Marketplace Report: Mixed U.S. Ecomonic Indicators

The U.S. economy grew at a slightly faster pace than earlier predicted and consumer spending was up slightly. However, housing sales are down and foreclosures are up. Steve Tripoli of Marketplace talks with Alex Chadwick about the overall economic picture as the summer ends and fall begins.

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ALEX CHADWICK, host:

Back now with DAY TO DAY. Summer fading - warm weather, too. One constant through economic seasons the last few years has been strong and steady economic growth. But there's news today that some economists are worried about a financial chill in the air. Steve Tripoli from MARKETPLACE joins us. Steve, what is this latest news?

STEVE TRIPOLI reporting:

Well, Alex, in a nutshell it seems to be that the downside risks for the economy are increasing from a number of places. Don't take my word for it. Let's turn to the Federal Reserve Board's just-released minutes from their August 8 meeting. Here is the quote: the slowdown in the housing market, the effects of higher energy prices on household purchasing power and the waning impact of household wealth effects on spending are expecting to hold economic growth to below potential over the next six quarters.

CHADWICK: Those are the notes from the meeting. How about a little translation?

TRIPOLI: Well, these are clearer than they used to be in the Greenspan era, but the translation is we can't use no-longer rising home prices to prop up our spending anymore - we consumers. That's one thing. And along with other factors, the Fed is saying this means the economy is in for at least sub-par growth for the next six quarters, or through the end of next year.

CHADWICK: Huh. Other figures out this morning.

TRIPOLI: Right. Revised economic figures for the spring show that growth was slowing sharply from the winter quarter's growth. And there's other news, too. The Census Bureau says incomes actually rose slightly, but only because people are working more or making it off their investments. It's not because paychecks are getting bigger. And the newly released consumer confidence numbers for August are the lowest for the year as well, and that's no surprise, given what we're hearing about incomes and housing and energy prices and household debt.

CHADWICK: And, you know, we're hearing this word recession these days, too.

TRIPOLI: Yeah. You know, it's in the air, just like the autumn chill that's coming. And no one knows for sure, of course. But the risk is clearly seen as higher. And it's a tough one to call, because there are conflicting signs, plus there's one unknowable out there. And the conflicting signs are that corporate balance sheets are healthy, even while household budgets are strained. And also that folks with highly skilled jobs are doing great while workers without college degrees are suffering.

CHADWICK: What is the unknowable?

TRIPOLI: Well, that unknowable thing is psychology. You know, two of the nation's leading housing experts wrote today that psychology seems to have turned abruptly in that market. They say that means, quote, there's a significant risk of a very bad period. The lesson there is that economic psychology elsewhere can also change suddenly, and only later do we see the accumulation of little things that triggered it.

So let's add to the forecast for a chill with a little forecast for wind, Alex. Later on MARKETPLACE, we'll find out why Portland, Oregon plans to start powering its city hall entirely with wind energy.

CHADWICK: Steve Tripoli of Public Radio's show MARKETPLACE from American Public Media,

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