General: There is still concern that the US economy will not fare so well in Q4 and in 2008. That is why the Federal Reserve is expected to announce its straight consecutive "insurance" interest rate cut when it convenes for its December meeting next week. Still, the third quarter showed an unexpectedly high growth rate, engineered largely by the undernourished US Dollar which facilitates strong export sales. Housing, consumer spending (automotive sales in particular) and rising energy prices all point to a slowdown that might have started already. At the same time, some of the following numbers also point to a resilient US economy that will avoid a dreaded recession.
GDP: +4.9% revised annual rate in Q3. This revision by an astonishing full percent was caused by very strong export activities.
Consumer Prices: +3.5% in October over last year; the core inflation rate (taking volatile food and energy prices out of the equation) rose a very tame 2.2% annually.
Consumer Confidence Index: 87.3 in November, down from a revised 95.2 in October. It is the fourth monthly decrease in a row.
Industrial Production: +0.1% in September over August and +1.9% compared to last year. The Purchasing Managers Index fell to 50.8 in November, slightly down from 50.9 in October. The direction is still classified as "growing," but any number below 50 indicates an economic contraction. The inventory index for November was 46.9, down from 47.2 in October, and the direction is "contracting." Non-farm productivity rose 6.3% in November, the highest increase in four years.
Unemployment: 4.7% in September. Automated Data Processing, a payroll processing company, reported an increase of 189,000 payrolls in November. Experts interpreted this as a strong indication that the labor market remains very strong.
Trade Balance: -$805 billion as of September for the past twelve months.
Housing: Housing starts in October rose by 3.0% over September. The seasonally adjusted annual rate of 1,229,000 units is still 16.4% below October 2006. Building permits in October came in at a seasonally adjusted rate of 1,178,000. This number is 6.6% below the September rate and 24.5% less than October 2006. Existing home sales fell 1.2% in October, the eighth consecutive monthly decline. The median home price was $207,800 in October, down from $210,400 a year earlier.
Automotive Industry: 998,108 units were produced in October, or 1.6% less than last year. In the first ten months of the year, a total of 9,176,862 units were produced, or 4.7% less than last year. Especially hard hit were medium and heavy trucks with a drop of 39.6% from last year. With car sales steadily declining, Ford and General Motors have announced lower production numbers for next year. It is expected that production of light vehicles could drop by three percent from 14.9 million units in 2007 to 14.5 million units in 2008.
Steel Production: 8.51 million metric tons (e) were produced in October, or 5.1% more than last year. In the first ten months of the year, 81.6 million metric tons were produced, or 3.0% less than last year.