U.S. consumer confidence in May 2008 plunged to its lowest level in almost 28 years, an indication American adults are very concerned about the near-term health of the U.S. economy as it slides into its first recession in six years.

The Reuters/University of Michigan Surveys of Consumers said its index of confidence fell to 59.5 in May 2008, Reuters reported Friday.

It was the index's lowest reading since June 1980 -- a period also characterized by high oil/gasoline prices and a sluggish U.S. economy.

Economists surveyed by Bloomberg News had predicted that the April 2008 index would fall to 62.5. The index stood at 63.2 in April 2008 and 69.5 in March 2008.

'An awful number'

Economist Peter Dawson told BloggingStocks Friday May's consumer sentiment reading reflects conditions on the ground. "It's an awful number, but it reflects conditions on Main Street, as the typical person experiences them," Dawson said. "We've got falling home prices, record-high gas prices, rising food prices, property taxes increasing in many areas, and no job growth. It's not a happy time for Americans right now and the University of Michigan sentiment numbers reflect that."

Europe's economy grew more than forecast in Q1 2008, the European Union's statistics office announced Thursday, as Germany's economy continues to bolster the continent's results.

Euro-zone GDP increased 0.7% in Q4 2008, 0.2 percentage points above the Bloomberg News survey consensus estimate.

Germany served as the primary economic engine, recording 1.5% in the quarter – its fastest growth in 12 years, Bloomberg News reported Thursday. Meanwhile, France registered 0.6% GDP growth. Together, Germany and France account for about 50% of the euro-zone's GDP.

On a year-over-year basis, euro-zone GDP increased 2.2% in the 15-nation group. Growth in the 27-nation European Union increased 2.4%.

However, despite the upside GDP surprise from both the euro-zone and Germany, key economic officials downplayed the results. European Central Bank President Jean-Claude Trichet told Reuters the news, while positive, simply confirmed what he had expected – that Q1 2008 would be good and the ensuing period slower.

A hint by Trichet?

Economist David H. Wang told BloggingStocks Thursday there could be a glimmer of hope for those who favor an interest rate reduction by the ECB. It was unusual for the ECB's Trichet to reference slower growth after the release of a GDP report, he said. Trichet, an inflation hawk, regularly speaks of Europe's industrial capacity and price pressures in the context of GDP, Wang said.

"I don't know if this was a hint, or perhaps a mini-hint, regarding monetary policy," Wang said. The currency market shrugged-off Trichet's comments, with both the euro and British pound remaining at essentially the same levels they were earlier in the day versus the dollar, at $1.5440 and $1.9445, respectively.

U.S. industrial production plunged 0.7% in April 2008, the U.S. Federal Reserve announced Thursday, as a spectrum-wide contraction took place in the nation's factories.

Economists surveyed by Bloomberg News had expected industrial production to decline 0.3% in April 2008.

Further, factory output plummeted 0.8% - - the largest drop in factory output since September 2005, a month that reflected the abnormal, irregular factory output reduction caused by Hurricane Katrina in the late summer of 2005. Excluding autos and auto parts, factory output declined 0.4%.

Also, capacity utilization increase declined to 79.7% in April 2008 from 80.4% in March 2008. Economists surveyed by Bloomberg News had expected capacity utilization to total 80.1% in April 2008. Capacity utilization totaled 80.3% in February 2008.

Industrial output evaluation

Economist David H. Wang said the April 2008 industrial production statistic reflects a familiar theme in the current U.S. economic slowdown: a contracting factory sector.

Initial U.S. jobless claims increased 6,000 to 371,000 for the week ended May 10 -- slightly above the consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week remained at 367,000.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 370,000.

Also, the 4-week moving average decreased 1,000 to 367,000. Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

Economist Peter Dawson said this week's job report "shows that labor conditions continued to soften. We're seeing little to no evidence that small or large companies have picked-up their hiring pace."

U.S. business inventories rose a scant 0.1% in March 2008 (pdf), the U.S. Commerce Department announced Tuesday -- the smallest inventory rise in a year.

Economists surveyed by Bloomberg News had expected March 2008 inventories to rise 0.5%.

Also, the March 2008 inventory-to-sales ratio declined to 1.27. Meanwhile, the February 2008 business inventory statistic was revised higher to an increase of 0.2%.

Inventories: Two-sided stat

Economist David H. Wang told BloggingStocks Tuesday the March 2008 inventory data can be interpreted two ways, with positive and negative dimensions.

On the one hand, businesses are keeping inventories at a bare minimum -- a fact that typically is bearish, short-term, for the U.S. economy, Wang said. "It can reflect a lack of business confidence in the economy's ability to grow in the short run," he said.

On the other hand, those same lean inventories mean that any sustained increase in demand will require businesses to ramp-up production quickly -- a phenomenon that generally limits the length of a recession / economic downturn, Wang said.

Another positive dimension to lean inventories: companies will not have to trim as many employees if the U.S. economy slows further. "In all, this month's inventory report contained a lukewarm stat," Wang said. "The best aspect of it is, businesses are prepared for a further downturn in the economy, should it occur."

