5/14: MetroIntelligence Economic Update by P. DUFFY

Federal Reserve Chairman Powell comments on the economic road ahead

The current downturn is unique in that it is attributable to the virus and the steps taken to limit its fallout. This time, high inflation was not a problem. There was no economy-threatening bubble to pop and no unsustainable boom to bust. The virus is the cause, not the usual suspects—something worth keeping in mind as we respond. But the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems. Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.



Producer Price Index falls 1.3 percent in April and 1.2 percent year-on-year

The Producer Price Index for final demand declined 1.3 percent in April (the largest monthly dip since the index began in December 2009), and was down 1.2 percent year-on-year.  Prices for final demand less foods, energy, and trade services fell 0.9 percent in April (the largest decline since the index was introduced in September 2013), and was down 0.3 percent year-on-year, the index’s first 12-month decrease.



Consumer Price Index falls 0.8 percent in April, but up 0.3 percent year-on-year

The Consumer Price Index declined 0.8 percent in April, for the largest monthly decline since December 2008. Over the last 12 months, the all items index increased 0.3 percent, a substantial decline from 1.5 percent in March. The ‘core’ index for all items less food and energy fell 0.4 percent in April, the largest monthly decline in the history of the series, which dates to 1957. This core index rose 1.4 percent over the last 12 months, its smallest increase
since April 2011, and down from 2.1 percent in March.



Small Business Optimism Index falls another 5.5 points in April to 90.9

Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months. The Optimism Index has fallen 13.6 points over the last two months.  However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived.



Gallup:  51 percent of American adults pulling back on spending

Fifty-one percent of U.S. adults say they have been spending less money in recent months than they used to, an increase of nearly 20 percentage points from a year ago. The last time a majority of Americans reported spending less than usual was in 2009-2010.


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