Economy Sees A Slide

http://news.yahoo.com/s/ap/20060601/ap_ ... fi/economy


(The Title changed to this After I posted this. I guess the propagand Machine doesnt want bad news out there about the economy.)
Home building, manufacturing index slide

By MARTIN CRUTSINGER, AP Economics Writer 17 minutes ago

WASHINGTON - The U.S. economy appears to be shifting into a lower gear with residential construction falling sharply and manufacturing activity slowing. The big question: Will the slowdown come in time to keep inflation from heating up?
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Investors got mixed signals on inflation in a raft of new economic data on Thursday, with a key gauge of wage inflation posting an improved reading while a barometer of manufacturing prices posting a sharp increase.

Wall Street chose to focus on the benign inflation reading and strong sales May sales gains reported by many retailers. The Dow Jones industrial average rallied for a second session, rising by 91.97 points to close at 11,260.28. On Wednesday, the Dow had gained 74 points after falling by 184 points on Tuesday.

Private analysts cautioned, however, that lingering inflation pressures may prompt the
Federal Reserve to push interest rates up one or two more times even as the economy slows to a more sustainable pace.

On the slowdown front, the
Commerce Department reported that residential home building dropped by 1.1 percent in April, the biggest decrease since January 2004.

The drop was large enough to pull overall construction spending down by 0.1 percent after the building industry set a string of record highs in recent months, reflecting a boom period fueled by the lowest mortgage rates in more than four decades.

In other signs of slowing, a key gauge of manufacturing activity edged down to the lowest level in nine months. The Institute for Supply Management's manufacturing index dipped to a reading of 54.4 in May, down from 57.3 in April.

Analysts said manufacturing momentum has ebbed significantly over the past four months, reflecting weaker orders. But an inflation gauge tied to the manufacturing index jumped by the sharpest amount in eight months, reflecting rising costs for raw materials.

In areas of strength, many nationwide chain stores reported better-than-expected sales results in May as consumers shook off sagging confidence readings to shop with enthusiasm for clothing and other products.

But even there, the story was mixed as Wal-Mart, the nation's largest retailer, failed to meet analysts' expectations as its lower-income customers felt squeezed by $3-per-gallon gasoline.

"The economy is strong but it is throttling back a notch," said Mark Zandi, chief economist at Moody's Economy.com.

He said Fed officials will probably remain undecided about whether to raise rates again at their June 28-29 meeting until they see further data including Friday's unemployment report, which is expected to show strong employment growth of around 170,000 workers in May.

In another report of slowing housing activity, the National Association of Realtors said its index for pending home sales fell for a third straight month in April, dropping 3.7 percent from the March level. This index tracks sales of previously owned homes where a contract has been signed but the deal has not yet gone to closing.

Home sales have been hurt by rising mortgage rates, which climbed this week to a four-year high of 6.67 percent for 30-year mortgages, Freddie Mac reported.

Weaker sales are beginning to depress prices. The Office of Federal Housing Enterprise Oversight reported Thursday that home prices rose at an annual rate of 8.12 percent in the first three months of this year, down from the double-digit gains of the past nearly two years.

Also giving support to the belief that inflation pressures will stay contained was a Labor Department report that revised its estimate of first quarter productivity up to a solid 3.7 percent, better than an initial reading of 3.2 percent.

And unit labor costs, the amount employers must pay for each unit of production, rose at a moderate 1.6 percent rate in the first quarter, down from a worrisome initial reading of 2.5 percent.

While rising wages are good for workers, the Fed keeps a close tab on wage pressures for signs that inflation is getting out of control. Higher productivity means that workers can be paid more from their increased output without forcing employers to boost the price of their products.

For April, total construction spending fell to a seasonally adjusted annual rate of $1.195 trillion. The 1.1 percent drop in residential construction was offset somewhat by a 2.5 percent rise in nonresidential activity, reflecting solid gains in office, hotel and shopping center activity.

Spending for public construction projects dropped by 0.2 percent with state and local activity falling by 0.3 percent while spending on federal projects surged by 0.6 percent to an all-time high of $20 billion at an annual rate.

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On the Net:

Productivity: http://www.bls.gov/lpc/

Doesn't matter. With all the millions of illegal aliens currently on welfare and millions more slithering across our border at the invitation of this jackass administration and senate we will all be one big happy welfare family.

1. Iraq mess
2. Immigration mess
3. New Orleans still unprepared for 2006 hurricane season
4. "Losing" my and other veteran's data to drug cartels and illegal aliens
5. Just being jackasses and wastes of taxpayer dollars

INVESTIGATE AND IMPEACH BUSH NOW!!!!!!!

THE SENATE: The most corrupt institution money can buy

In other words, they're telling us that the shell game will be up VERY SOON, and we had ALL best be ready for it.

And now boys and girls, its time for a blast from the past! Here's cut from from that hit band of the 1970s, STAGFLATION!