When one travels in economists' circles, one tends to tap into the issues, controversies and policy ideas 'dismal science' practitioners are debating.

And one issue economists have rattled around concerns the speed of fiscal policy stimulus, or more accurately, the lack thereof. In the digital age, the internet has propelled a host of speed-enhancing changes, and it occurred to this group of economists that U.S. Government policy is decidedly behind the curve in this area.

Here's why: economist David H. Wang noted that the U.S., in an attempt to jump-start its economy stalled by the nation's worst housing slump in more than 15 years, has implemented a host of monetary policy changes to provide monetary stimulus quicker. The U.S. Federal Reserve cut key, short-term interests multiple times during a 10-week span (and later implemented additional rate cuts), and devised two, new, Fed-administered institutions to address the credit crisis, provide liquidity, and ensure the orderly operation of financial markets.

Initial jobless claims decreased 18,000 to 365,000 for the week ended May 3, below the consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised up 3,000 to 383,000.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 370,000.

Also, the 4-week moving average increased 2,500 to 367,000. Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

Economist Peter Dawson said this week's job report "shows that soft labor conditions are an enduring feature of the sluggish U.S. economy. Hiring in both small and large companies has to turn up before we can say this economy is gaining some traction."

The largest increases in initial claims for the week ending April 26 were in: Massachusetts, +5,591, New York, +4,648, Kentucky, +3,776, New Jersey, +3,521, and Michigan, +3,238. The largest decreases were in: Texas, -3,373, Rhode Island, -1,835, California, -1,689, Pennsylvania, -1,597, and, Connecticut, -1,423.

Meanwhile, the number of continuing claims decreased by 10,000 to 3.020 million from a revised 3.030 million for the week ended April 26, the latest period for which figures were available.

Economic Analysis: Another poor weekly jobless report. Weekly claims were above the consensus estimate, and the 4-week moving average remains at an elevated level. Further, the continuing claims total remains over 3 million -- an indication of a soft job market. That statistic, combined with a elevated 4-week average, indicates that labor market conditions are not improving -- a decided negative for the U.S. economy.

Sales of existing homes in fell 1.0% in March 2008, the National Association of Realtors announced Wednesday, as the prospect of continued home price declines discouraged potential buyers.

The NAR's existing home sales index declined to 83.0 in March 2008. The index totaled a revised 83.8 in February 2008, and stood at 103.9 in March 2007.

Economists surveyed by Bloomberg News had expected the March 2008 existing home sales index to drop to 83.8%.

Regional conditions vary

Conditions varied by region. In the Midwest, the index fell 10.4% in March 2008 to 74.1; in the West, the index fell 1.4% to 91.2, and in the South, it fell 0.1% to 84.9. In the Northeast, the index rose 12.5% to 80.8%.

U.S. worker productivity increased at a 2.2% annual pace in Q1 2008, above the consensus estimate, as businesses cut both jobs and worker hours to contain costs, the U.S. Labor Department announced Wednesday.

Economists surveyed by Bloomberg News had expected productivity to increase 1.7% in Q1 2008. Productivity is now up 3.2% on a year-over-year basis.

Productivity increased 1.8% in 2007 and 1% in 2006. Productivity measures output per hour worked. Economist say rising productivity usually leads to increases in income, as businesses can increase salaries/wages paid without increasing their per unit costs.

Meanwhile, unit Q1 2008 labor costs, a statistic adjusted for increases in efficiency, increased to 2.2%, compared to a 2.8% increase in Q4 2007. Labor costs have risen just 0.2% on a year-over-year basis, the smallest increase since 2004. Labor costs increased 3.1% in 2007.

Economists surveyed by Bloomberg News had expected Q1 2008 labor costs to increase 2.2%.

Economist Peter Dawson liked the Q1 2008 productivity report, for the most part. "There is some concern about employers curtailing employee hours, but in general, the 2.2% increase in productivity is a healthy stat. U.S. workers are becoming more productive. It'll help businesses contain costs amid all other cost increases. It's a generally good report."

Economic Analysis: As Dawson noted, in general, a favorable Q1 2008 productivity report. The nation's workforce continues to become more-efficient, which is a good sign, given increasing business costs in other areas -- raw materials, commodities, energy and transportation costs, etc. Early in 2008, companies are containing employee costs, and increased productivity is contributing to this goal.

American motorists, already stung by an 80% increase in gasoline prices in the past year, sense that $5 per gallon is ahead, and they may be (regrettably) right.

A CNN/Opinion Research Corp. poll found that 94% of respondents expect to pay $4 per gallon this year, and 78% expect to pay as much as $5, CNNMoney reported Tuesday.

The national average currently is $3.62 per gallon as tracked by the Lundberg Survey, Bloomberg News reported. Many higher-cost areas of the United States -- including New York, San Francisco, Los Angeles, and Boston -- are already experiencing prices over $4 per gallon.

Further, traders and analysts say seasonal, structural, and geopolitical factors are likely to push gasoline considerably higher in the weeks ahead -- with gasoline's upward arc lasting months, if the price of oil continues to rise.

