United States Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

Introduction

The United States is the world's largest economy at $13.21 trillion in 2006, with a population of 303 million. The economy boasts high levels of productivity and invests large amounts in research and high technology. New York City is one of the three financial centers of the world. The US is the most significant nation when it comes to trade, leading the world in imports, though its large trade deficit is funded through selling treasury bonds inside and outside the country. Since the US also has a large federal deficit, the US has large national and external debt. The boom in the housing sector, fueled by low interest rates, and strong growth, slowed and reversed in 2006. As a result, the US Dollar was particularly hard hit in 2007.

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United States' Fundamental Indicators and Chart

Monthly Data for May, 2008

Date	EST	Indicator	Actual	Forecast	Previous
5/1	8:30am	Personal Income	0.3%	0.4%	0.5%
		For March Provided by the Commerce Department Personal incomes increased 0.3% in March, lower than anticipated, and less than the 0.5% seen in February. With spending in March at 0.5%, it means the difference between the two amounts to -0.2%. From the Release: "Personal income increased $38.8 billion, or 0.3 percent, and disposable personal income (DPI) increased $29.6 billion, or 0.3 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $42.9 billion, or 0.4 percent. In February, personal income increased $58.2 billion, or 0.5 percent, DPI increased $50.3 billion, or 0.5 percent, and PCE increased $11.0 billion, or 0.1 percent, based on revised estimates."
5/1	8:30am	Personal Spending	0.4%	0.2%	0.1%
		For March Provided by the Commerce Department Personal spending heated up in March, rising 0.4% compared to 0.1% in February. The figure doubled the consensus estimate, and was a positive sign for the economy as consumer spending makes up roughly 70% of GDP. The Dollar strengthened following the release, and hit a new intra-day low vs the the Euro. However, adjusted for inflation, spending was up 0.1%. Incomes were up 0.3%, as was expected.
5/1	8:30am	Core PCE Price Index m/m	0.2%	0.1%	0.1%
		For March Provided by: Department of Commerce Core PCE y/y: 2.1%, forecast 2.0%, pr. 2.0%, Core PCE Deflator y/y: forecast 3.2%, pr. 3.4% The Personal Consumption Expenditure Price Index is one of the favored measures of inflation by the Federal Reserve. March's data showed core inflation, which strips out energy and food prices rising 0.2%, compared to February's 0.1% rise. Compared to March 2007 inflation was up 2.1% higher than expected. The Fed prefers to see the annual rate of core PCE at a rate between 1% to 2%, and today's figure bolsters the case that the Fed may try and hold rates steady as their concern shifts from economic growth to inflation.
5/1	8:30am	Jobless Claims	380K	363K	342K
		For Week Ending April 26th Provided by: The Department of Labor Continuing Claims (Apr 19): 3.019M, pr. 2.934M The number of Americans receiving first time claims for unemployment benefits jumped 38K to 380K, wiping away last week's surprisingly good figure. This week's report is more in line with recessionary conditions as companies shed more jobs as a result of a weaker economy. A plummeting housing market has spilled over into the larger economy as consumers have tightened their belts (thought today's spending data was better than expected) and firms spend less on business investment. Those person's continuing to collect unemployment benefits rose above 3 million to 3.019 million, the most since April 2004. Tomorrow's non-farm payroll data is expected to show the economy shedding around 60K jobs for the month of April.
5/1	10:00am	ISM Manufacturing Index	48.6	48.0	48.6
