Slow Economic Growth Plan Confirmed
Cited: Reuters
The economic recovery tepid pace was underscored by the unexpected reduction of demand for long-lasting US manufacture goods last month as well as a drop in the gauge of business spending plans.
Another report from the Commerce Department on Wednesday, October 27, showed new home sales continued to bounce along the bottom, leaving intact expectations in financial markets that the Federal Reserve would ease monetary policy further next week.
“You are seeing a convergence in the different sectors of the economy around the slow-growth scenario,” said Zach Pandl, an economist at Nomura Securities International in New York.
Orders for durable goods excluding transportation fell 0.8% after rising 1.9% in August as bookings for communications equipment tumbled sharply. Economists, who track this core figure closely, had expected a 0.5% gain.
Overall orders, however, jumped by 3.3% — the largest increase since January — lifted by a surge in demand for aircraft. Orders had dropped 1% in August and economists had looked for a 2% increase in September.
The second report showed new home sales rose 6.6% last month to a still-weak 307,000 unit annual rate.
While the durable goods data supported other recent evidence of cooling in manufacturing, the home sales figures pointed to some improvement in the battered housing market, leading traders in U.S. financial market to anticipate less aggressive action from Fed policymakers who meet on November 2-3.
U.S. stocks ended mixed, with the Dow industrial average and S&P 500 weaker and the Nasdaq Composite slightly higher. The dollar pushed into positive territory against major currencies for the year. Prices for U.S. government debt fell.
Analysts expect Fed officials next week to announce bond purchases of at least $100 billion a month to push borrowing costs lower to help rejuvenate the economy’s sputtering recovery from the worst recession in 70 years.
The central bank, which cut overnight interest rates to near zero in December 2008, has already bought about $1.7 trillion worth of Treasury and mortgage-related debt.
Its decision will be announced a day after Tuesday’s congressional election, which is widely seen as a referendum on President Barack Obama’s performance on the economy. His Democratic Party is seen facing large losses.
Off-Topic Breach: Country lighting when done properly can turn that cold dark room into something bright and cheery. It is as simple as changing out your inadequate light fixture for a primitive wrought iron or some wood chandelier lighting. May I suggest the Washington Wood Wrought Iron Chandelier for a gorgeous touch of class?
BUSINESSES HESITANT TO SPEND
Business spending, which has been growing strongly, is starting to slow down.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business investment, slipped 0.6% in September after a 4.8% increase in August. Markets had expected a 0.8% gain.
“Overall, these figures suggest that the industrial recovery is nearing an end. Without it, the overall economy is going to struggle,” said Paul Dales, a U.S. economist at Capital Economics in Toronto.
The government is expected to report on October 29 that the economy expanded at a 2% annual rate in the third quarter, a touch faster than the second quarter’s 1.7% pace but too sluggish to cut into a 9.6% jobless rate.
Last month, overall durable goods orders were boosted by a 105 percent surge in demand for non-defense aircraft and parts that more than reversed a 30% plunge in August.
Inventories of durable goods inventories rose for a ninth straight month, while shipments, which go into the calculation of gross domestic product, were down for the second consecutive month.
The housing data added to recent signs of stability in the housing market after a slump in activity following the end of a tax credit for home buyers. Data earlier this week showed sales of previously owned homes increased in September.
Applications for loans to buy homes, a tentative early indicator of sales, rose 3.9% last week, a separate report from the Mortgage Bankers Association showed.
The number of new homes available for sale last month dropped to a 42-year low of 204,000, the Commerce Department’s report showed. At September’s sales pace, that represents eight months’ supply, down from 8.6% months’ worth in August.
Analysts called that a step in the right direction, but cautioned investigations into the processing of foreclosures by some banks could harm the housing recovery.
“Once the (foreclosure) moratoriums end, the new-home market will have to contend with a large number of distress sales again,” said Celia Chen, a senior director at Moody’s Analytics in West Chest, Pennsylvania.
In August, the median sales price of new homes rose 1.5% $223,800. This is the highest since May compared to September of last year when prices rose 3.3%.
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My Take: Well, all these reports I keep reading made me think of an economics teacher I once had. And one of his lectures he proved his point. That point was to reduce prices to increase sales. He said basically that retailers could make more money in the turnover of products.
I think something simple like wall decals. This type of retail sales item can run anywhere from $5-$50 for one decal. It just depends on what you’re buying and whether it is customized or not. Let’s take the mid range of a decal that sells for $25. Let’s say it takes $15 to create vinyl wall lettering. That means that the retailer is making a $10 profit. If that retailer would drop their price by $5, they could double their sales and still make the same profit. In fact, there is the possibility that they could triple their sales and make even more profit just because they dropped the cost by $5.
The same could go for promotional products that many businesses and schools utilize for advertising or marketing. Just as many businesses, schools will purchase imprinted school T shirts for sporting events or school pride and then resell them. By selling the products to schools and lower price, the school could purchase more and make more money for school activities.
This concept could be utilized in any type of retail business, such as smokeless cigarettes. Many non-smokers are on a crusade to reduce the number of smokers. By reducing the cost of electronic cigarette starter kits, more smokers may purchase them just so that they can smoke where smoking is prohibited. The electronic cigarette gives a smoker the ability to smoke without producing secondhand smoke or speaking up everything with the smell of smoke or that stale cigarette smell.
I am sure that might economics teacher would be amazed that one of his students was actually listening to his lecture. I also believe that if more retailers would catch on to this idea, it would help our economy improve greatly.
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Other Resources
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