Economic Data

ECONOMIC DATA - VANGUARD

This week's economic data continued to signal improvements across the economy—from manufacturing to services to consumer borrowing. The markets, however, were more focused on developments in a number of hot spots in the Middle East and the ongoing tensions between Russia and the West.

For the week ended August 8, 2014, the S&P 500 Index was up 0.3% to 1,931 (for a year-to-date total return—including price change plus dividends—of about 6%). The yield on the 10-year U.S. Treasury note fell 8 basis points to 2.44%, for a year-to-date decrease of 60 basis points).

Services sector strengthens further

The ISM Non-Manufacturing Index rose to 58.7 in July, the highest level since 2005. (A reading above 50 indicates that the sector is expanding.) Among the equally weighted components of the index, the strongest gains were seen in business activity and new orders, but increases were seen in employment and supplier deliveries as well.

In total, 16 non-manufacturing industries reported growth, thanks to a stabilization or improvement in market conditions, with utilities alone reporting a contraction in activity.

Across-the-board improvements in factory orders

New orders for manufactured goods rose 1.1% in June, a stronger than expected rebound from the previous month's –0.6% reading. Orders for durable goods—manufactured products expected to last for three years or more—rose 1.7%, helped by the often volatile transportation segment, which saw a surge in orders for commercial and defense aircraft and parts.

Other segments made healthy gains as well, including machinery, computers, and electronic products, which bodes well for business investment. Orders for nondurable goods rose a more modest 0.6%. Compared with a year earlier, overall factory orders were up 2.5%.

Trade deficit narrows

The U.S. trade deficit (exports minus imports) shrank 7% in June to $41.5 billion compared with a revised figure of $44.7 billion for May. Exports inched higher on increased sales of commercial aircraft, automobiles, and pharmaceuticals.

However, more of the drop in the deficit was due to imports. Record-high food imports were offset by declines of more than $1 billion in both automobile and cell phone imports. With the recent energy boom in the United States, petroleum imports also fell, hitting their lowest level in more than three years.

"The shrinking trade deficit in June is supportive of stronger growth in the second quarter," said Vanguard economic analyst Vytas Maciulis. "It means that the next estimate of second-quarter gross domestic product may be revised up from the initial reading. However, while exports are likely to remain strong, the strength of domestic demand is the wildcard in the trade balance outlook."

Consumers continued borrowing for big-ticket items

Consumer credit, excluding mortgages, climbed $17.3 billion in June to a total of $3.2 trillion, according to data released by the Federal Reserve. That represents an increase of 6.5% over the previous year, a little off the 7.4% gain reported for May.

The lion's share of the rise was due to consumers taking on more nonrevolving credit, a category that includes automobiles, appliances, and student loans. Revolving credit, which includes credit card debt, expanded by $942 million, suggesting consumers are still reluctant to significantly increase their discretionary spending.

Productivity swings higher

The productivity of U.S. workers climbed by 2.5% on an annualized basis in the second quarter, according to a preliminary estimate from the Labor Department. That increase follows on the heels of a downwardly revised figure of –4.5% in the first quarter, the sharpest drop in productivity in more than 30 years.

Unit labor costs were unusually volatile as well, rising by only 0.6% in the second quarter compared with a revised first-quarter estimate of 11.8%.

Year over year, productivity was up 1.2% and unit labor costs rose 1.9%.


ENGLISH LANGUAGE

You think English is easy?
1. The bandage was wound around the wound.
2. The farm was used to produce produce.
3. The dump was so full that it had to refuse more refuse.
4. We must polish the Polish furniture..
5. He could lead if he would get the lead out.
6. The soldier decided to desert his dessert in the desert..
7. Since there is no time like the present, he thought it was time to present the present.
8. A bass was painted on the head of the bass drum.
9. When shot at, the dove dove into the bushes.
10. I did not object to the object.
11. The insurance was invalid for the invalid.
12. There was a row among the oarsmen about how to row.
13. They were too close to the door to close it.
14. The buck does funny things when the does are present.
15. A seamstress and a sewer fell down into a sewer line.
16. To help with planting, the farmer taught his sow to sow.
17. The wind was too strong to wind the sail.
18. Upon seeing the tear in the painting I shed a tear..
19. I had to subject the subject to a series of tests.
20. How can I intimate this to my most intimate friend?

Let's face it - English is a crazy language. There is no egg in eggplant, nor ham in hamburger; neither apple nor pine in pineapple. English muffins weren't invented in England nor French fries in France . Sweetmeats are candies while sweetbreads, which aren't sweet, are meat. We take English for granted. But if we explore its paradoxes, we find that quicksand can work slowly, boxing rings are square and a guinea pig is neither from Guinea nor is it a pig.

And why is it that writers write but fingers don't fing, grocers don't groce and hammers don't ham? If the plural of tooth is teeth, why isn't the plural of booth, beeth? One goose, 2 geese. So one moose, 2 meese? One index, 2 indices? Doesn't it seem crazy that you can make amends but not one amend? If you have a bunch of odds and ends and get rid of all but one of them, what do you call it?

If teachers taught, why didn't preachers praught? If a vegetarian eats vegetables, what does a humanitarian eat? Sometimes I think all the English speakers should be committed to an asylum for the verbally insane. In what language do people recite at a play and play at a recital? Ship by truck and send cargo by ship? Have noses that run and feet that smell?

How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites? You have to marvel at the unique lunacy of a language in which your house can burn up as it burns down, in which you fill in a form by filling it out and in which, an alarm goes off by going on.

English was invented by people, not computers, and it reflects the creativity of the human race, which, of course, is not a race at all. That is why, when the stars are out, they are visible, but when the lights are out, they are invisible.