Economy is moving along quite nicely...

[6SpeedTA95]

The economy is continuing its expansion with significantly better than expected 4th quarter numbers...

WASHINGTON — The economy snapped out of a sluggish spell and grew at a faster-than-expected 3.5 percent pace in the final quarter of last year as consumers ratcheted up spending despite a painful housing slump.

The fresh snapshot of business activity, released by the Commerce Department Wednesday, underscored the resilience of the economy; it has managed to keep on moving despite the ill effects of the residential real-estate bust.

The economy's performance in the October-to-December quarter, which followed two quarters of rather listless activity, exceeded analysts' forecasts for a 3 percent growth rate.

The economy opened 2006 on a strong note, growing at a 5.6 percent pace, the fastest spurt in 2 1/2 years. But it lost steam during the spring and late summer. It grew at a 2.6 percent pace in the second quarter and then a weaker 2 percent pace in the third quarter. The fourth-quarter's rebound ended the year on a positive note.

For all of 2006, the gross domestic product (GDP) increased by 3.4 percent, an improvement from a 3.2 percent showing in 2005.

That's even more impressive considering the economy was hit by the housing slump. Investment in home building for all of last year was slashed by 4.2 percent, the most in 15 years.

GDP measures the value of all goods and services produced within the United States and is the best barometer of the country's economic standing.

President Bush, who had a trip to New York scheduled Wednesday to discuss the economy, was certain to point to the GDP figures as evidence that his policies are working and benefiting most Americans. But Democrats, now in control of Congress for the first time in a dozen years, counter that economic inequality is widening and that it's harder for America's middle class to get ahead.

An AP-Ipsos poll in early January found that 55 percent of Americans disapproved of the president's handling of the economy, while 43 percent approved.

In the fourth quarter, consumers spent more freely, a major factor behind the rebound in overall economic activity. Consumer spending grew at a 4.4 percent annual rate, up from a 2.8 percent pace in the third quarter and the strongest since the opening quarter of 2006.

An improvement in the nation's trade picture helped by stronger U.S. export growth also was a factor in the overall GDP boost.

More brisk government spending also helped the fourth-quarter GDP. Government spending increased at a 3.7 percent pace in the final quarter, up from a 1.7 percent growth rate in the third quarter.

All those positive factors helped to blunt some negative forces.

Investment in home building during the fourth quarter plunged at a rate of 19.2 percent, even worse than the 18.7 percent drop in the prior quarter. Both were the worst drops in 15 years.

The drop in residential building in the fourth quarter shaved 1.16 percentage points off GDP. In the third quarter, it sliced a bigger 1.20 percentage point off of overall economic growth. That led to hope that the damage to the economy from the housing slump might be easing a bit.

Businesses, meanwhile, trimmed investment in equipment and software and reduced investment in inventory building.

FOXNews.com - Consumer Spending Boosts Economy as GDP Growth Rises to Better-Than-Expected 3.5 Percent - Economy

