New Economic Reports Bring Same Old Story

Leading economic reports released Friday, as well as a University of Michigan study of consumer sentiment, all showed that the U.S. economy has yet to pull out of its slowdown.

U.S. factory orders, excluding transportation, were unchanged in July, a report by the Department of Commerce said. Orders for durable goods were revised downward to -0.7% from - 0.6% in July.

Inventories were also down in July by 0.6%, but shipments were up 0.5% for the month. The ratio of inventory to shipments was 1.38, compared with June’s 1.40.

While a drop in inventories might be considered a harbinger of future production and increased truck traffic; static or slumping orders for factory goods, especially durable goods like furniture, appliances and cars, suggest that the increases will not materialize for awhile.

The National Association of Purchasing Management – Chicago added to the gloomy news when it reported that its regional manufacturing index in August was 43.5 — still under the benchmark of 50 that would signal an end to decline.

U.S. consumers are confirming the bad news, as shown by a University of Michigan study of consumer sentiment. The university said its index of consumer sentiment fell from 92.4 in July to 91.5 in August. Preliminary readings had the index as high as 93.5.

The index is at its lowest point since April. Started in 1966, the index starts with a base of 100, indicates how comfortable consumers are with their finances and the economy.

Since a recession is defined by two straight quarters of negative total economic output, generally measured by the gross domestic product, the index numbers do not signal a recession, but they are not a good sign for the beleaguered U.S. economy.

Meanwhile, Joseph Stiglitz, economics professor at Columbia University, told the Wall Street Journal that it may be time to revise how a recession is defined.

Stiglitz believes that a recession could be defined by four straight quarters of growth less than 2%.

Last quarter’s GDP rose a miniscule 0.2%, making it the fourth straight quarter of limited expansion – the first time this has occurred since 1946, the Journal said.