Politics Getting Involved
Issue: 10/12/07 Friday
The stock market did it’s normal thing today and was up 78 points. The bond market continues to creep up steadily, and this is the big mover over the past week. Today the 10 year bond ended at 4.69%. This is increasing the steepness of the interest rate spread. The steeper it gets, the more it’s pointing at inflation.
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The Bush administration reported Thursday that the federal budget deficit fell to $162.8 billion in the just-completed budget year, the lowest amount of red ink in five years. The administration credited the president’s tax cuts for helping generate record-breaking revenues but warned of an approaching “fiscal train wreck” unless Congress deals with unsustainable growth in Social Security, Medicare and Medicaid. President Bush, appearing with his economic team to trumpet the news, noted that the deficit turned out to be $81 billion lower than it was projected to be in February. (I hope you can read the political statement in this announcement.)
He said the deficit represents 1.2 percent of gross domestic product — less than the average of the last 40 years. ”By keeping taxes low we can grow the economy, and by working with Congress to set priorities we can be fiscally responsible and we can head toward balance,” Bush said after the meeting across the street from the White House. “And that’s exactly where we’re headed.”
The deficit for the 2007 budget year that ended on Sept. 30 was 34.4 percent lower than the $248.2 billion deficit recorded in 2006, reflecting faster growth in revenues than in government spending.
Administration officials said the government was on track to accomplish Bush’s goal of eliminating the deficit by 2012. But Democrats said the improvement in the deficit this year did not mask the fact that Bush’s economic policies transformed the budget surpluses of the
You can bet this will be ingrained in the upcoming election.
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Retail sales posted a stronger-than-expected gain in September, easing fears about a possible recession, while a big surge in gasoline costs pushed wholesale inflation higher. (Can anyone read the words “inflation” here???) The Commerce Department reported Friday that retail sales increased 0.6 percent last month, double what had been expected, as a big increase in auto sales helped offset weak demand for clothing. Meanwhile, the Labor Department said wholesale inflation jumped by 1.1 percent in September, the biggest increase in seven months, as gasoline costs shot up by 8.4 percent, the biggest gain since March. However, outside of energy and food, core inflation remained well contained, rising by just 0.1 percent.
With consumer spending, the economy’s main growth engine, continuing at a solid rate, some analysts said the chance of another interest-rate cut by the Federal Reserve when it next meets on Oct. 30-31 is growing less likely. So why did the market go up???
That caution is also affecting businesses. The Commerce Department reported that companies added to their inventory levels by a tiny 0.1 percent in August, much lower than expected, as businesses worried about increasing stockpiles until they get a better read on economic growth.
Here are Today’s closing details:
DJ30 – 14,093 (Up 78 points)
10 year US Treasury Bond – 4.69% (Up 0.03%)
Euro 1.4182
Gold closed at $754 per ounce. (Down $4)
Oil Closed at $83.69 (Up 0.61)
Gasoline is $2.09 (Up 0.02)
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