NEW YORK (MarketWatch) -- U.S. stocks rallied on Wednesday, with the Dow Jones Industrial Average surging over 100 points to a new high, after the Federal Reserve left interest rates unchanged as expected and said that economic growth has picked up while core inflation is moderating, easing concerns that the central bank's focus on inflation could lead to further rate hikes.
"The interpretation is that inflation is moderating while there's a pick up in the economy, which should all be good for equities," said Barry Hyman, market strategist at EKN Financial. See Fed statement.
"Both the equity and the bond markets are rallying, that's a powerful story," he said. "If growth can maintain itself without inflation picking up, then any scenario will work for the markets."
The Dow Jones Industrial Average ($INDU : Dow Jones Industrial Average
News , chart, profile, more
Last: 12,650.77+127.46+1.02%
Fed comments ease growth concerns
The Fed's comments that core inflation pressures appeared to be moderating helped soothe investors nerves.
Before the open, news that the U.S. economy shook off a summer slump and surged at a faster-than-expected 3.5% annual growth rate in the fourth quarter ( See full story.) failed to provide a boost to the market as investors were concerned about inflation and the direction of interest rates.
The Fed was widely expected to again leave rates unchanged and to maintain its bias on fighting inflation. See full story.
Late last year, markets were hoping that a slowing economy would lead the Fed to cut rates this year, relieving pressure on stock valuations. But recent data, culminating with the GDP report, have reversed those expectations.
"The fooler in 2007 might just be that the economy reaccelerates and the Fed, rather than lowering interest rates, either keeps them where they are or actually raises rates," said Jeffrey Saut, market strategist at Raymond James, in his investment newsletter.
"If interest rates are raised, the question then becomes, can earnings grow fast enough to offset the [pressure on stock valuations] that inevitably occurs under a higher interest rate environment?"
But, at least for now, both the bond and equity markets seemed convinced that the Fed remains on hold with receding inflation pressures making future rate hikes unlikely.
The bond market, which had already gained some ground after news that the Chicago manufacturing sector contracted in January, advanced further after the Fed's statement.
The benchmark 10-year Treasury bond was last up 12/32 at 98 14/32 in price while its yield, which moves inversely, fell to 4.841%. See Bonds.
Meanwhile, the dollar also reversed early gains against major rivals. See Currencies., boosting the price of gold. Gold was last up $8.90 at $653.10 an ounce, lifting the likes of Meridian Gold Inc. (MDG : Meridian Gold Inc
News , chart, profile, more
Last: 29.33+0.89+3.13%

U.S. stocks rally after Fed soothes nerves - MarketWatch


This should continue the upward pressure on wages throughout the majority of the economy. This should also keep tax revenues rising on a federal level. All good news as unemployment continues to drop.

[6SpeedTA95]

More articles

Stocks rally, Dow hits record post Fed
Major stock gauges jump after central bank holds rates steady, as expected, and says core inflation pressures are moderating; bond prices rise on news, sending yields lower.
By Alexandra Twin, CNNMoney.com senior writer
January 31 2007: 3:31 PM EST


NEW YORK (CNNMoney.com) -- Stocks rose Wednesday afternoon - with the Dow industrials touching a record trading high - after the Federal Reserve opted to keep interest rates unchanged, as expected, and suggested that core inflation is moderating.

The Dow Jones Industrial average (up 122.57 to 12,645.88, Charts) added 0.9 percent at around 3:25 p.m. ET, roughly an hour after the decision. The blue-chip barometer hit a fresh all-time trading high and was on track to post a record closing high. The broader S&P 500 (up 10.75 to 1,439.57, Charts) index added 0.8 percent.

The tech-heavy Nasdaq composite (up 19.24 to 2,467.88, Charts) also added 0.8 percent.

Policymakers opted to hold a key short-term interest rate steady at 5.25 percent, as expected, for the fifth meeting in a row.

In the closely-watched statement, the central bankers acknowledged the recent signs of strength in the economy and said that growth should expand at a moderate pace over the next few quarters. On inflation, the bankers said core pricing pressure had improved, but that wage inflation remained an issue.

The statement had few surprises, with minor changes that just served to reflect the recent data, said Stephen Stanley, chief economist at RBC Greenwich Capital.

"'We've seen some improvement on the growth side and some inflation numbers that were tamer," Stanley said. "The bottom line is that they are less likely to have to ease because of weaker growth or to raise rates because of higher inflation."

Stocks rose on the news, with investors perhaps breathing a sigh of relief that the Fed sees the economy as holding up well. In addition, the statement did not specifically imply more rate hikes are on tap anytime soon, something investors have been concerned about recently.

"I think the Fed sounds very happy and when the Fed's happy, then so are the markets," said Stuart Schweitzer, global markets strategist at JP Morgan Asset and Wealth Management.

Stocks rallied last fall partly on bets that the Fed would start cutting interest rates in the first half of 2007. But a recent series of surprisingly strong economic reports - including Wednesday morning's fourth-quarter GDP growth reading - knocked out bets on a rate cut anytime soon and raised concerns that another hike might be on tap first.