		For April Provided by: Institute of Supply Management Official Relase: Report Prices: 84.5, pr. 83.5 (Mar), 75.5 (Feb) New Orders: 46.5, pr. 46.5 (Mar), 49.1 (Feb) Production: 49.1, pr. 48.7 (Mar), 50.7 (Feb) Employment: 45.4, pr. 49.2 (Mar), 46.0 (Feb) Inventories: 48.1, pr. 44.9 (Mar), 45.4 (Feb) The Manufacturing sector matched March's figure of 48.6, the 3rd month in a row that activity has contracted. Despite that fact, the release helped the Dollar extend some of its earlier gains vs the Euro as the result came in better than expected. Prices continue to rise, as 84.5% of respondents said they saw higher prices for commodities and energy and their purchasing power declines as the Dollar continues to fall in value. From the Release: "The manufacturing sector failed to grow in April as the PMI fell below 50 percent for the third consecutive month. Manufacturers are in a situation where both new orders and production are slowly declining, but prices continue to rise at highly inflationary rates. Bright spots this month are the growth in the Backlog of Orders Index after six consecutive months of decline, continued strength in new export orders and a reduction in customers' inventories."
5/1	10:00am	ISM Manufacturing Prices	84.5	83.5	83.5
		For April Provided by: Institute of Supply Management Official Relase: Report Prices: 84.5, pr. 83.5 (Mar), 75.5 (Feb) New Orders: 46.5, pr. 46.5 (Mar), 49.1 (Feb) Production: 49.1, pr. 48.7 (Mar), 50.7 (Feb) Employment: 45.4, pr. 49.2 (Mar), 46.0 (Feb) Inventories: 48.1, pr. 44.9 (Mar), 45.4 (Feb) The Manufacturing sector matched March's figure of 48.6, the 3rd month in a row that activity has contracted. Despite that fact, the release helped the Dollar extend some of its earlier gains vs the Euro as the result came in better than expected. Prices continue to rise, as 84.5% of respondents said they saw higher prices for commodities and energy and their purchasing power declines as the Dollar continues to fall in value. From the Release: "The manufacturing sector failed to grow in April as the PMI fell below 50 percent for the third consecutive month. Manufacturers are in a situation where both new orders and production are slowly declining, but prices continue to rise at highly inflationary rates. Bright spots this month are the growth in the Backlog of Orders Index after six consecutive months of decline, continued strength in new export orders and a reduction in customers' inventories."
5/1	10:00am	Construction Spending	-1.1%	-0.8%	-0.4% -0.3%
		Monthly Change for March Provided by: Census Bureau Down 1.1%, total spending for construction decreased to an annual rate of $1.124trillion. The larger than expected decline mainly came from the residential sector, which was down 4.5% in March, and down 19.7% on the year. Non-residential spending increased 1.3% in March. Spring is suppose to be a recovery period for the housing market. So far this Spring, any signs of recovery have been short-lived, and the slowdown does not seem to be decelerating. Housing starts, building permits, pending home sales continue to tumble to historic lows. Economists and analysts are seeing no recovery until 2009.
5/1	4:00pm	Motor Vehicle Sales	10.4M	11.4M	11.1M
		Domestic Sales for April
5/2	8:30am	Average Hourly Earnings	0.1%	0.3%	0.3%
		For April Provided by: Bureau of Labor Statistics
5/2	8:30am	Nonfarm Employment Change	-20K	-80K	-81K -80K
		For April Provided by: Bureau of Labor Statistics Unemployment Rate: 5.0%, pr. 5.1% (Mar), pr. 4.8% (Feb) April payrolls did better than expected, falling only 20K compared to expectations of an 80K drop. The unemployment rate improved as well to 5%. Manufacturing payrolls declined by 46K, while service producing jobs increased by 90K. The news bolsters the case that the Fed is ready to pause in its interest rate cutting campaign. It seems despite all the talk over a recession, growth was still positive in the 1st quarter and job losses are coming at a slower pace than anticipated. Therefore it seems that the recession seems to be concentrated much more in the housing and financial sectors, while the spillover into the broader economy has not completely tanked other sectors. The Dollar felt an immediate boost vs its rivals jumping around 1 cent vs the Euro, extending its eralier gains against the Yen and paring earlier losses to the Pound and Canadian Dollar.
5/2	8:30am	Unemployment Rate	5.0%	5.2%	5.1%
		For April Provided by: Bureau of Labor Statistics
5/2	10:00am	Factory Orders	1.4%	0.2%	-0.9% -1.3%