Primary culprit: Rising oil prices

The biggest factor in gasoline's rise is the price of oil, which Tuesday topped $122 per barrel in NYMEX trading for the first time in its history. Oil is up more than 100% since 2006. In November 2001, oil traded at about $17 per barrel. Moreover, because the crude component accounts for more than 60% of the price of a gallon of gasoline, refiners have passed that added cost onto consumers.

In the private sector, as in public policy, sometimes blinders prevent one from seeing the entire landscape, and a good example of that may be the current status of the U.S. housing sector.

Banks, mortgage lenders, mortgage-backed securities holders and public officials have tended to focus on the plight on subprime and comparable mortgages, and rightfully so, as these loans constitute the largest pool of non-performing assets secured by homes.

U.S. housing: A psychological shift

Still, as economist Glen Langan points out, the unusual focus on subprime has caused the nation to overlook a broader trend regarding the housing sector -- namely, the psychology of the housing market.

"What we're not grasping yet, as a nation, is that even with programs to help people stay in their homes and avoid foreclosure, the public's stance toward the housing market has changed," Langan said. "The psychology of the housing market has changed. And this has little to do with at-risk mortgages. This a psychological shift among middle-income and upper-middle-income homeowners and taxpayers. It looks like they'll be sitting on the fence for a long period of time, and this will delay the housing recovery, hurting the economy in the process."

Those familiar with former U.S. Federal Reserve Chairman Alan Greenspan's observations about macroeconomics, in general, and the U.S. economy, in specific, will remember his comments regarding "irrational exuberance" -- imprudent buying of stocks; and "the conundrum" -- the tendency for long-term interest rates to remain low, despite Fed increases in short-term interest rates.

Enter a third: the "pale recession."

Greenspan Monday said the U.S. economy has slipped into an "awfully pale recession" and may continue to experience doldrums for the rest of 2008, Bloomberg News reported Monday.

Further, regarding the economy, Greenspan added that "we are clearly receding" and said it was too soon to declare an end to the credit crisis created by the collapse of the subprime mortgage market and housing sector correction, Bloomberg News reported. Greenspan declined to comment on monetary policy.

The services industry in the United States unexpectedly expanded in April 2008, the Institute for Supply Management announced Monday.

The ISM's non-manufacturing index rose to 52 in April 2008 from 49.6 in March 2008. The services index had declined in the three months before April 2008.

Economists surveyed by Bloomberg News had expected the April 2008 survey to fall to 49.3. Readings below 50 indicate a contraction.

Conflicting economic data

Economist David H. Wang said Monday the services sector report adds another "counter conventional wisdom" data point to the current U.S. economic landscape. "When you add the services number with last week's rise in April [2008] factory orders, you have a complex economic picture right now," Wang said. "On the one hand, some economists will point to the housing slump, which is a legitimate head wind. On the other hand, others will point to services and factory indicators that say the economy is not as weak as many had thought it would be. It's a conflicted, muddled economic picture right now."

U.S. factory orders increased a surprising 1.4% in March 2008, the U.S. Commerce Department announced Friday, on rising international demand for U.S. goods. It was the fastest growth for factory orders since December 2007.

Economists surveyed by Bloomberg News had expected March 2008 factory orders to increase by 0.3%. Factory orders fell a revised 0.9% in February 2008, slightly better than the previously announced decline of 1.3%.

Also factory orders, excluding the volatile transportation equipment component, increased 2.2% in March 2008.

Economists follow the factory orders statistic because it provides one of the most comprehensive surveys of advance orders for durable goods -- how busy factories are likely to be in the period ahead. Factory orders also are a major value-added component of the U.S. economy.

Orders for durable goods increased 0.1% in March 2008, revised up from the 0.3% decline estimated a week ago. Orders for nondurable goods rose 2.6%, unfilled orders increased 1.1%, shipments climbed 1.1%, and inventories for manufactured goods rose 1.1%.

U.S. economy's saving grace: exports

Economist Peter Dawson told BloggingStocks Friday the economy "is making a concerted effort to complicate economists lives" by recording stronger-than-expected economic data, of late.

The U.S. economy shed just 20,000 jobs in April 2008, the U.S. Labor Department announced Friday, as the world's largest economy continues to come to grips with the deepest housing slump in more than a decade.

Economists surveyed by Bloomberg News had expected the U.S. economy to shed 75,000 jobs in April 2008. The U.S. lost a revised 81,000 in March 2008, up from the earlier 80,000 estimate.

Meanwhile, the unemployment rate fell 0.1 percentage point to 5.0% in April 2008, from 5.1% in March.

The number of unemployed adults increased by 434,000 to 7.8 million in March 2008. Since March 2007, the number of unemployed adults has increased by 1.1 million, and the unemployment rate has risen by 0.7 percentage points.

By sector, factory payrolls decreased 46,000. Builders cut 61,000 jobs, retail eliminated 12,400, and financial firms cut 5,000 jobs. On the positive side, service industries added 90,000 workers.