The central bankers may still raise rates this year. But the statement also seemed to imply that they might leave rates unchanged.

"The Fed sounds as though they do not expect to need to do anything either way, but they are committed to doing what may be needed if inflation should flare up," Schweitzer added. "It's a very lean, balanced statement."

Treasury prices added to earlier gains after the announcement. The rally lowered the yield on the benchmark 10-year note to 4.82 percent from 4.88 percent late Tuesday.

In currency trading, the dollar slumped versus the euro and yen, adding to earlier losses.

CNNMoney.com Market Report - Jan. 31, 2007

Economy posts surprising growth
GDP posts healthy 3.5% annual growth rate for the fourth quarter, up from 2% gain in third quarter.
By Chris Isidore, CNNMoney.com senior writer
January 31 2007: 10:56 AM EST


NEW YORK (CNNMoney.com) -- Economic growth picked up in the fourth quarter, the government said Wednesday, a surprisingly strong showing given the ongoing slump in the housing market.

The reading means the economy grew at a slightly stronger pace in 2006 than in 2005, but that's unlikely to spur the Federal Reserve to change its recent policy of holding interest rates steady, economists said.

Gross domestic product, the broadest measure of the nation's economic activity, grew at an annual 3.5 percent rate in the quarter, according to the government's first reading for the period. That compared to 2 percent growth in the third quarter.

Economists surveyed by Briefing.com had forecast a 3 percent pace of growth in the fourth quarter.

The fourth quarter reading resulted in a growth rate of 3.4 percent for the full year, up slightly from the 3.2 percent pace seen in hurricane-impacted 2005.

Unusually warm weather in much of the nation may have contributed to the strong showing.

"The fourth quarter number is probably overstated due to the weather, and we're still expecting a slowdown in the first half of 2007," said John Silvia, chief economist at Wachovia. "But you look at the data and you have to say the consumer is doing fine, exports were solid. This is exactly what everybody wants."

The pace of growth is actually helped by the relatively low inflation rate in the fourth quarter, due to falling energy prices in the period. Since GDP is adjusted for inflation, smaller gains in prices subtract less from growth than during periods of higher inflation.

Two other government readings showed declining inflation pressures in the fourth quarter.

The Fed's pregnant pause
In the GDP report, the so-called PCE deflator, which measures prices paid by consumers, fell 0.8 percent over the last 12 months. The core PCE deflator, which excludes food and energy, was up 2.1 percent from a year earlier, down from a 2.2 percent rate in the third quarter.

Separately, the Labor Department's Employment Cost Index, which measures the labor costs paid by employers, rose 0.8 percent in the fourth quarter, down from a 1 percent gain in the third quarter and below economists forecast for another 1 percent rise.

The report comes as the Fed is holding a two-day meeting to weigh what it should do with interest rates. The central bank is generally believed to want to see the core PCE deflator in the range of 1 to 2 percent.

Silvia said the GDP report gave no excuse for the Fed to start cutting rates in order to spur a slowing economy. During much of 2006, economists and investors had been betting on slower growth and Fed rate cuts this year.

But Silvia said at this point he believes the inflation pressures have retreated enough to stop the Fed from raising rates in order to cool the economy and maintain price stability.

"It comes down to how tough does the Fed want to be on inflation?" said Silvia, referring to the chance of a rate hike. "Do you really need it (the core PCE reading) down to 2.0 percent or do you declare victory at 2.1 and leave rates where they are.

"Myself, I would declare victory," he added. "We may not have beaten the spread, but we won the Super Bowl."

GDP up 3.5 percent in fourth quarter, topping forecasts - Jan. 31, 2007

[6SpeedTA95]

FOXNews.com - Stocks Zoom After Fed Announcement - World Market Analysis | Financial News | Market Data | Stock Market News

NEW YORK — Strong growth. Moderate inflation. And the Federal Reserve's apparent acknowledgement of a stellar economic picture. It all combined to send stocks soaring on Wednesday.

