the last book.  Specifically, it mentioned that manufacturing activity was steadily increasing, which is in keeping with other reports, and that consumer spending has picked up—including autos and residential real estate.  Labor conditions also seem to be improving in many areas; however, wages remain tempered, which is watched closely due to potential inflation implications.  Those inflation pressures appear to be in check. Read more