Numbers still point to lukewarm economic recovery
Conflicted news from Federal Reserve reflects tentative relationship drags on between Americans and their money.
Tess Vigeland: Ever date somebody who couldn't seem to keep their story straight? Consider that a metaphor for today's economy, and you've got the makings of a turbulent relationship between Americans and their money. Just today, there was more conflicted news out of the nation's central bank, and that's got our senior business correspondent Bob Moon groaning: Enough, already! He's ready for a breakup unless he sees some commitment to economic recovery. Hello, Bob.
Bob Moon: Hey, Tess.
Vigeland: So, what's your problem? You know, nothing's perfect -- especially not the economy, right?
Moon: Well, you know, there's this song I was listening to the other day, about a guy who's fed up with the way things are going in his relationship...
Clip from "Double Talk," by Michael Franks: 'Cause I can't take no more of your double talk!
And I think Michael Franks there pretty much sums up the way a lot of us feel about our relationship with the economy lately -- we've been getting mixed signals month after month. So it's no wonder the consumer-confidence surveys have basically stalled since June.
Vigeland: Well, so what kind of signals were you getting from today's news -- how you feeling today?
Moon: Just more mixed signals, Tess.
Moon: Wall Street was in the doldrums all morning on more discouraging economic signals from both Europe and Asia.
Vigeland: But wait a minute --
Vigeland: Doldrums. Aren't we also in the middle of summer? Isn't everybody on vacation?
Moon: Well, that's true, that's true. But, Japan's exports fell in July, and that pushed that country back into a trade deficit last month. Then, stocks took off like a rocket when the minutes were released from the last meeting of the Federal Reserve.
Moon: They suggested that many Fed members were talking about the need for further economic support coming fairly soon. Now that could mean the Fed will open the spigot on its cheap money again, but after the initial euphoria, it seems some traders also saw that as a dark sign that the Fed is starting to lose hope and it doesn't have many tricks left to turn things around.
Vigeland: So even in just a single report, we have either, "Yaaay!" or, "Oh, dear!"
Moon: That's right.
Vigeland: Well, let's talk about housing for a moment, because we've had some news out of that sector recently, and in fact we've, you know, actually had some economists calling the bottom on this thing.
Moon: And I'll give you that: The National Association of Realtors reports home resales rose by a healthy 2.3 percent in July, and the median price rose above $187,000, which is more than 9 percent higher than the same time last year. You can largely thank record low interest rates for helping spur that rise.
But then the Mortgage Bankers Association comes and whispers in my other ear.
Moon: And applications for U.S. home mortgages tumbled last week. That reflects activity in both refinancing demand and new home purchases, and those applications actually fell more than 7 percent in the past week, at the same time mortgage rates started to edge back up.
Vigeland: Oh, dear, so I'm guessing you don't know which story you're going to put your faith in, that what's going on here? All right, well, didn't we also hear just recently that wages are rising? Consumer spending is also up. Those back to school sales apparently got people into the stores. So, what's wrong with all that?
Moon: Well, true, wages have been growing at an annualized rate of 7.5 percent. That's the best in five years, which could explain the modest rising in consumer spending last month.
But what's going to happen if oil prices keep rising, as they did again today? Prices at the pump are up at an annual rate of nearly 12 percent since February. And today, the U.S. government reports crude inventories in this country dropped more than expected for the fourth straight week. That sent benchmark prices up ore than a quarter per barrel today. That's what I mean by having this love-hate relationship with the economy.
Vigeland: All right, so brass tacks here, Bob. You going to break up with the economy?
Moon: Well, first of all, it's not like I have any choice, right?
Vigeland: Well, that's true, you're kind of stuck.
Moon: Yeah, but I am ever the optimist, so as long as things don't stray too far, I guess I'm in it to stay. But check back with me again real soon.
Vigeland: Thanks, Bob.
Moon: Thanks, Tess.