Wednesday, June 9, 2010

Economics/Bernanke-Wholesale inventories-Bernanke testimony –

· Beige Book takeaways – Feroli - The latest Beige Book, reflecting information collected by the Chicago Fed through May 28th, noted that "economic activity continued to improve" in all 12 Fed districts, although it cautioned that growth was "modest." The general tone of the anecdotal information was modestly positive, as it gave little indication that financial market volatility or foreign developments were weighing on sentiment. While activity was still restrained in many sectors -- commercial and residential real estate, labor markets, etc. -- these seemed to reflect the lingering on of pre-existing concerns rather than any new shock to the economy. Unlike the last Beige Book, the St Louis district also reported activity increasing.
· Bernanke testimony – some takeaways: 1) economy appears to be on track to continue to expand through this year and next; 2) inflation is likely to remain subdued; 3) Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the recovery in economic activity; 4) In the housing market, sales and construction have been temporarily boosted lately by the homebuyer tax credit. But looking through these temporary movements, underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down; 5) On the inflation front, recent data continue to show a subdued rate of increase in consumer prices; 6) Europe - If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest. Although the recent fall in equity prices and weaker economic prospects in Europe will leave some imprint on the U.S. economy, offsetting factors include declines in interest rates on Treasury bonds and home mortgages as well as lower prices for oil and some other globally traded commodities. The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy; 7) federal budget appears to be on an unsustainable path.
· Wholesale inventories rose to its highest level since June 2009, increasing 0.4% in April to $397.8 billion. Inventories of durable goods increased 0.3% to $236.2 billion, the highest level since August 2009, but down 6.7% since last April. Inventories of nondurable goods increased 0.7% to $161.6 billion, the highest level since November 2008. The total inventory/sales ratio fell .01 to 1.13 in April. This is .29 below the January 2009 level when the ratio began to continuously fall as sales have generally outpaced inventories. Wholesale sales for April totaled $351.1 billion, increasing 0.7% from March's level to its highest level since October 2008. Sales of both durable and nondurable goods were, respectively, 17.7% and 15.1% above their April 2009 levels

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