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Economy in Brief

OECD Leaders Rose Again
by Tom Moeller March 8, 2004

The Index of Leading Indicators for the Major Seven OECD Countries began 2004 signaling economic growth. A 0.3% (6.2% y/y) rise in January was the tenth consecutive monthly increase.

Six-month growth in the leading index dipped slightly to a still very-strong 7.9%.

The leading index for the European Union rose just 0.2% in January but early figures for February already indicate a firmer 0.5% gain that left the six-month growth rate at a firm 6.3%.

Leaders in Germany nudged 0.2% higher in January and the six-month growth rate stayed firm at 9.0%. In France the leading index added momentum as a 0.5% gain kept the six-month growth rate at 8.0%.

Leaders in Italy again dropped. The 0.3% decline in January followed a 0.6% fall in December which was revised shallower from the initial report but it was the third decline in a row. The six-month growth in the leaders fell to 1.1%, down from recent highs near 5%.

Leaders in Japan rose 0.2% leaving the six-month growth rate near 3%.

In Canada the leading index jumped another 1.1%. Six-month growth of 7.7%% was improved from -4.0% just last April. In the U.K. the leaders rose 0.6% and that pulled six-month growth to 5.9%, the strongest since mid-2002. Leading indicators in the United States edged up 0.3% following several months of huge gain so the six-month growth rate was at 11.5%.

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OECD Main Economic Indicators Jan Dec Y/Y 2003 2002 2001
OECD Major Seven - Leading Index (Trend Restored) 120.9 120.6 6.2% 1.5% 2.2% -3.1%
  European Union 120.9 120.7 5.1% 2.0% 3.1% -1.9%
  Japan 101.8 101.6 2.7% 1.2% -0.6% -4.5%
  United States 133.4 133.0 9.0% 1.9% 2.7% -3.5%
U.S. Households' Net Worth Up Despite Credit Surge
by Tom Moeller March 8, 2004

The Flow of Funds Accounts reported by the US Federal Reserve indicated that the net worth of the household sector jumped to over $44 trillion last year, up 11.7% versus 2002. The gain followed three successive years of decline.

As a percentage of disposable personal income net worth rose to 533.8% versus 501.1% in 2002. These percentages were down sharply from the peak of 617.7% set in 1999.

Strong 10.6% growth in credit market debt last year nearly kept pace with the rise in asset values.

Home mortgage liabilities surged 12.5% in 2003. That equaled the prior year's growth and was the fastest since 1986. It partially reflected the refinancing boom which held growth in consumer credit at only 5.2%, half the recent peak 11.4% growth rate in 2000. Bank loans ballooned by 76.5%, but these represent only a small fraction of financial liabilities.

Household sector assets grew 11.5% in 2003. The surging stock market pumped up holdings of corporate equities by 24.1% and holdings of mutual funds by 29.6%. In addition, the value of tangible assets jumped as real estate holding grew 10.0%, the strongest yearly gain since 1985.

US Flow of Funds 2003 3Q03 2002 2001
Net Worth: Household Sector (Billion) $44,411.2 $42,250.6 $39,763.2 $41,281.3
  % of Disposable Income 533.8 508.6 501.1 548.4
Credit Market Debt Outstanding (y/y % Chg.)
  US Non-financial Sector 8.3% 8.5% 7.1% 6.3%
    Federal Government 10.9% 10.6% 7.6% -0.2%
    Household 10.6% 11.1% 10.0% 9.1%
    Corporate Business 3.4% 3.1% 0.8% 4.9%
Total Assets: Household Sector 11.5% 9.9% -1.6% -0.1%
  Tangible 9.1% 7.5% 8.7% 8.0%
    Real Estate 10.0% 8.0% 9.4% 8.7%
  Financial 12.9% 11.4% -6.9% -3.8%
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