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ECONOMIST LOOKS AT GDP IMPACT ON ELECTION

 ECONOMIST LOOKS AT GDP IMPACT ON ELECTION
 CHARL0TTE, N.C. Oct. 27 /PRNewswire/ -- The Commerce Department


today reported that real Gross Domestic Product rose at a 2.7 percent annual rate in the third quarter, led by a 3.4 percent bounce in consumer spending and a half-point decline in the inflation rate.
 GDP growth over the past year could have an impact on the presidential election, said David Orr, First Union's (NYSE: FTU FTUpr) chief economist, speaking at the corporation's quarterly economic update here today. "In the year prior to each of the past 11 presidential elections, back to Harry Truman in 1948, the GDP has averaged 4.4 percent when the incumbent party won. In elections when the incumbent party lost, the GDP averaged 2.2 percent. With GDP growth of 1.9 percent in the last 12 months, you can draw your own conclusions."
 Orr said, however, that the economy is not as bad as it might appear. "For most Americans, the economy should feel better than the numbers indicate because the problems are concentrated in two areas: exports and defense," Orr said. "Excluding defense and trade, the civilian domestic GDP rose 2.8 percent over the last year instead of the 1.9 percent rate."
 Net exports/imports subtracted 0.7 percentage points from GDP growth in the third quarter. Defense in the third quarter was 5.6 percent below the 1991 pace. "The prospects for exports and defense are not positive for the next several quarters because the slowdowns in Europe and Japan are still worsening," Orr said. "Improvements in those countries that would help U.S. exports are not expected until late next summer. By then, Japan's recently announced fiscal stimulus program and Europe's lower interest rates should lead to a modest turnaround."
 In the U.S., figures released last week for personal income growth in the second quarter show that problems are concentrated in the larger states. "Geographically, much of the country is seeing fairly decent rates of economic activity," Orr said. "But unfortunately for Mr. Bush, the weakest growth in personal income is concentrated in states with the most electoral votes. The best 10 states in personal income growth have only 66 electoral votes, whereas the 10 worst states have 160 electoral votes."
 Of the 10 states with the best year-to-year growth in personal income, only one is also a top 10 state in terms of population: North Carolina. North Carolina ranked 10th, with personal income up 6.3 percent, compared to the U.S. average of 4.7 percent.
 Of the 10 worst states in terms of personal income growth, four were top 10 states in terms of populations: California, 48th, with 3.3 percent growth; Illinois, 47th, with 3.6 percent; Florida, 45th, with 3.7 percent; and Michigan, 42nd, with 4.0 percent.
 Nationally, payroll employment in September was essentially unchanged from last September and the unemployment rate was 7.5 percent. However, in the nine largest states, with 243 electoral votes, employment was still 1 percent lower than last September, and the unemployment rate averaged 8.3 percent.
 Other key highlights of the economy are:
 CONSUMER SPENDING -- Retail sales in September were 4.4 percent ahead of September 1991 before inflation adjustment. In the third quarter alone, retail sales rose at a 5.4 percent annual rate, 3 full percentage points higher than the CPI in the quarter. Auto sales averaged a 6.3 million rate in the third quarter, versus a 6.1 million rate in the second quarter, while light truck and van sales averaged a 4.3 million pace in the third quarter versus 4.1 million in the second quarter. The University of Michigan Consumer Sentiment Index was 75.6 in September versus 80.2 in June and 83.0 last September.
 HOUSING -- Single-family housing starts in the third quarter averaged an annual rate of 1.03 million, up 5 percent from the second quarter rate and 18 percent above last year's third quarter. Multi- family starts averaged an annual rate of 170,000 in the quarter, up 7 percent from the second quarter and 2 percent higher than third quarter 1991. Existing home resales in September were 5.1 percent higher than September 1991. The median price of $103,200 was 2.9 percent higher than last September. New home sales in August were 9 percent higher than August 1991. The median price of $121,00 was 0.2 percent higher than last August.
