General: The sub-prime mortgage crisis combined with a stalling economy as well as a total loss of consumer confidence have finally overwhelmed America's financial system. Housing starts have fallen to a level not seen since 1961 and there is no relief in sight for the struggling car industry. The first two weeks of September saw the nationalization, failure or tax payer sponsored rescue of two giants in America's mortgage market, two huge investment banks and what was once the world's largest insurer. The combined assets of these five institutions exceeded $4.3 trillion. The US government has been sucked deep into the maelstrom of Wall Street and there is a nagging feeling that the worst is still to come. A number of "solid" banks still have huge amounts of bad mortgage assets. The US government has vowed to come up with a rescue plan for banks and for money market mutual funds as well that cannot cope with the cash demand for investors who want to get out of the market. This gigantic nationalization and bail out program is unprecedented in the world's largest capitalist country and it is too early to tell where it will all end. On the brighter side: out-of-control commodity prices are falling just as fast as some of the banks' stocks. A sub $100/barrel oil price will help to contain inflationary tendencies and so will the precipitous drop of steel prices.
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GDP: + 3.3% in Q2 over Q1. This preliminary figure clearly exceeds the advance number of 1.9%. For the latest twelve months through the end of Q2, the growth rate was 2.2%.
Consumer Prices: +5.4% at end of August for the past twelve months, -0.1% over July
Consumer Confidence: 56.9 in August - up from 51.9 July
Industrial Production: -1.1% in July
Producer Prices: +9.6% in August
Unemployment: 6.1% in August
Trade Deficit: $62.2bn in July (up from $58.8 bn in June) $844.6 bn for the past twelve months
Housing: Housing starts in August fell to a seasonally adjusted annual rate of 895,000 units. This is 6.2% below July and 33.1% below last year. Housing permits in August fell 8.9% to a seasonally adjusted annual rate of 854,000 units. This is 36.4% below August 2007. Existing home sales in July increased to a seasonally adjusted annual rate of 5.00 million units. This is 3.1% higher than June but 13.2% less than July 2007. At the current sales rate the inventory of unsold homes translates into 11.2 months, slightly up from an 11.1 month supply in June. The median home price in July was $212,400, down 7.1% from a year ago.
Automotive Industry: 690,758 units were produced in August or 31.7% less than last year. In the first eight months of the year 6,152,773 units were produced or 16.4% less than last year. Sales of light vehicles dropped 15.5% in August compared to last year. In the first eight months of the year 9,797,814 light vehicles were sold or 11.2% less than last year. The top selling vehicle in August was GM's Silverado, a prodigiously gas guzzling pick-up truck. Considering the deep discounts and zero percent financing, it is doubtful that GM made any money on this bestseller.
Steel Production: 8.5 million metric tons in July or 2.7% more than last year. In the first seven months of 2008, 59.4 million mt were produced or 4.8% ahead of last year.
Currency: US$1 = Euro 0.70 as of September 17 (0.72 a year ago)
Purchasing Managers' Index: According to the Institute for Supply Management the PMI fell to 49.9 in August from 50.0 in July. Any number under 50 signifies signals a contraction. Other data in that report were as follows:
New Orders: 48.3 (45.0 in July) - trend is "contracting"
Production: 52.1 (52.9) - "growing"
Inventories: 49.3 (45.0) - "contracting"
Customers' Inventories: 54.5 (47.0) - "too high"
Backlog Orders: 43.5 (43.0) - "contracting"
Overall Economy: "growing slower" (82nd consecutive month of growth)