		For March Provided by: US Census Bureau Factory orders recovered in March to post a 1.4% increase, and February's decline was revised up. Dissecting the data it is apparent that even though shipments increased, most of the gains came as a result of higher unfilled orders and a build up in inventory. Summary from Release: "New orders for manufactured goods in March, up following two consecutive monthly decreases, increased $5.9 billion or 1.4 percent to $432.3 billion, the U.S. Census Bureau reported today. This followed a 0.9 percent February decrease. Shipments, up two of the last three months, increased $4.9 billion or 1.1 percent to $428.7 billion. This followed a 1.9 percent February decrease. Unfilled orders, up thirty-four of the last thirty-five months, increased $8.9 billion or 1.1 percent to $832.3 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.0 percent February increase. The unfilled orders-to-shipments ratio was 5.49, down from 5.50 in February. Inventories, up thirteen of the last fourteen months, increased $5.0 billion or 0.9 percent to $544.3 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.7 percent February increase. The inventories-to-shipments ratio was 1.27, unchanged from February."
5/5	10:00am	ISM Non-Manufacturing Index	52.0	49.1	49.6
		For April Provided by: Institute of Supply Management US services grew in April, beating expectations of another month of contraction. The Dollar strengthened in a knee-jerk reaction to the news. The Business Activity/Production and New Orders subgauges decreased slightly, while Employment and Deliveries were up. Prices also continued increasing, climbing to 72.1 from March's 70.8. The report helps to bolster the case that the US economy is seeing some improved activity after the last two quarters saw the US face a sharp slowdown. The Federal Reserve policy makers have signaled that they will hold interest rates steady now at 2%. If economic data continues to surprise on the upside, then they will be able to carry out that intention.
5/7	8:30am	Labor Productivity q/q	2.2%	1.5%	1.8%
		Preliminary Version for 1st Quarter Provided by: Department of Labor Labor Costs q/q: 2.2%, forecast 2.6%, pr. 2.8% (rev from 2.6%) US worker productivity climbed 2.2% in the first quarter, higher than expectations. Productivity has gone up as companies try and get more productivity out of their current workers, and trim staff hours by the most in 5 years (-1.8%). Firms are responding to weaker sales and higher raw materials costs and an economy that is seeing negative job growth during 2008 (the economy is down 260,000 according to payroll data). A loose labor market and higher productivity can work to keep wage inflation down. Labor measured 2.2% for the 1st quarter, slowing from the upwardly revised 2.8% seen in the 4th quarter. Costs were lower than the forecast of a 2.6% increase, which should also work to limit inflation. Adjusted for inflation, hourly pay decreased 0.7% in the year ended in March, which is the weakest performance in 13 years.
5/7	8:30am	Labor Costs q/q	2.2%	2.6%	2.8% 2.6%
		Preliminary Version for 1st Quarter Provided by: Department of Labor Labor Costs q/q: 2.2%, forecast 2.6%, pr. 2.8% (rev from 2.6%) US worker productivity climbed 2.2% in the first quarter, higher than expectations. Productivity has gone up as companies try and get more productivity out of their current workers, and trim staff hours by the most in 5 years (-1.8%). Firms are responding to weaker sales and higher raw materials costs and an economy that is seeing negative job growth during 2008 (the economy is down 260,000 according to payroll data). A loose labor market and higher productivity can work to keep wage inflation down. Labor measured 2.2% for the 1st quarter, slowing from the upwardly revised 2.8% seen in the 4th quarter. Costs were lower than the forecast of a 2.6% increase, which should also work to limit inflation. Adjusted for inflation, hourly pay decreased 0.7% in the year ended in March, which is the weakest performance in 13 years.
5/7	10:00am	Pending Home Sales m/m	-1.0%	-1.0%	-2.8% -1.9%
