Macro Pulse May 2010 -- Extending the Trend

Executive Summary

Our call last month for a 3.1 percent rise in 1Q2010 real gross domestic product (GDP) hit close to the Bureau of Economic Analysis’ peg of 3.2 percent. Although considerably lower than 4Q2009’s 5.6 percent, the 1Q2010 growth would have been slower yet had consumer spending not jumped at the fastest rate in three years.

On its surface, the April employment report looked quite encouraging. Non-farm payroll employment rose by an estimated 290,000 jobs, although the unemployment rate edged up to 9.9 percent because of the number of people returning to the labor force. Because of slow hiring, the rise in consumer spending outstripped the increase in incomes again in March. Although incomes still exceed outlays, the two metrics are converging.

The manufacturing sector expanded in April for the ninth consecutive month. The performance of individual industries at least somewhat related to the forest products sector improved “across the board.” Most housing metrics showed gains in March; in the activity category, only single-family starts and total completions declined.

The Netherlands Bureau for Economic Policy Analysis estimates the volume of world trade expanded at least through February. Closer to home, U.S. exports and imports both rose in February; the trade deficit widened, though, because imports rose more quickly than exports. The monthly average price of West Texas Intermediate crude oil rose for a second consecutive month in April, to $84.48 per barrel – a gain of $3.24 (4.0 percent). The wider trade deficit and more expensive oil stemmed from the U.S. dollar’s depreciation against a basket of 26 currencies.

Click here to read the entire May 2010 Macro Pulse.