Worst economy since the "great depression".
Posted on 05/03/2006 9:20:29 AM PDT by Mikey_1962
NEW YORK (Reuters) - Activity in both the vast U.S. services sector and at factories accelerated more than expected, according to data on Wednesday that pointed to fresh economic vigor and the possibility of more interest rate hikes.
Most economists are expecting economic growth to slow from a torrid first-quarter pace of 4.8 percent, yet the latest figures showed no hints of slowing and appeared likely to keep the Federal Reserve leaning toward further hikes in interest rates. Federal Reserve Chairman Ben Bernanke said last week a pause in the rate-hike cycle was possible.
The Institute for Supply Management's services index rose to 63.0 in April from 60.5 in March as new orders jumped, confounding Wall Street estimates for a slowdown to 59.2.
In addition, the government reported new factory orders rose a stronger-than-expected 4.2 percent in March, beating estimates for a 3.5 percent gain, as demand for transportation equipment, computers and electronics proved robust.
Treasury debt prices fell and the dollar firmed against the euro after the data.
"It does suggest that the overall economy is improving and for the market it is part of the recent theme -- all the numbers are coming in on the stronger side of expectations," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.
Financial markets have fully priced in another rate rise at the Fed's policy meeting next week, and on Wednesday raised the chances of a follow-up move in June.
"They want to keep their options open for late June but most likely they may end up leaning toward another rate hike as the data continues to come in strong," said Brown.
Worries about higher interest rates pressured stocks -- with the Dow Jones industrial average (^DJI - News) down 42.67 points, or 0.37 percent, at 11,373.78 -- and Treasury debt prices. The benchmark 10-year Treasury note (US10YT=RR) was down 11/32 in price to yield 5.16 percent.
STOCKS AND SALES RISING
The services sector accounts for about 80 percent of U.S. economic activity, including businesses like restaurants, hotels, hair salons, banks and airlines.
Businesses cited rising energy costs, with the prices-paid index rising to a six-month high, but overall activity was not dampened as new orders surged to 64.6 from 59.5.
"Most of the comments our members made this month were very positive, very bullish," said Ralph Kauffman, chair of the non-manufacturing ISM business survey committee. "Retailers indicated that the prices they are paying are going up. I don't think that their sales are having a problem. Their profit margins are probably being squeezed somewhat."
Kaufmann also noted inventories rose in April and businesses were deliberating stockpiling goods in expectations of increased business ahead.
Separate government data showed March's gain in factory orders was caused in part to a 14.7 percent jump in new orders for transportation equipment, while civilian aircraft and parts orders soared 71.3 percent.
Orders for nondefense capital goods climbed 12.9 percent, the strongest increase since November. Stripped of aircraft, orders for nondefense capital goods -- a proxy for business spending -- advanced a still-strong 3.9 percent.
Orders for durable goods, expensive items meant to last three years or longer, advanced an even stronger 6.5 percent in March, revised up from a 6.1 percent gain reported last week.
SOLID JOBS
A new employment indicator released on Wednesday for the first time suggested a solid gain in April jobs, ahead of the official payrolls report due out on Friday.
ADP Employer Services, a private firm, estimated the 178,000 private jobs were added in April, based on a survey sample of 14 million workers. It also estimated 22,000 government jobs were created in April, which would bring the month's total payrolls increase to 200,000, in line with current Wall Street consensus.
The Labor Department will release its monthly employment report on Friday.
Financial markets are hoping the April jobs report will help clarify the outlook for official interest rates. Fed Chairman Bernanke last week said a pause in tightening was possible, but rates rises could resume even after a break in tightening.
Damn those tax cuts for the wealthy!!!
Bush's fault!!!
But gas prices went up so Bush s**ks.
Hmmm, I wonder why I havent heard this news on the OLD LIBERAL MEDIA networks. Hmmm....
That's it I'm going to find a tall building today and jump.
Goodbye cruel world.
Oh wait, I'm not a Democrat.
Whew
"Women and minorities hardest hit".
You're gonna jump OVER it?
Wow - that's impressive!
Just watch, rising interest rates are going to be the new Dem mantra.
Yeah, the corporate economy is healthy, it's the personal economy that needs a boost.
No one will know.
There will not be a peep about this on the 'news' channels, except, maybe, fox.
Yes it is.
For my next trick, I will hold my breath until the Dow tops 12,000.
You know what I am talking about! Crrrrack!
Worst economy since the "great depression".
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