		Seasonally adjusted annual rate for March Provided by: National Association of Realtors Official Release: Press Release Pending home sales, a forward looking indicator for the housing market, continued to decline in March, as expected. Since March of 2007, the figures fell 20.1%. The decline should be flat or lighter in the Spring months as this is usually a period of recovery in the housing market. Then summer months should bring some positive figures. After a correction to start the week, the greenback is continuing its strength. The Fed pause is essentially locked in, and inflation is becoming more significant and further limits the posibility of a Fed cut. From the Release: "A flat pattern in home sales activity should continue for the next couple months before improving over the summer, according to the latest forecast by the National Association of Realtors®. Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. "Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," he said. "As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available." The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9."
5/7	10:30am	Crude Oil Inventories	5.7M	1.4M	3.8M
		Provided by: Energy Information Administration
5/7	3:00pm	Consumer Credit m/m	15.3B	6.0B	6.5B 5.2B
		For March Provided by: Federal Reserve Americans borrowed $15.29 bln worth of credit in March, an increase of 7.21%. The figures was higher than expected and were the fastest pace since November. Revolving credit (credit card borrowing) rose at an annual pace of 7.92% for March the largest increase since November. Non revolving credit was up 6.79%.
5/8	8:30am	Jobless Claims	365K	370K	383K 380K
		For Week Ending May 3rd Provided by: The Department of Labor Continuing Claims (Apr 26): 3.020M, pr. 3.030M (rev from 3.019M) Claims rebounded this week, falling 18K, but the 4 week-moving average, which smoothes out inherent volatility from week to week, continued to rise. With slower growth on the horizon, and raw material costs increasing, firms and factories may lower production as sales decline. This will mean less jobs as the economy goes through a period of marked slowdown (though officially not a recession yet). From the release: "In the week ending May 3, the advance figure for seasonally adjusted initial claims was 365,000, a decrease of 18,000 from the previous week's revised figure of 383,000. The 4-week moving average was 367,000, an increase of 2,500 from the previous week's revised average of 364,500."
5/8	10:00am	Wholesale Inventories	-0.1%	0.5%	0.9% 1.1%
		For March Release from U.S. Census Bureau Official Release: PDF Inventories declined as sales of goods increased. Also, inventories of petroleum and petroleum products were down 5.6 percent from last month and inventories of farm product raw materials were down 3.9 percent. The inventory to sales ratio declined to 1.09. On the year, total stockpiles increased 6.8%.
5/9	8:30am	Trade Balance	-58.2B	-61.4B	61.7B -62.3B
		For March Provided by: Bureau of Economic Analysis Exports m/m:-1.7% pr. 2.0% Imports m/m:-2.9% pr. 3.1% The US trade defict narrowed more than expected. Both exports and imports shrank, making trading activity a lesser impact on GDP than at this point last year. Demand for US products declined, but was somewhat offset by an increase for food, feed, and beverages. Imports declined the fastest since December of 2001. As the consumers and businesses feel the pinch from the economic slowdown, demand for car and oil imports declined. The dollar had been losing overnight, but pared some of the losses on the positive trade data. The caveat is that although the trade gap narrowed, the reason behind it was a decline in trade activity. That means the impact on the GDP is reduced.
5/13	8:20am	Fed Chairman Bernanke Speaks
		Fed Reserve Chairman Ben Bernanke will speak at the Atlanta Fed's Financial Markets Conference Speeches Provided by: Federal Reserve
5/16	10:00am	UMich Consumer Sentiment (p)
		For May
5/23	10:00am	Existing Home Sales
		For April.
5/27	10:00am	New Home Sales
		For April.
5/27	10:00am	Conference Board Consumer Confidence
		For May
5/28	8:30am	Durable Goods Orders
		For April
5/28	8:30am	Core Durable Goods Orders
5/29	8:30am	Gross Domestic Product
		Preliminary Annualized version for 1st Quarter. Provided by the Department of Commerce
5/30	8:30am	Personal Income
		For April Provided by the Commerce Department
5/30	8:30am	Personal Spending
		For April Provided by the Commerce Department
5/30	9:45am	Chicago PMI
		For May
5/30	10:00am	UMich Consumer Sentiment (f)
		Final version for May

