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- Panda Express restaurant coming to Cape's Siemers Drive (2/14/17)2
- Settlement reached in accidental shooting case at Kelly High (2/15/17)10
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- Cape officer shoots man inside a home (2/16/17)7
- Southeast reports three confirmed cases of mumps; more cases possible (2/14/17)1
- Right to Work and Taxes (2/10/17)
- Former Cape cop indicted on possessing child porn (2/17/17)
- Man dies after being shot by officer; said to have come at cop with knife (2/16/17)29
Stocks don't flinch despite economic data
WASHINGTON -- Bad news was no news to the American economy Tuesday.
The government released a triple dose of discouraging data: The economy shrank over the summer even more than previously believed, and consumers reduced their spending by the largest amount in 28 years. During the same period, home prices fell to levels not seen since early 2004.
"Consumers and businesses were like deer in the headlights ... frozen," said economist Ken Mayland, president of ClearView Economics.
Most of the numbers were updates of previously released figures, and the revisions indicated that economic conditions were growing worse.
But Wall Street barely flinched and actually recorded its third straight day of gains, something that had not happened since the financial meltdown began almost 2 1/2 months ago. The Dow Jones industrials closed up 36 points, following a two-day rally in which the major indexes soared more than 11 percent.
The updated reading on the economy's performance from the Commerce Department showed the gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter.
That was weaker than the 0.3 percent rate of decline first estimated a month ago, and it marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when terrorists attacked the U.S. and the nation was suffering through its last recession.
GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country's economic fitness.
The new GDP figure matched economists' expectations, but nevertheless underscored just how quickly the economy deteriorated as the housing and credit crisis intensified. The economy logged growth of 2.8 percent in the second quarter.
Meanwhile, the Federal Deposit Insurance Corp. said the list of banks it considers to be in trouble shot up nearly 50 percent to 171 during the third quarter -- the highest level since late 1995.
The FDIC also said commercial banks and savings institutions suffered a 94 percent drop in third-quarter profits to $1.7 billion. Except for the fourth quarter of 2007, it was the lowest profit since the fourth quarter of 1990.
The FDIC does not reveal the institutions on its "troubled" list, but on average, about 13 percent of them end up failing.
Nine banks failed in the third quarter, reducing the FDIC's deposit insurance fund to $34.6 billion from $45.2 billion in the second quarter. Both figures are below the target minimum level set by Congress.
Twenty-two banks have failed so far this year compared with three for all of 2007, and more failures are expected.
Elsewhere, the New York-based Conference Board said its Consumer Confidence Index for November rose to 44.9, from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967, and Americans' views on the economy remain the gloomiest in decades as they grapple with massive layoffs, slumping home prices and dwindling retirement funds.
To revive the economy, President-elect Barack Obama says a top priority will be working with Congress to enact a massive stimulus package that he says will generate millions of new jobs.
The new, lower third-quarter GDP reading mostly reflected an even sharper cutback in spending by consumers and slower sales growth of U.S. exports.
American consumers -- the lifeblood of the economy -- slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.
Consumers have grown nervous about spending because of job losses, declining investment portfolios and sinking home values.
Underscoring the strain, the report showed that Americans' disposable income fell at an annual rate of 9.2 percent in the third quarter, the largest quarterly drop on records dating back to 1947. The government's initial estimate had showed a record 8.7 percent decline in disposable income for the quarter.
Sales of U.S. exports grew at a 3.4 percent pace in the third quarter. That was lower than a 5.9 percent growth rate initially estimated and marked a sharp slowdown from the second quarter's blistering 12.3 percent growth rate. The deceleration reflects less demand from overseas buyers coping with their own economic problems.
Home builders slashed spending at a 17.6 percent pace, marking the 11th straight quarterly cut and fresh evidence of the depth of the housing slump.
Also Tuesday, a report on home prices and downbeat earnings results from homebuilder D.R. Horton showed further deterioration in the housing market. The Standard & Poor's/Case-Shiller U.S. National Home Price Index said that home prices tumbled a record 16.6 percent during the third quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.
Fort Worth, Tex.-based D.R. Horton Inc. reported a nearly $800 million loss in its fiscal fourth quarter on slower home sales and more than $1 billion in charges amid a battered housing market.
To help revive the economy, the Federal Reserve is expected to lower interest rates when its meets on Dec. 16, its last session of the year. Last month, the Fed dropped its key rate to 1 percent, a level seen only once before in the last half-century.
So far, though, the Fed's rate reductions -- a $700 billion financial bailout package and a flurry of other radical actions -- have been unable to break though a dangerous credit clog, restore stability to financial markets and help the sinking economy.
The nation's unemployment rate is at 6.5 percent, a 14-year high, and is expected to climb. Employers have cut payrolls every month so far this year. The total number of unemployed in October was just over 10 million, the most in 25 years.
Given all the bad news, consumers are likely to make still more cuts, probably ensuring that the economy continues to shrink for the remainder of 2008 and into 2009.