U.S. economic recap – week of November 7, 2005

U.S. economic recap – week of November 7, 2005

The US economy got a much-needed boost last week when it was reported that consumer sentiment, which measures consumer confidence based on their spending, had risen considerably in early November. The economic indicator is perhaps one of the most important, as consumer spending accounts for nearly two-thirds of US economic growth. For the most part, US consumers have been pretty consistent in their buying habits keeping the economy afloat if not thriving. That has not been the case in recent months, however, as soaring fuel prices have put a crimp in consumer spending habits. Now with gas prices having fallen 25 percent since their Labor Day holiday high, cash-strapped Americans are finding it easier to purchase those items they had been putting off. The American Automobile Association recently reported that the price of a gallon of unleaded gasoline has fallen $0.41 since the end of September. Diesel prices also have started to slowly decline trimming two cents in the past month. Steel production falls The domestic steel industry continues its seesaw ride with the latest production figures showing that for the week ended November 5, domestic production declined about 0.3 percent from the previous week. According the American Iron and Steel Institute, domestic production totaled about 1.96 million net tons, a year-on-year drop from 2.12 mnt for the same period in 2004. Year-to-date steel production totaled 87.5 mnt while a year ago it was 93.3 mnt, a decline of just over six percent. Regionally, the Youngstown, Ohio/Pittsburgh area reported it produced 217’000 nt for the week ended November 5, a decline of 2’000 nt from the prior week. In the Northwest Indiana/Chicago region, production increased 16’000 nt to 469’000 nt from the week before. Overall, US mills are operating at 84.8 percent operational capacity compared to 85.1 percent for the prior week. A tale of woeful earnings In other steel news, most of the results are in for third quarter earnings and for many companies the news was not very good. Wheeling-Pittsburgh Corp., Metals USA, Oregon Steel Mills, Olympic Steel Inc., and US Steel Corp., to name a few, all reported lower-than-expected sales and/or declines in earnings. Most blamed softening steel prices as well as the lingering effects of Hurricane Katrina and have reassured investors and shareholders that the fourth quarter will be considerably better. No worries from Wall Street The poor showings from the nation’s steel industry did little, however, to dent Wall Street’s momentum. Investors are cautiously hoping that the markets can maintain their rally, which is going into its third week for the Dow Jones Industrial Average and S&P 500, and the fourth week for the NASDAQ. Steel notwithstanding, most analysts single out excellent earning reports and the recently declining oil prices for the market’s new found health. Meanwhile, the US dollar has staked itself to a two-year high against the euro and Japanese yen. Currently the dollar is hovering at around $1.17 against the euro and has recently fallen as low as $1.16, a two year low.