U.S. stocks climbed Wednesday, driving the Dow to a record close after the Federal Reserve left rates steady and flagged no new concerns about inflation that would have merited higher borrowing costs.

Based on the latest available data, the Dow Jones industrial average unofficially ended up 98.62 points, or 0.79 percent, at 12,621.93, while the Standard & Poor's 500 Index gained 9.66 points, or 0.68 percent, to finish unofficially at 1,438.48, and the Nasdaq Composite Index advanced 15.34 points, or 0.63 percent, to close unofficially at 2,463.98.

The Dow closed higher for the seventh month in a row in January, gaining 1.3 percent. The S&P 500 rose for the eighth straight month, adding 1.4 percent in January. The Nasdaq finished January with a 2 percent gain.

The Fed, which issued its economic assessment as it decided to leave short-term interest rates unchanged at 5.25 percent, said recent indicators "suggested somewhat firmer economic growth" and tentative signs of stabilization in the housing market. Investors also appeared pleased by the central bank's comments that readings on core inflation have "improved modestly" in recent months.

Other economic data had cheered investors Wednesday. The economy gave off fresh signs it could sidestep a sharp slowdown. The Commerce Department found the economy grew at 3.5 percent annual rate in the fourth quarter as consumers increased spending despite a pullback in the housing market. Wall Street had been expecting an increase of 3 percent.

Wall Street had expected the Fed would leave short-term interest rates unchanged for the fifth straight meeting after a string of 17 straight increases that began in 2004. But investors had been uneasy about the central bank's economic assessment statement and whether it would indicate that policy makers are considering raising interest rates in the near future because the economy and/or inflation has been growing too fast.

"They coupled a firmer economic growth scenario with the expectation of moderate growth and they expect the inflation outlook to be improving," said John Miller, head of fund management at Nuveen Investments said of the Fed's Open Market Committee. "I don't think it makes it any more likely that they would feel compelled to raise rates."

Light, sweet crude rose $1.28 to $58.25 per barrel on the New York Mercantile Exchange.

Among other economic data helping move markets was a Commerce Department report that found spending in December on construction projects fell 0.4 percent after rising 0.01 percent in November.

A weaker report came from the National Association of Purchasing Management-Chicago index of business conditions in the Midwest; it fell to 48.8 in January from 51.6 in December. A reading below 50 generally signals a pullback in the region's manufacturing, and this was the first time the reading had fallen below 50 since April 2003. The Chicago number is often viewed as an indicator of how the nation's overall manufacturing sector might be holding up. That report is due Thursday.

"The GDP number was a very good for both the stock and the bond markets because it showed better growth and less inflation," said Stuart G. Hoffman, chief economist for PNC Financial Services Group in Pittsburgh.

Hoffman said the Wednesday's data represented a dichotomy for the economy. "Manufacturing activity is still pretty weak, particularly for autos, whereas the service economy is still quite strong. The markets were whipsawed a little bit. First they see a stronger GDP number and then they get evidence that manufacturing is weaker."

In other economic news, the cost of hiring and retaining workers moderated in the fourth quarter, possibly easing some concern about wage inflation. Wages and benefits rose 0.8 percent in the fourth quarter, down from a 1 percent increase in the third quarter, the Labor Department reported.

"The stock and bond markets respond positively to low inflation and low or stable interest rates. Good news on both is sort of an elixir for both the stock and bond markets," Hoffman said.

In corporate news, Boeing (BA) rose $3.73, or 4.3 percent, to $89.73, giving a lift to the Dow industrials. The aerospace company's fourth-quarter profit more than doubled amid broad strength in its commercial airplane and defense system businesses. Revenue climbed 26 percent to $17.5 billion, coming in well ahead of Wall Street's forecast.

SanDisk Corp., which makes flash memory products, fell $3.30 , or 7.7 percent, to $39.53 after it posted a fourth-quarter loss amid big charges related to its acquisition of Israeli flash memory maker M-Systems.

