US economic overview - October 2, 2006

General: The US economy has been weakening, however not to any drastic extent. The housing and automotive sectors are under pressure, but unemployment is still remarkably low. GDP: 2.6% in Q2 after its final review by the Federal Reserve. Consumer Prices: rose only 0.2% in August (food and energy costs are factored out) The core index was up 0.2% as well. However, compared to August 2005, it rose 2.8%. The Consumer Confidence Index of the Conference Board rose to 104.5 in September from 100.2 in August. Producer Prices: rose only 0.1% in August, largely because of falling automotive prices (Producer prices were + 5.3% in August 2005). Wages: + 3.9% in August (+ 2.7% a year ago). Industrial Production: slowed 0.1% in August, while capacity utilization fell 0.3% to 82.4%. The index is still strong, however this represents the largest drop since Hurricane Katrina in August, 2005. The manufacturing index of the Richmond branch of the Federal Reserve rose to nine in September from six in August. Unemployment: 4.7% August (4.9% year ago), total number of unemployed stood at 7,119,000 in August. Trade Balance: - $839.7 billion as of July for the latest 12 months. Current Account Balance: - $218.4 billion in Q2, - $838.1 billion for latest 12 months; by the end of Q2 and for the first time in 90 years, the US paid more interest to foreign creditors than it received from its investments abroad. The gap in Q2 was $2.5 billion. In effect, the US made a quarterly debt payment of $2.00 for every American household, in contrast to a net investment income of $31 a year ago. Housing: Overall, the numbers are still very weak. Housing Starts fell 6% in August; building permits fell 2.3% in the same month. New home sales increased 4.1% in August to a 1.050 million annual rate. Existing homes fell less than expected in August. Durable Goods Orders: decreased by 0.5% in August to a seasonally adjusted $209.75 billion.Wall Street had expected a 0.5% climb. Automobile Production: A total of 1,037,220 units were manufactured in August. This is 4.4% up on July. From January - August, 7,710,972 units were built, which is 3.5% less than during the same period last year. Steel Production: 8,410K mt in August; after industry-wide reports of high inventories, steel stocks have come under pressure and are on the slide slightly. Special Concern: The cost of the employer-sponsored health care plans continues its upward trend. A recent survey shows that so far in 2006, health care premiums have been climbing twice as fast as wages and inflation. They are almost double their cost in 2000.