FedViews

Looking at the outlook from a year ago, our forecasts for economic growth and inflation proved to be reasonably on target, but the unemployment rate rose far more than we had expected. According to currently available data, real GDP growth was close to zero last year, with a sharp contraction in the first half of […]

Incoming data continue to indicate that the economic recovery is taking hold. Deterioration in the labor market is abating. Household spending is expanding at a moderate pace. Tentative signs suggest that the housing sector may have bottomed, and housing construction has begun to grow. Financial market conditions have improved further. The employment report for the […]

The U.S. economy expanded at a 3.5% annual rate in the third quarter, ending a string of four straight quarters of negative growth. Consumer spending increased at a robust 3.4% annual rate in the third quarter, boosted by the cash-for-clunkers program. Not surprisingly, sales of motor vehicles fell sharply after the program ended. But the […]

Five key questions are often asked about current economic and financial conditions: Has the financial crisis ended? Is the recession over? Will the economy return to full employment and normal conditions anytime soon? Is inflation going to jump too high? Does the Federal Reserve have an “exit strategy” to undo its extraordinary policy actions of […]

On balance, it’s probable that the economy has reached bottom and begun its slow recovery. The course going forward surely won’t be smooth or painless, and clear risks remain. Housing activity has been showing fairly uniform signs of recovery. For example, housing starts and permits have been rising fairly steadily since the beginning of the […]

Financial markets are improving, and the crisis mode that has characterized the past year is subsiding. The adverse feedback loop, in which losses by banks and other lenders lead to tighter credit availability, which then leads to lower spending by households and businesses, has begun to slow. As such, investors’ appetite for risk is returning, […]

Over the past several weeks, forward-looking economic indicators such as stock prices, corporate bond spreads, and the Institute for Supply Management (ISM) survey of manufacturers have been giving more positive readings, while lagging economic indicators such as employment and unemployment have continued to reflect the ongoing contraction in the U.S. economy. In the manufacturing sector, […]

The economy shows many signs of continued weakness. That said, several indicators suggest that the pace of contraction is slowing. This does not mean that economic activity is increasing, but that it might bottom out in coming months. Historically, such indicators have signaled a turning point in the business cycle and the onset of a […]

The economy has been suffering from an adverse feedback loop in which losses by banks and other lenders have led to a tightening of credit availability, which in turn has crimped spending by households and businesses. The resulting reduction in demand has dragged down the housing sector and the broader economy, contributing to greater losses […]