In our economic analysis,
we look at the three economic components of a healthy economy: full employment, stable prices, and economic growth. We track three economic indicators to guage the health of the economy, more specifically, to guage whether the economy is getting better or getting worse:
• Unemployment numbers to monitor employment • The Consumer Price Index (CPI) – to monitor
prices / inflation
• Manufacturing Output – to track economic growth
Consumer Price Index
Consumer prices are showing no signs of inflationary pressure. It appears the economic stimulus has not yet triggered rising prices. As a result, policy makers are able to continue on a track of accomodative monetary and fiscal policy at least in the near term. We will continue to monitor this indicator closely. The next reporting date is December 14, 2012.
The general trend in the rate of unemployment continues to be an excruciatingly slow but steady decline since its peak three years ago in October, 2009. Expect policy makers to take credit for the improvement in the unemployment rate and continue on their path of accomodative fiscal and monetary policy, especially while there are no signs of inflation on the horizon. We will continue to track the unemployment numbers. The next reporting date is Dec. 7, 2012.
After 12 quarters of strong growth following the recession of 2008-09, the recovery in manufacturing output appears to have stalled here (temporarily, we hope) in the third quarter. We see the numbers are down -0.7% from the previous quarter. Again, the threat of a slowdown in manufacturing output would give cause for the fiscal and economic stimulus to continue in the near term. Fourth quarter preliminary numbers will not be released until February 7, 2013. We will have to wait until then to see if the drop was just a temporary set back or the beginning of a possible trend.
The three statistics seem to indicate policy makers will be keeping rates low for now. As the saying on Wall Street goes, “Don’t bet against the Fed.” Please stay posted for further Economic Updates as new data is released.