Economic trends in the housing, trade, and manufacturing sectors
The FOMC’s take
The FOMC meeting minutes were released on Wednesday, April 9. Participants commented on and discussed different sectors and the economic drivers including housing, manufacturing, spending, etc.
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The housing bubble, which was a result of Americans with the poorest credit being leant money to purchase houses they couldn’t afford, impacted the U.S. economy badly. Broad market ETFs like the SPDR S&P 500 (SPY), and the iShares S&P 100 (OEF), real estate ETF like the Vanguard REIT Index ETF (VNQ), along with banks like Citigroup Inc. (C) and Bank of America (BAC), all saw the prices slump.
Since then, the housing sector has been trying to recover, with the U.S. government playing an active role to help the sector recover and regain its lost momentum. However, the pace of activity in the housing sector appeared to have softened in the first quarter of the year, with housing starts lower in January and February, and permits showing a declining trend. Although new home sales did expand, existing home sales decreased since the last FOMC meeting held on January 28-29, 2014.
The manufacturing sector was roughly flat because of the effects of the severe winter weather. However, the indications for broader manufacturing indicators, such as new orders, were consistent with an expectation of moderate expansion in factory output in the coming months.
Growth in real private expenditures for business equipment and intellectual property products stepped up in the fourth quarter, with forward-looking indicators consistent with modest increases in business equipment spending in the near term. Real business spending for non-residential structures remained essentially unchanged, while real non-farm inventory investment increased at a significantly slower pace.
Real federal government spending was roughly flat in the first quarter, as the general downtrend in purchases seemed likely to be almost offset by a reversal of the effects of the partial government shutdown during the fourth quarter.
The U.S. international trade deficit, after widening in December, remained almost unchanged in January. Exports increased in January, but the gains were modest as decreases in sales of cars, petroleum products, and agricultural goods were just offset by gains in other major categories. Imports also rose in January as the increase in the volume of oil imports more than offset declines in imports of non-oil goods and services.
The meeting went on to discuss the trends in public expenditure, and the state of inflation and prices.