Some green shoots sprouting in US economy, but their survival is questionable

Monday, 27 July 2009 10:58:00 (GMT+3)   |  
       

General: Experts and consumers alike are feverishly looking for the “green shoots” signaling the much anticipated economic turnaround. There are some promising signs. Housing starts and automobile construction in June were up for the second consecutive month. But the actual numbers are still well below the pre-recession level and according to some experts it could be 2015 until those heady levels are reached again. Indications are that productivity in the US grew at a rapid 5% in Q2. In itself this is good news but it also points to a larger problem that will be hard to resolve. Unemployment is climbing and will likely be into the double digits before long. Moreover, the big American shopping machine has fallen apart. It is estimated that $13 trillion of household wealth has been destroyed since the beginning of the crisis. Americans now save 5% of their net income as opposed to a zero or even negative savings rate in the last two years. The government’s stimulus package has softened the blow a bit but it has increased the budget deficit by 12 percentage points as well. So, some green shoots are undeniably around. But their survival in these still very harsh economic conditions is questionable.

GDP: -5.5% in Q1 2009 from Q4 (revised down from -5.7%). Compared to Q1 2008 the fall was -2.5%.

Consumer Prices: -1.4% in June (+4.2% a year ago)

Consumer Confidence: 49.3 in June, down from 54.8 in May

Industrial Production: -13.6% in June from a year ago; -1.2% compared to April. In Q2 the decline was -11.6%, a more moderate contraction than the -19.1% in Q1

Producer Prices: -4.6% in June from a year ago; +1.8% compared to May

Unemployment:
9.5% in June

Trade Deficit: -$25.96 billion in May, -$674.4 billion for the past twelve months

Currency:  0.70 Euro to US$1 as of July 22 (0.64 a year ago) 

Housing: Housing starts in June rose to a seasonally adjusted annual rate of 582,000 units. This is 3.6% above May’s revised number but -46.0% below last year. Housing permits increased 5.9% to a seasonally adjusted annual rate of 563,000 units. This is 27.7% below June 2008. Existing home sales in June rose 3.6% from May to a seasonally adjusted annual rate of 4.89 million units. This is -0.2% from June 2008. The national median existing-home price for all types was $181,800, -15.4% from a year ago. Total housing inventory at the end of June fell to 3.82 million units, representing a 9.4 month supply at the current sales rate.

Automotive Industry: 387,074 units were produced in June or -52.5% from last year (up 7.7% over May!). In the first six months of the year 2,329,248 units were produced or -52.4% less than last year. In June 859,847 units of light vehicles were sold. This is -27.7% under June 2008 and off -7.1% from May. In the first six months of 2009 the decline of total sales was -35.1% compared to last year.

Steel Production: 4.4 million metric tons in June or -46.9% from last year. In the first six months of the year 24.5 million metric tons were produced or -51.8% from last year.

Purchasing Managers’ Index: According to the Institute for Supply Management the PMI rose to 44.8 in June from May’s 42.8. It remains for the 17th month in a row in a contracting mode but it is getting closer to the 50 mark that would signal a turnaround.

Other data in that report were as follows:

New Orders: 49.2 (51.1 in May) – trend is “contracting” reversing the “growing” trend from May
Production: 52.5 (46.0) – “growing”
Inventories: 30.8 (32.9) – “contracting”
Customers’ Inventories: 43.5 (46.0) – “too low”
Manufacturing Sector: “contracting” for 17 consecutive months but at a slower rate
Overall Economy: “growing” for the second month in a row


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