Current Events and Updates

last updated 01/10/2004
Note: Reports link to appropriate government sites.

Economic Growth
Economic growth surges in the third quarter of 2003. Real Gross Domestic Product grew at an annual rate of 8.2 percent in the third quarter of 2003, according to final estimates from the Bureau of Economic Analysis. This growth follows a 3.3 percent increase in the previous quarter. The contributors to growth were broad-based, including consumption, equipment and software, residential fixed investment, and exports. Although this extraordinary rate of growth is not expected to last in future quarters, it seems to mark a turning point for the economy to an era of strong growth. [Outside Econweb] Full report

Unemployment falls but employment growth is stagnant. The unemployment rate ticked downward to 5.7 percent in December from 5.9 percent in November. The number of people employed, however, increased by just 1,000 in December. A reduction in the labor force of 309,000 accounted for the decline in the unemployment. In all, 8.8 million people were unemployed in December. [Outside Econweb] Full report

Inflation and Prices
Consumer prices fall in November. The consumer price index (CPI) edged downward by 0.2 percent in November, after registering no change in October. Even after excluding food and energy, the "core" CPI declined by 0.1 percent. Energy prices declined during the month while food prices increased. Inflation overall has registered just 1.8 percent over the past 12 months, and core inflation is up just 1.1 percent. The low inflation should allow the F.O.M.C. to keep interest rates at their presently low levels for quite some time. [Outside Econweb] Full report

Producer prices fall in November. Producer prices for finished goods declined 0.3 percent in November following a robust 0.8 percent increase in October. Excluding food and energy, the "core" producer price index (PPI) declined 0.1 percent. Between November 2002 and November 2003, the PPI has increased 3.4 percent, yet the core PPI has climbed just 0.5 percent over the same period.[Outside Econweb] Full report

Exchange Rates and International Trade
The trade deficit tops $40 billion once again in October. The U.S. international deficit in goods and services increased to $41.8 billion in October, from a revised $41.3 billion in September, as imports increased more than exports. Exports increased to $88.0 billion in October from $85.7 billion in September. Imports, however, increased even more to $129.7 billion in October from $127.1 billion the previous month. Between January and October 2003, the cumulative U.S. trade deficit is $409 billion, $72 billion higher than the year-to-date trade deficit at the same time last year. The trade deficits persist despite the weakening dollar. The dollar remains strong, however, relative to major manufacturing countries such as China.[Outside Econweb] Full report

The dollar plummets against European currencies. The weighted average exchange value of the U.S. dollar against major currencies fell sharply in December to 86.27 from 88.51 in November. The drop came primarily from a weakening of the dollar versus the euro. It now takes $1.23 to purchase one euro, up from $1.17 in November. The dollar also weakened against the British pound. The exchange rate against China's currency--the yuan--remained constant during the month partially because China's government has been pegging the yuan's value at that level. Over the past year, the dollar has depreciated by 15 percent. [Outside Econweb] Full report

Monetary Policy and Interest Rates
The Fed holds rates steady again in December. At its meeting of December 9, the F.O.M.C. kept the federal funds rate unchanged at 1.0 percent. The Committee stated that "with inflation quite low and resource use slack... policy accommodation can be maintained for a considerable period." The risks of deflation, however, seem to have declined. The December press release stated that "(t)he probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation." The next scheduled F.O.M.C. meeting is January 27/28, 2004. [Outside Econweb] Full report

Fiscal Policy and the Budget Deficit
The 2004 budget deficit is well ahead of the record-pace of 2003. The federal budget deficit was about $126 billion during the first three months of fiscal year 2004 (October through December), $18 billion more than the shortfall recorded over the same period last year. Although government revenues have risen by almost 3 percent compared with the first quarter of fiscal year 2003, outlays have increased by more than 5 percent to $565 billion. [Outside Econweb] Full report

Labor productivity soars in the third quarter of 2003.  Labor productivity in the nonfarm business sector increased by a striking 9.4 percent in the third quarter of 2003, as output increases far outpaced hours. Specifically, output increased by 10.3 percent during the quarter while hours of all persons increased by just 0.8 percent. Meanwhile, productivity in the business sector increased by a robust 8.6 percent. Productivity growth will almost surely decline in the fourth quarter as GDP growth returns to a more typical rate. [Outside Econweb] Full report  

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