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Central Bank Watch - Latest FOMC Decision

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April
30th, 2008

Actual

Forecast

Revised Form

2.00%

2.25%

N/A

Provided by: The Federal Reserve
Official Release: Statement

Two members dissented against the rate cut, as policy makers strengthened their language against inflation. After a knee-jerk reaction in which the Dollar gained, it was moderately lower against its rivals in the 30 minutes after the release. The Fed painted a rather weak picture of the economy, but that the recent cuts should work to help growth going forward. The statement may not have been as hawkish as some had hoped, as it leaves options open for the Fed in terms of its next move.

From the Release:

""Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."

"Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months...uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully."

Next Release Date: June 25th 2008, 14:15 EST

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Central Bank Watch - Bank Officials' Comments

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January 11 (Fed Chairman Bernanke) -- Dovish Statement by Fed Chairman.

Fed Chairman Bernanke said "additional policy easing may well be necessary" to offset "downside risks" to the U.S. expansion. "In light of recent changes in the outlook for and the risk to growth" the Federal Open Market Committee may be required to lower interest rates further. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.

The speech points to signs that the FOMC may lower rates by 50 basis points in its next meeting if data continues to point to a possible recession in the United States. His comments caused the dollar to extend losses against the Euro, and for the day the Dollar had its biggest decline in 2 months.

November 29 (Fed Chairman Bernanke) -- Get Ready for a Rate Cut

Bernanke's statement made way for a rate cut as he cited revived financial turmoil in the last couple of months. Consumer spending is expected to remain strong for now, although tighter credit conditions and deepening housing slump will put on the stress. He stated "these developments have resulted in a further tightening in financial conditions, which has the potential to impose additional restraint on activity in housing markets and in other credit-sensitive sectors".

A rate cut is warranted to bolster the economy. After Donald Kohn stated this inclination to cut rates on Wednesday, stocks soared as Dow Jones industrial average gained more than 300 points. After Bernanke backed up the intention, the DJI has gained more than 50 points by 11:30AM EST.

November 08 (Fed Chairman Bernanke) -- Fed Chairman Bernanke spoke in front of Congress (Joint Economic Committee) about the economic outlook in Washington DC.

Bernanke cited risks of the ailing dollar, specifically in fueling inflation. He also warned of a more drastic and noticeable slowdown in the economy, in the coming m months, although it is resilient. He gave dovish undertone, as he expects the economy to recover next year, reducing the possibility to cut rates in December.

Regarding the housing sector, he predicted a rise of delinquencies in subprime ARM will cause an increase in foreclosures as "a sizable number of recent-vintage subprime loans experience their first interest rate resets."

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Economic and Financial Profile

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US Dollar's Devaluation:

Since 2002, the Dollar has been sliding against the Euro. In 2007, as 1 Euro is approaching $1.50, the Dollar is beginning to lose its undisputed title as the "world's reserve currency." With the rise of the Euro, central banks around the world have shifted their portfolio's away from Dollars, weakening demand for the "greenback".

Euro Appreciation 2002-2007

US Economy Headed For Rough Patch Thanks to Housing Sector:

Even though GDP grew 3.9%, at an annual rate, in the third quarter, the US economy may be in store for lower growth ahead. The main factor driving down growth forecasts is the imploding housing market. The housing sector has been in a recession, with construction down, prices falling due to lack of sales, and lending being curtailed as credit costs rise. Financial firms have been reporting losses on Wall Street, and have given the US markets and the whole world bouts of heavy selling.

Secondly, the US is currently facing large trade and budget deficits, which are partly funded by purchases of US bonds by foreigners. Finally, the rising price of oil may stoke inflation, and eat into the wallets of the US consumers, though firms seem to have taken the rising costs in stride. Consumer confidence however hit lows not seen since after Katrina, and may impact spending during the holiday shopping season.

Growth and employment has become a bigger concern than inflation, which was the main thought of the central bank until mid 2007. In an effort to stem the housing losses and to prop up the economy, the Federal Reserve has lowered rates by 75 basis points in its last to two meetings.