9311djl (04/22/83)
W E E K L Y B U S I N E S S S U M M A R Y
Keeps You Aware of Current Economic Trends
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Vol. I No. 26 April 22, 1983
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HEADLINES
o+ Consumer prices rose only 0.1% in March resulting in an annual
rate of inflation of only 0.4% for the first quarter. Food price
increases led the inflation as fruit and vegetable prices jumped
4.4% in the month as a result of poor weather in Florida and
California. Energy prices continued their slide despite price
increases for natural gas. Although prices are remaining stable
currently, there still exists the fear that inflation may be
reignited in the next twelve months. At this point we can safely
claim that prices will not increase fast unless consumer demand
soars in the next year (since as demand rise, equilibrium prices
will rise, too). But, since consumer demand has not yet gained
recovery momentum, we can expect no big gains in demand and
therefore slow price jumps.
o+ The Labor department reported last week that the Producer Price
Index (PPI), which measures wholesale prices, fell 0.1% in March
causing the PPI for the first quarter of 1983 to fall at an
annual rate of 4.1%, the steepest descent for any quarter in more
than three decades (4Q1952). Energy wholesale prices fell 3.2%
while food prices rose 0.5%. General raw materials prices rose
modestly at 0.6% indicating that a recovery is underway since
prices usually rise as business picks up. Economists now predict
that wholesale prices should rise at most 1% during 1983 as
compared to 1982's rise of 3.5%. Since last March, the index has
inched up a mere 2.2%. Continued suppression of wholesale prices
will inevitably lead to only slight increases in the CPI.
o+ Real GNP for the first quarter of 1983 grew at a solid 3.1%
annual rate. Although the rate of growth was less than
previously expected, some economists note that the subdued pace
might allow further cuts in interest rates and induce a more
durable recovery. The expansion was the best since the 7.9%
spurt in the first quarter of 1981. Prospects for the remainder
of 1983 are continued rates of growth in the 2-5% range.
o+ Factory production made a strong 1.1% gain in March as production
of construction supplies, furniture, and carpeting soared in
response to February's boom in housing starts (up 93%).
Manufacturing output alone was up 1.3% with steel and lumber
contributing the most improvement. Coal, oil, and gas production
was off 2% in response to falling energy prices. For the first
quarter, industrial production has increased 2.3%, an annual rate
of 9.6%. This news is encouraging for 1983 job prospects as
employment will certainly increase in response to the increased
production needs.
o+ Coupled with the production report is the claim that the long
recession has been "effectively buried" as the manufacturing
operating rate soared to its highest level (69.4%) since last
summer. The level for March jumped 0.7% over February's level.
For the auto industry, capacity utilization fell from 59.1% to
58.8%, the rate remained well above its fourth quarter trough.
Iron and steel companies operated at 52% in March up drastically
from December's 36.5%. Continued gains in production will be
seen only if demand for goods by consumers gets stronger.
o+ Contrary to February's housing starts figure, March's number
declined to an annual rate of 1.61 million units. The level,
although lower than in recent months, was still 75% above the
level of last March.
o+ Orders to U.S. factories for "big ticket" durable goods rose a
minute 0.3% in March. Increases for machinery, household goods,
and military hardware outweighed declines for the transportation
industries and primary metals. The gain, which is the fourth in
the past five months, marked a significant rebound from
February's 3.5% drop.
o+ An encouraging omen of strong consumer spending came from the
Commerce Department's report that personal income rose 0.6% in
March. Being the largest gain since last fall, the 0.6% surge in
income justifies claims of economic recovery albeit a slow one.
Additionally, personal consumption spending rose 0.4% in March
after having fallen in February. Increases in paychecks
accounted for most of the $14.6 billion jump in income, and the
remaining part was made up of increased unemployment benefits
hardly a sign of good economic health. The personal income
statistics are:
Personal Income: $2.66 trillion
Disposable Income: 2.26
Personal Consumption: 2.06
Personal Savings: .13
National Savings Rate: 6%
Per capita Income: $9,650