Can the economy improve for the second half of 2011?
Though our economic growth is being challenged by some strong headwinds, including high food prices, high gas prices, and a soft housing market, good news came at the right time last week. The Conference Board reported on Friday that its index of leading economic indicators grew by 0.8% in May. This represents the largest increase since February and is a strong improvement over the initial forecast. Some of the things that helped lift the index were:
• Federal Reserve policies designed to help financial markets.
• An increase in building permits, which signal future construction.
• A boost in consumer confidence as gas prices fell.
• Fewer people applying for unemployment benefits.
This report reaffirms what many economists have already been saying – while we are clearly facing some obstacles, the overall picture is improving. According to Moody’s analytics, economists are anticipating second-quarter growth between 2% and 2.5%. "Consumers are not panicking. We should begin to emerge from the soft patch in the second half of the year; a lot of the drags on the recovery are fading," said Ryan Sweet, a senior economist there.
In related news, the Dow rose for the first time since April and the S&P 500 broke a six-week losing streak by climbing 0.3%. In addition, suppliers are finally able to predict full rebounds from the March Japanese earthquake, with Honda projecting a return to normal production in August and Toyota following suit in September. While the economic recovery will likely continue to ebb and flow, these are some of the signs that we are still headed in the right direction.
ECONOMIC CALENDAR: Tuesday – Existing Home Sales Wednesday – EIA Petroleum Status Report, FOMC Meeting
Thursday – Jobless Claims, New Home Sales Friday – Durable Goods Orders, GDP
HEADLINES:
The Senate voted Thursday to cut the $5 billion-a-year subsidy given to oil refiners for blending ethanol into gasoline. Provided in the form of tax credits, the subsidy gives 45 cents a gallon to refiners who use ethanol, a renewable fuel additive that comes mainly from corn in the U.S..
Ownership of the Los Angeles Dodgers baseball team will be determined by a one-day divorce trial. The outcome will decide whether Frank McCourt is the sole owner, or if the team should be considered community property, which could likely lead to a sale of the team.
Microsoft won antitrust approval to complete the purchase of Skype, an internet phone service. Its largest acquisition to date, the company will buy Skype for $8.5 billion.
In the United States, 176 million people watched online videos last month, much of it on YouTube, according to the latest survey by comScore. Each person watched 15.9 hours on average.
