General: the US economy is still reeling under the housing and credit crises. The stock markets took a severe beating in the last two weeks. The Purchasing Managers Index was reduced to 53.8 in July, down from 56.0 in June, though the Consumer Confidence Index rose to 112.6 in July up from 105.3 in June. After a paltry 0.6% growth in Q1, the first reading of Q2 points to a more satisfactory growth rate.
GDP: + 3.4% in Q2
Industrial Production: + 1.4% in June. Non-farming related labor productivity grew 1.8% and labor cost 2.1% in Q2
Consumer Prices: + 2.7% in June for the latest twelve months
Trade Balance: - $827.1 billion in May for the latest twelve months
Currency: so far this year, the US dollar has weakened considerably against a number of currencies. Experts point to the undiminishing trade deficit and to the weakening economy facing an uncertain development in view of a possible credit crunch as the subprime lending crisis continues unabated. The Brazilian Real has appreciated the most against the US currency (+12% as of August 7), closely followed by the Turkish Lira (+ 11%) and the Canadian dollar (+12%). The Euro appreciated 4%, whereas the Indonesian rupiah (-3%) and the Argentine peso (- 3%) were two currencies that have lost value against the US dollar so far this year. The weaker dollar has made US exports more competitive, but imports – and the US imports a lot of goods and commodities – will get more expensive and could adversely affect inflation figures.
Steel Industry: 8.3 million (e) mt were produced in July, or 3.3% less than last year. In the first seven months of 2007 8.58 million mt were produced, or 4.2% less than during the same period last year.
Special Focus:
Automotive Industry: Even though there has been some encouraging news from the US automotive industry recently, the overall situation remains grim. July has been one of the worst sales months in almost nine years, and the combined market share for the “Big Three” (GM, Ford and Chrysler) fell to under 50% for the first time in history. On the brighter side, GM showed a Q2 profit of $891 million and Ford managed to come in with a $750 million profit. Ford's profit was realized because of its distress sale of Austin Martin and improved sales in Latin America and Asia. Ford's US unit lost $279 million in Q2. Both companies still have quite some ground to cover to make up for last year's losses. GM lost $ 3.8 billion in 2006 and Ford an eye watering $12.7 billion. Daimler finally culminated the sale of its Chrysler division for $7.4 billion to Cerberus Capital Management. Showing progress in catching up with the Japanese transplants, GM was credited in an industry report with four of the 10 most efficient assembly plants in North America. The US car industry has to face the daunting specter of the legacy costs, especially the health care plans. Management of GM, Ford and Chrysler are working with union officials on the VEBA (Voluntary Employee Benefits Association) model. Still, GM and Ford have a combined $60 billion of available liquidity and would be hard put to fully fund even a reduced health care benefit plan. The industry is hoping that, at one time, the government might step in with comprehensive health care benefits. In July, a total of 650,842 units were produced, or 16.5% more than in July 2006. In the first seven months of 2007, 6,356,920 units were produced, or 4.9% less than during the same period last year.