Businesses should take optimistic economic indicators with a grain of salt, NY Fed says
While Congress finally came to an agreement on the much debated payroll tax, officials are cautioning businesses that the economy isn't at full speed yet.
For example, Federal Reserve Bank of New York President William Dudley recently downplayed the increased investment in inventories. Despite expansion reaching a 3 percent annual pace in the last three months of 2011, Dudley put a damper on the positive news.
"Historically, a quarter in which inventory investment makes a significant growth contribution is typically followed by a quarter in which that growth contribution is modest or even negative," Dudley said, according to Bloomberg BusinessWeek. "That appears to be what is shaping up for the first quarter of this year."
Dudley additionally attributed an improved economy to "unusually mild weather," which he claimed can boost economic activity and lead to an increased level of construction, the source notes.
However, Eric Green, chief economist at TD Securities, told Bloomberg that Dudley's comments reflect the "dovish" position of the leaders of the Federal Open Market Committee.
For example, Federal Reserve Bank of New York President William Dudley recently downplayed the increased investment in inventories. Despite expansion reaching a 3 percent annual pace in the last three months of 2011, Dudley put a damper on the positive news.
"Historically, a quarter in which inventory investment makes a significant growth contribution is typically followed by a quarter in which that growth contribution is modest or even negative," Dudley said, according to Bloomberg BusinessWeek. "That appears to be what is shaping up for the first quarter of this year."
Dudley additionally attributed an improved economy to "unusually mild weather," which he claimed can boost economic activity and lead to an increased level of construction, the source notes.
However, Eric Green, chief economist at TD Securities, told Bloomberg that Dudley's comments reflect the "dovish" position of the leaders of the Federal Open Market Committee.
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