In Brief: April 29, 2013

The Senate and the House of Representatives managed to adopt a “continuing resolution” - a stop-gap measure that extends the government’s funding capacity through the end of the current fiscal year ending in September - to avoid the shutdown of public services before a March 27 deadline. The next major step will be taken on May 18 when Congress votes on raising the debt ceiling. This vote is unlikely to be accompanied by significant budget measures. With midterm elections approaching, the Democrats oppose any further spending cuts that are not accompanied by tax increases, which the Republicans categorically refuse.

GDP growth for Q4 2012 was revised upwards again to 0.4% (annualised rate), thanks notably to a stronger surge in investment than in previous estimates. Sluggish growth in the year-end period is due to a considerable contraction in federal spending, notably on military equipment and massive destocking, which cut 1.5 points from growth. Foreign trade made a positive contribution of 0.3 points. Consumption remained solid (1.8%), buoyed by very dynamic investment, not only in capital goods (11.8%) but also in non-residential construction (16.7%) and real estate (17.5%). After increasing at a mild pace, profits accelerated strongly in Q4, up 9.5% (annualised rate) vs. an average of 1.4% in the previous three quarters.

The real estate sector continued to turn around in recent months. Housing starts increased 0.8% in February, and the data for December and January were revised upwards. The stock of houses on the market is still very low. Prices have continued to pick up and now affect all regions. The S&P/Case Schiller index for the 20 largest metropolitan areas rose 8.1% in January after increasing 6.8% and 5.4% in the previous months.

Manufacturing production rebounded 0.8% in February after contracting 0.3% in January, building on a 1.3% increase in December. Production was only 1% short of its peak in late 2007.

BY Philippe D'ARVISENET

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