Tuesday, November 24, 2009

FOMC minutes

Minutes from the November 3-4th FOMC meeting were released earlier today.


Notable from the release:


-Manufacturers increased production in September for the third consecutive month. 
-The gradual recovery in construction of single-family homes from its extremely low level earlier in the year continued, and home sales increased in the third quarter. 
-Although consumer spending on motor vehicles declined in September after the expiration of government rebates, other household spending rose. 
-Outlays for equipment and software (E&S) appeared to be stabilizing. 
-the labor market weakened further, and business spending on nonresidential structures continued to decline. Meanwhile, consumer price inflation remained subdued in recent months.


The last meeting was in June.  Since the last meeting, another 1.3million jobs have been lost.  I don't bring that up to be melancholy - rather I note it as it relates to the changes in long-term projections for GDP growth.  


Amazingly, despite an additional loss of 1.3million jobs since the last update to long term projections, the FOMC has RAISED estimates for long term GDP growth (just slightly, but still...).  This is key because congress uses this data to project tax revenues in the future, and any boost to GDP in this report will show smaller projected deficits than could reasonably be expected.  If the FOMC were to get more cynical realistic with its outlook, that would show higher deficits in the future.  To their credit, they did increase the outlook for the long-term unemployment rate.  Although how that can be increased at the same time as GDP growth escapes me....



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