Printer icon Print Page

The U.S. Economic Month at a Glance: February 4, 2013

Confidence Slumps Despite Solid Job Gains

The partial agreement by the U.S. Congress to address the fiscal cliff issue does not appear to have improved the mood of households, as consumer confidence plunged in January. Unfortunately, this is not the only piece of bad news that the economy has had to digest so far in this new year. Contrary to the consensus forecast, real GDP dropped in the final quarter of 2012. Still, the news was not entirely gloomy, as the recovery in the housing and labour markets continued to gather momentum. We expect the economy to expand at a modest pace of 2 to 2.5 per cent in 2013, with growth picking up speed in the second half of this year.

The deal reached by Congress and the White House on January 1 included higher marginal tax rates for those earning more than $450,000 a year, limits on tax deductions and credits for high-income earners, and the expiry of the payroll tax holiday. While these measures will raise around $600 billion in tax revenue over the next decade, the deal failed to address much-needed cuts in government spending and the need to raise the Treasury’s debt ceiling. These crucial issues must be solved by Congress over the next few weeks to ensure that the Treasury can continue to borrow money to fund deficits and debt and help set the economy on a sustainable long-term fiscal path. The uncertainty created by Congress’s inability to come up with viable solutions to these issues has resulted in a lack of hiring by businesses.

The ongoing uncertainty also appears to have unsettled consumers, given that confidence (as measured by The Conference Board, Inc.) dropped 8.1 points in January to 58.6, its lowest level in a year. The sharp decline likely reflects the negative impact on spending attributable to the hike in federal taxes that kicked in at the beginning of this year. The share of households who said they expected their incomes to decline over the next six months increased to its highest level since the 2008–09 recession.

We expect the economy to expand at a modest pace of 2 to 2.5 per cent in 2013, with growth picking up speed in the second half of this year.

The latest labour market report could help to put households in a better frame of mind. The economy created 157,000 new jobs in January. More importantly, revisions to the 2012 numbers indicated that there were an additional 647,000 positions created last year over and above the original estimates. In January, the construction industry rebounded and created close to 30,000 new jobs, thanks to mild weather, the ongoing recovery in housing markets, and reconstruction activity to repair the damage caused by Hurricane Sandy. Service industries generated 130,000 jobs last month, with the gains evenly spread across most sectors. Modest job increases will continue in the months ahead as businesses ramp up hiring. However, gains will be hampered by potential cuts in government employment due to looming reductions in spending scheduled to go into effect in March.

Real GDP surprisingly dropped by 0.14 per cent (annualized) in the final quarter of 2012. (An increase in the 1 to 2 per cent range had been anticipated by most forecasters.) The drop was a result mainly of a 22 per cent plunge in federal defence spending—a development that lowered real GDP by 1.3 percentage points in the quarter. The cutbacks indicate that the military is starting to prepare for rapidly approaching reductions in spending that Congress will likely approve in March. The impact of the weak state of the global economy was also evident, as growth in real exports declined in the fourth quarter. On the plus side, consumer spending posted a modest gain as did non-residential construction. Growth should return to positive territory in the first quarter of this year, as we do not expect defence spending to post another dramatic decline. However, it will take until the second half of this year before real GDP growth accelerates to the 3 per cent range.

U.S. Data Released to February 4, 2013

Monthly growth rates
(unless otherise indicated)
Latest month
One mo. ago
Two mos. ago
Three mos. ago
Four mos. ago
Five mos. ago
Six mos. ago
month avg.
Leading indicators
Consumer confidence (1) Jan. 58.6 66.7 71.5 73.1 68.4 61.3 65.4 66.4
Institute for Supply
Management (PMI) (1)
Jan. 53.1 50.2 49.9 51.7 51.6 50.7 50.5 51.1
Domestic demand
Personal consumption Dec. 0.20 0.37 –0.09 0.77 0.31 0.39 –0.02 0.28
Personal income Dec. 2.59 1.01 0.06 0.40 0.08 0.14 0.25 0.65
Real personal disposable income Dec. 2.74 1.05 0.05 0.40 0.08 0.14 0.23 0.67
Savings rate (1) Dec. 6.5 4.1 3.4 3.3 3.6 3.9 4.1 4.1
Retail sales Dec. 0.43 0.29 –0.24 1.24 1.14 0.77 –0.79 0.41
Motor vehicle sales (1)
(million units, annualized)
Jan. 14.9 14.5 14.1 14.4 14.0 14.5 14.0 14.3
Housing starts (1) (000s) Dec. 954 851 889 843 750 728 754 824
Industrial production Dec. 0.26 1.04 –0.35 0.21 –0.98 0.67 0.02 0.12
Capacity utilization rate (1) Dec. 78.8 78.7 78.0 78.4 78.3 79.2 78.8 78.6
CPI (Y/Y) Dec. 1.7 1.8 2.2 2.0 1.7 1.4 1.7 1.8
Core CPI (Y/Y) Dec. 1.9 1.9 2.0 2.0 1.9 2.1 2.2 2.0
Producer price index (Y/Y) Dec. 1.3 1.4 2.3 2.2 1.9 0.5 0.8 1.5
Labour market
Employment (000s) (2) Jan. 157 196 247 160 138 165 153 174
Unemployment rate (1) Jan. 7.9 7.8 7.8 7.9 7.8 8.1 8.2 7.9
Credit market
Federal funds rate (1) Dec. 0.16 0.16 0.16 0.14 0.13 0.16 0.16 0.15
90–day Treasury bill rate (1) Dec. 0.07 0.09 0.10 0.11 0.10 0.10 0.09 0.10
30–year Treasury note (1) Dec. 2.88 2.80 2.90 2.88 2.77 2.59 2.70 2.80
(1) Level
(2) Level change
n.a. = not applicable
Sources: The Conference Board of Canada; U.S. Department of Commerce, Bureau of Economic Analysis.

Labour Markets

Labour markets charts for February 2013

Income and Consumption

Income and consumption charts for February 2013


Prices charts for February 2013

Consumer Markets

Consumer markets charts for February 2013

Financial Markets

Financial market charts for February 2013

Business Markets

Business market charts for February 2013

Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.
Sources: The Conference Board of Canada; Moody's
Kip Beckman Kip Beckman
Principal Economist
Forecasting and Analysis

Next Release

January 5, 2018

Canadian Month at a Glance

U.S. Forecast Data

You can purchase U.S. Forecast data directly from the e-Data site. Or if you need this data on a regular basis, you can purchase a database subscription.

Upcoming Webinars


Dec 18Canadian Outlook with the Chief Economist: A Slowdown in Store
Dec 18 at 2:00 PM

Jan 18The Cost of Inequity and the Role of Early Child Education in Closing the Gap
Jan 18 at 2:00 PM

Economics Blog