Bartlett Quarterly Review
April - June, 2009
Quarterly Economic Perspective
- Investors (and even the Federal Reserve Board) at times seemed uncertain whether to worry more about inflation or deflation. One of the few positive side effects of the sinking economy seemed to be inflation measures that remained relatively benign--particularly compared with a year ago, when skyrocketing oil and food prices helped push the annual inflation rate to 4.2%. As a result, the Fed recently indicated that it doesn't foresee raising interest rates for "an extended period."
- The unemployment rate rose a full percentage point over the quarter, bringing the number of jobs lost since the recession's December 2007 start to 6.5 million. Including marginally attached and involuntary part-time workers, the unemployment rate reached 16.5% in June. Weekly unemployment figures at quarter's end indicated that job losses could be slowing, though actual gains seemed likely to remain elusive.
- Sales of existing homes began to turn up in the second quarter, though they were still down by 3.6% from May of last year. However, foreclosures and short sales were a major factor in pushing those numbers higher, as were median home prices that were 16.8% lower than last year. First-time homebuyers lured by a federal tax credit represented a substantial piece of the market. However, by the end of the quarter, problems with conservative home appraisals and rising mortgage rates loomed as potential threats to a housing recovery.
- The difference between 2-year and 10-year Treasury interest rates increased from 1.9% to 2.42% by the end of the quarter. However, it was unclear whether that steeper yield curve represented a harbinger of economic recovery, as it has in the past, or investor concern about increased U.S. Treasury debt.
- The International Monetary Fund forecast that global recovery would be slower than expected, and that the world economy would shrink by 1.3% this year rather than the 0.5% growth it forecast in January. Next year's 1.9% growth rate forecast was two-thirds of the IMF's January projection for 2010.
- Americans continued to save more. By May, savings represented 6.9% of personal income--quite a change from the 0.0% of early 2008.
Economic Data/Currencies
The Markets
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