Economic Recovery Gaining Momentum Says Fed President

Manufacturing continues to lead the country out of recession.

In comments at a University of Arizona conference this morning, Dallas Federal Reserve President Richard Fisher said that “absent some exogenous shock, the recovery that began last summer is unlikely to be reversed and will instead proceed, slowly gathering momentum as we progress through the year“.  Fisher further commented that the growth “may not result in as rapid a reduction in unemployment as we would like. But it is positive and noteworthy”. Fisher did not advocate an increase in interest rates yet, but said the Fed would act when appropriate.  Fisher believes the U.S. GDP will gain about 3% this year.  Mortgage rates have edged higher in recent week as a result of increasing treasury yield spreads.

The next two opportunities for the Fed to raise rates are at meetings in the end of April and the end of June.  While the Fed has pledged to keep rates low “for an extended period”, inflationary pressures could force a rate hike earlier than anticipated.  As always, we will monitor these developments and keep you up to date as news breaks.

The manufacturing sector continues to lead the United States out of the recession. Factory orders increased 0.6% in February, marking the 10th increase in the last 11 months.  The increase beat out the projected gain of 0.5%. The increase, however, is the smallest since August of 2009.  Durable goods orders, which comprise almost half of factory orders, were also up 0.9%.

Inventories rose only 0.5%, disappointing many as growing inventories are an indicator that manufacturers are confident in future sales prospects.

Aaron Smith, a senior economist for Moody’s said in a Bloomberg article this morning that “Manufacturing will keep driving the recovery as we get continued support from inventories and from rising demand”.

Reports from ADP Employer Services showed that private employers unexpectedly cut 23,000 jobs in March.  The Labor Department’s jobs report on Friday is expected to show that all employers added 180,000 jobs in March.  This would be the largest gain in three years.

As has been the norm for the last few weeks, today’s economic reports are mixed, but somewhat encouraging. Positive news in the jobless claims report tomorrow and the employment report on Friday would go a long way toward further convincing the country we are indeed pulling out of the recession.  Stay tuned to this space for all the latest economic news and analysis.