General: As President Obama takes over the reins in Washington today, he is facing an economic crisis of staggering proportions. Long term reforms of the tax system, fiscal policies, the Social Security system (public pensions) and Medicare (health care for retirees) have to be initiated as soon as possible. A fiscal surplus of 1% of the GDP eight years ago has turned into a deficit of more than 2% GDP.
At the same time, the stalled economy needs to be restarted. Consumer spending in December plunged a very steep 2.7% and no immediate reversal of this trend is in sight. GDP figures for Q4 are expected to run an abysmal 5%. The most optimistic outlook for this year calls for a one percent growth but most forecasts point to a contraction of about 1%. The incoming administration is pushing a $825bn stimulus package through Congress and this might well be the best hope for a reversal of economic fortunes late in 2009. The expected programs for infrastructure projects are in there but, tellingly, the single largest spending item is for health care payments to individual states.
GDP: -0.5% in Q3 over Q2 as per revised figures, +0.7% for the past twelve months
Consumer Prices: +0.1% at end of December for the past twelve months. This is the smallest calendar year increase since 1954.
Consumer Confidence: down to 38.0 in December, matching October's all-time low. November's index was 44.9.
Industrial Production: -2.0% in December from the preceding month. For the year, the decline was -7.8% compared to 2007.
Producer Prices: -1.9% in December compared to November; -0.9% for 2008 compared to 2007
Unemployment: 7.2% in December. A total of 524,000 jobs were lost in December, affecting all major industry sectors. In the last four months of 2008 1.9 million jobs were lost in the US.
Trade Deficit: $40.4bn in November (down from $56.7bn in October); $833.1bn for the first eleven months of 2008. In this period the trade deficit with China increased to $246.5bn or 3.8% over the previous year.
Housing: Housing starts in November fell to a seasonally adjusted annual rate of 625,000 units. This is 18.9% below October and 47.0% below the previous year. Housing permits in November fell 15.6% to a seasonally adjusted annual rate of 616,000 units. This is 48.1% below November 2007. Existing home sales in November declined to a seasonally adjusted annual rate of 4.49 million units. This is 8.6% below the revised October figure and 10.6% below November 2007. At the current sales rate the inventory of unsold homes translates into 11.2 months, up from 10.3 months in October. In November the national median existing-home price for all types was $181,300, down 13.2% from a year ago.
Automotive Industry: 490,924 units were produced in December or 27.8% less than last year. In 2008 a total of 8,681,439 units were produced or 19.3% less than 2007. In December total sales of light vehicles declined 35.5% compared to December 2007. For the year 13,244,018 vehicles were sold or 18.0% less than 2007. General Motors' sales went down 31.0% in December (-22.6% for the year), Ford's 31.6% (-20.1%), Chrysler's 53.1%. (-30.0%) and Toyota's 36.7% (-15.4%). Almost all car manufacturers selling in the US had negative sales growth in 2008. Subaru had a very slight growth of 0.8%. The bestselling light vehicle in 2008 remains the Ford pick-up truck F Series. A total of 515,513 units were sold or 25.4% less than 2007. Chevrolet Malibu had the strongest sales growth in 2008 (+51.5% from 2007).
Steel Production: 5.1 million metric tons in November or 38.4% less than last year. In the first eleven months of 2008 88.7 million mt were produced or 2.2% less than last year.
Purchasing Managers' Index: according to the Institute for Supply Management, the PMI fell to 32.4 in December from 36.8 in November. It is the fifth consecutive month indicating contraction and the pace is faster.
Other data in that report were as follows:
New Orders: 22.7 (27.9 in November) - trend is "contracting" for 13 consecutive months
Production: 25.5 (31.5) - "contracting"
Inventories: 38.8 (39.1) - "contracting"
Customers' Inventories: 57.0 (55.0) - "too high"
Backlog Orders: 23.0 (27.0) - "contracting"
Manufacturing Sector: "contracting faster" for the fifth consecutive month
Overall Economy: "contracting" for the third consecutive month
Currency: US$1 = Euro 0.79 as of December 3 (0.68 a year ago)
Special Focus - International Trade: trade among nations is declining sharply and nowhere is it more pronounced than in the US. In the four months from July to November 2008 combined exports and imports by the US fell 18.0% from $398bn to $326bn and two thirds of this decline was on the import side. This helps explain the worldwide crisis because so many countries depend on the US market for their growth. Japan's exports dropped 27% in November compared to a year ago and Germany's fell 11.8%, its worst drop this decade. Chinese exports fell 2.2% in December following a 2.2% decline in November. Imports into China contracted even more sharply, dropping 21.3% in December after a fall of 17.9% in November. Experts all over the world will be analyzing these numbers and coming up with explanations but in the short run, there is only one way out of this trade hole: being the world's largest economy, the United States have to be led out of their current economic crisis by their newly-inaugurated young president and start consuming again.