The Monday Economic Report

This week's economic report again brings generally mixed news. Of the nine major economic indicators that came out last week, two improved, three decelerated, one was unchanged and three declined. (To see all of last week's indicators, see the Latest Economic Reports section below.)

Two of the three declining indicators reported last week were on the housing market, where both new and existing home sales fell in February. This bad news complements other recent housing indicators which together show that the upturn in the housing market has stalled. Still, the fact that the tax credit for new homebuyers has been extended through April means that housing activity could get a temporary bump in the second quarter as people take advantage of the expiring tax provision.

News on the manufacturing front was generally positive last week. Regional reports show that manufacturing activity in the Mid-Atlantic and Midwest continued to grow in March.

In addition, the Commerce Department's final report on fourth quarter 2009 GDP growth was released last Friday. While the general consensus was for no change, the pace of GDP growth actually decelerated more than expected, from 5.9 percent annualized growth (the prior "preliminary report") to 5.6 percent growth (last week's "final report").

As the chart above shows, all major components of the domestic economy (consumer spending, business and residential investment, and government spending) decelerated in the final report.

The only improvement in last Friday's report was on the trade side, which showed that exports grew slightly faster in the final report (22.8 percent) than the prior estimate of 22.4 percent growth. As a result, exports accounted for 42 percent of GDP growth in the quarter, accounting for 2.4 of the total 5.6 percent of GDP in the fourth quarter.

The important role that exports are playing in the developing recovery shows how vital it is for U.S. companies to be able to effectively compete in the global market place. This means not only open access to markets abroad, but also competitive domestic costs that allow U.S. based companies to effectively compete in the global economy. Each of these are essential to U.S. global competitiveness.

Dave Huether

Chief Economist

National Association of Manufacturers