 INDUSTRIAL PRODUCTION -- Third quarter industrial production rose at a 1.6 percent annual rate from the second quarter, but the gain occurred solely in July, followed by monthly declines in August and September. September production was only 0.2 percent above September 1991. Textile and tobacco quarterly production rose at 2.4 percent and 3.7 percent annual rates, respectively, while apparel and furniture production declined at 2.2 percent and 2.0 percent annual rates, respectively. Assembly of autos was 11 percent below the third quarter sales rate, while light truck and van assemblies trailed sales by 15 percent. Capacity utilization in September was 78.4 percent versus 78.6 percent in June and 79.9 percent last September.
 EMPLOYMENT/UNEMPLOYMENT -- There were 14,000 jobs lost during the third quarter, compared with 163,000 new jobs in the second quarter. Private sector jobs did worse, shedding 69,000 in the third quarter after adding 153,000 in the second quarter. To get just 1 percent job growth per year requires 270,000 new jobs per quarter. The unemployment rate fell to 7.5 percent in September from 7.8 percent due to fewer new entrants into the labor force. Last September it was 6.8 percent.
 INFLATION -- The Consumer Price Index in September was 3.0 percent higher than in September 1991. Over the past six months, the rate was only 2.4 percent. The service sector has been leading the CPI slowdown recently, rising at only a 2.8 percent annual rate in the third quarter, compared with a 4.7 percent rate in last year's third quarter. The price of tangible goods rose at only a 2.0 percent annual rate in the third quarter, but that was up from the 1.3 percent annual rate in third quarter 1991.
 TRADE DEFICIT -- The monthly average deficit in July/August for merchandise trade was $8.1 billion, compared with $6.1 billion in those two months last year. The August deficit of $9.0 billion was the worst since November 1990. August exports were only 3 percent higher than August 1991, only half the rate of increase from August 1990 to August 1991. Imports in August were 8.3 percent higher than August 1991.
 U.S. DOLLAR -- In September the dollar was 2.5 percent lower than in June and 5.0 percent below September 1991 when compared with a weighted average of major trading partners. Compared with the German mark, the dollar ended September at 1.41, down 7.4 percent from the end of June, and 15.4 percent lower than a year earlier. Compared with the Japanese yen, the dollar ended September at 119.8, down 4.6 percent from the end of June and off 9.8 percent compared with a year earlier.
 OIL PRICES -- The price of West Texas Crude was virtually unchanged at $21.70 per barrel at the end of September, compared to $21.60 at the end of June. The month end price last September was $22.25, resulting in a year-to-year price decline of 2.5 percent.
 INTEREST RATES -- The prime rate was 6.0 percent in September, compared with 6.5 percent in June and 8.0 percent last September. Ninety-day Treasury Bills averaged 2.97 percent in September, compared with 3.70 percent in June and 5.25 percent in September 1991 (discount rate basis). Thirty-year Treasury Bonds averaged 7.34 percent in September compared with 7.84 percent in June and 7.95 percent in September 1991. Mortgage rates (30-year fixed) averaged 7.92 percent in September, compared with 8.51 percent in June and 9.01 percent in September 1991. High-quality, long-term municipal bonds averaged 6.25 percent in September, compared with 6.49 percent in June and 6.8 percent in September 1991.
 First Union Corporation is the nation's 11th largest bank holding company, based on assets of $48.3 billion (excluding pending acquisitions) as of Sept. 30, 1992, and operates 898 banking offices in Florida, North Carolina, South Carolina and Georgia, one banking office in Nashville, Tenn., and 200 nonbanking offices in 36 states.
 -0- 10/27/92
 /CONTACT: Sandy Deem, First Union Corporation 704-374-2710 or home 704-567-1176/
 (FTU) CO: First Union Corporation ST: North Carolina IN: FIN SU: ECO


MM -- CH005 -- 5428 10/27/92 13:01 EST
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Date:Oct 27, 1992
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