U.S. economic recap – week of December 6, 2005

U.S. economic recap – week of December 6, 2005

In terms of good news, the previous week was like Christmas morning for the nation's economy with a whole stocking of good stuff to crow about. Despite all the Cassandra cries that soaring oil prices, record trade deficits, and Hurricane Katrina were going to stymie the economy's growth and possibly send the country careening back into a recession, the numbers posted show that, heading into 2006, the US economy is on sure footing. Starting off was a Census Bureau report that new durable goods orders rose 3.4 percent in October. Durable goods are considered to be large ticket items meant to last three or more years. The report surprised economists who had predicted a mere 1.5 percent rise and soundly trumped September's read which was revised to a two percent decline. The highlight though was a stellar gross domestic product report (GDP) which stated that it grew 4.3 percent in the third quarter beating all predictions by a full percentage point. The reading was the fastest pace of growth since the first quarter 2004 and far exceeded the 3.3 percent rate of growth from the second quarter 2005. More amazingly was that the growth came against intimidating odds. A mixture of three major hurricanes, accelerating fuel costs, a record trade deficit, and rising interest rates would have seemingly deducted from the GDP in a pronounced fashion but not only did it not, the report also showed that inflation is largely contained and perhaps even receding slowly. New steel production numbers The latest steel production numbers released by the American Iron and Steel Institute reveal that domestic and local production is holding steady. Nationally, domestic mills produced 2.03 million net tons for the week ended December 3. That is a scant 0.1 percent decline from the same week in 2004. Domestic capacity utilization was 87.9 percent last week versus 91.8 percent for the previous week. Regionally, the Northwest Indiana/Chicago area reported production was 493'000 nt, a rise of 36'000 nt from the previous week. The Pittsburgh/Youngstown, Ohio district reported it produced 219'000 nt which was a small 2'000 nt decline from the previous week. Production in the Southern District, the largest steel producing region totaled 589'000 nt. and the trade gap saga goes on and on ... 62 members of Congress sent a letter to President Bush this week urging him to put tighter restrictions on the amount of Chinese steel that enters the country. They pointed out gross discrepancies between domestic and Chinese production such as how between 2002 and 2004 production of steel pipe and tube fell more than 25 percent in the US, while 20 percent of the sector's work force was laid off. Conversely, the Chinese market share increased from 0.4 percent to 10 percent during that same period. The letter is just the latest in a series of AD movements in Washington DC as of late. The Department of Commerce recently announced it would initiate a formal dumping investigation over carbon and alloy wire rods from Turkey, China, and Germany and wire rod imports from locations in Mexico, Trinidad, Canada, and Ukraine. The investigations will proceed with the normal preliminary formalities to determine if any injury was caused to US businesses. Happy New Year? Into the new year, there will continue to be a few hot-button issues the economy will have to keep a wary eye on such as creeping oil prices, the above-mentioned trade gap problem, and the faltering US auto industry which continues to see its share of problem including a recent announcement by Ford that it will cut up to 30'000 jobs and close 10 plants in the next five years. All-in-all, the most recent wellspring of good news would appear to indicate that everything is a go and the economy is fundamentally strong.