Time Warner Inc. (TWX) slipped 23 cents to $21.81. The company's fourth-quarter profit jumped 34 percent, aided by the sale of Internet access businesses in Europe and an agreement that brought new subscribers to its cable TV unit.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.15 billion shares.

Overseas, Japan's Nikkei stock average closed down 0.61 percent. Britain's FTSE 100 closed down 0.62 percent, Germany's DAX index finished up 0.01 percent, and France's CAC-40 was down 0.66 percent.

Record close on the DOW, woot

[ballz2wallz]

I'm surprised the conservatives are avoiding this thread like the plague, since the Democrats are now in power and the economy is strong!

[6SpeedTA95]

Originally Posted by ballz2wallz

I'm surprised the conservatives are avoiding this thread like the plague, since the Democrats are now in power and the economy is strong!

[ballz2wallz]

Originally Posted by 6SpeedTA95

[kinggovernor]

[Stylerod]

How come every quarter it's always "better then expected"? It's been going great for years now.

[ballz2wallz]

Originally Posted by Stylerod

How come every quarter it's always "better then expected"? It's been going great for years now.

Because they expect bad things from Bush.

[6SpeedTA95]

Originally Posted by Stylerod

How come every quarter it's always "better then expected"? It's been going great for years now.

third quarter last year was worse than originally expected and economist in many cases underestimate GDP.

[Thorgrim]

NEW YORK (CNNMoney.com) -- Job growth slowed in January, the government reported Friday, in a report that showed a labor market roughly in line with Wall Street forecasts, even if the most recent gain was a bit below expectations.

[6SpeedTA95]

Originally Posted by Thorgrim

NEW YORK (CNNMoney.com) -- Job growth slowed in January, the government reported Friday, in a report that showed a labor market roughly in line with Wall Street forecasts, even if the most recent gain was a bit below expectations.

Yeah and thats actually some good news, so what is your point?

[Thorgrim]

Originally Posted by 6SpeedTA95

Yeah and thats actually some good news, so what is your point?

In other good news, no tsunamis destroyed india today

The point is that mediocre growth that translates into job growth that isn't even keeping up with population growth, in 2004 it was 150,000 a month, we hit below that

U.S. Job Growth in January Disappoints

That's a mix of slightly better than average news, and bad news...overall...not good

[RMNIXON]

Originally Posted by 6SpeedTA95

Yeah and thats actually some good news, so what is your point?

In a free society everybody gets to celebrate in their own way......

[6SpeedTA95]

Originally Posted by Thorgrim

In other good news, no tsunamis destroyed india today

The point is that mediocre growth that translates into job growth that isn't even keeping up with population growth, in 2004 it was 150,000 a month, we hit below that

U.S. Job Growth in January Disappoints

That's a mix of slightly better than average news, and bad news...overall...not good

Nice random judgement. You can't take a snapshot and just say weaker employment data is a bad thing without looking at the entire picture.

This slightly weaker than expected job data is not at all a bad thing in our current situation. Inflation has been headed down and wages have been heading up. That trend will continue with the current jobs posting. We're at full employment, still gaining jobs and finding good labor is fairly difficult. This will continue to push wages up. But a slightly weaker job number should also help to temper inflation worries at the fed level. This means the 5.25 rate will probably remain intact for at least the entire first quarter if not the entire first half of the year.

[kinggovernor]

Originally Posted by RMNIXON

In a free society everybody gets to celebrate in their own way......

and those doom and gloom members will always find a reason why the economy isn't running well

[Thorgrim]

You forget the great recession of 1994 that hit after Clinton's tax hikes took affect, at least that's what conservatives kept saying

Oh wait that was just baseless partisan attacks, at least here we have real data to be concerned about...and for good reason, the economy went down in 2001, and ofcourse naturally it has gone up...even rather pathetically, it has to go down and its pointing to sooner rather than later

Looks like right-wingers are setting up the "Bush's tax cuts worked, Hillary destroyed the economy" story, i have no interest in believing the story about our great economy when poll after poll shows americans don't believe it and aren't feeling it