A much feared double-dip recession may have been averted for now, but the US economy is decidedly losing momentum. The Federal Reserve wants to help but is pretty much out of ammunition. Short term interest rates are already close to zero percent. Chairman Bernanke has indicated that the Fed might be buying more Treasury bonds and mortgage-based securities. The revised number for Q2 shows growth slowing down to a pallid 1.3 percent, which for most experts is uncomfortably close to contraction. Housing starts increased slightly in July but had plunged dramatically the previous two months. Housing sales in July practically ground to a standstill and not all can be blamed on the expired new home tax credits. Unemployment remains high and consumer confidence low. The trade deficit in general keeps on rising and so is the deficit of the bilateral trade with China, growing by $4.0 billion in June.
GDP | +1.6% Q2, down from + 3.7% Q1 and also from the preliminary +2.4%. Compared to Q2 2009 GDP increased +3.2% |
Consumer Prices | +1.2% July (-2.1% a year ago) |
Consumer Confidence | 50.4 in July, down from 54.3 in June |
Industrial Production | +1.0% in July and +7.7% for the past 12 months |
Producer Prices | +4.2% July from a year ago; +0.2% compared to June |
Unemployment | 9.5% July |
Trade Deficit | -$50.0 billion in June; -$592.4 billion for the past 12 months |
Currency | 0.79 Euro to 1 US dollar as of August 25 (0.70 a year ago) |
Steel Production | 6.699 million metric tons in July or 32.9% more than last year and 21.3% less than 2008 |
Housing: Housing starts in July increased to a seasonally adjusted annual rate of 546,000 units. This is 1.7 percent higher than the revised June rate but 7.0 percent below last year. Housing permits fell 3.1 percent to a seasonally adjusted annual rate of 565,000 units. This is 3.7 percent below last year. Existing home sales in July dropped 27.2 percent from June to a seasonally adjusted annual rate of 3.83 million units. This is 25.5 percent below July 2009. The national median existing-home price for all types was $182,600 in July or 0.7 percent over last year. Total housing inventory at the end of July rose to 3.98 million units, representing a 12.5 month supply at the current sales rate.
Special Focus: Automotive Industry: 513,071 units of light vehicles were produced in July or 35.0 percent more than last year. In the first seven months of the year 4,338,685 units were produced or 62.8 percent more than last year. In July 1,050,101 units of light vehicles were sold. This is a 5.2 percent increase over last year. Year-to-date, 6,664,124 units were sold or 14.8 percent more than last year.
The American car industry has recovered remarkably fast. GM showed impressive net earnings of $1.3 billion for Q2 and announced that it will turn itself into a public company again. The Initial Public Offering (IPO) is scheduled to be executed before the end of the year and is expected to raise up to $16 billion. Not all problems have been solved, however. GM's pension fund still is underfunded by $27 billion. Ford is the strongest unit of the former Big Three. Its $2.6 billion net earnings in Q2 was the best quarterly performance in 12 years. Ford still has outstanding debts of $27 billion but is expected to have retired them all by the end of 2011. Early August, Standard and Poor's upgraded Ford's credit rating to B-plus from B-minus. Chrysler is lagging behind declaring a loss of $172 million for Q2. It has cut costs admirably but is still burdened with a clapped-out range of old car models. New models will be introduced late this year, and by 2012 a number of Fiat vehicles will support the Chrysler range. At least, these are the hopes of the Italian car maker who owns 20 percent of Chrysler. All three companies have global aspirations. Again, Ford is leading with its concept that its "global" cars can be built and sold in every important market. GM has established a vital presence in China where it still outperforms Ford. Its European arm, Opel/Vauxhall, still requires investments of up to $4.6 billion but is expected to turn profitable soon. Far from being in its death throes, the US car industry is set to rise from the ashes. Could it be that the controversial government intervention 15 months ago has really worked for the better?
Purchasing Managers' Index: according to the Institute for Supply Management the PMI fell to 55.2 in July down from 56.2 in June. It is a "growing" trend for the 12th consecutive month but at a slower pace.
Other data in that report are as follows:
New Orders: 53.5 (58.5 June) - trend is "growing" for the 13th straight month
Production: 57.0 (61.4) - "growing" for the 14th consecutive month
Inventories: 50.2 (45.8) - "growing" for the first time after four years of "contracting"
Customers' Inventories: 39.0 (39.0) - "too low"
Manufacturing Sector: "growing" for the 12th straight month
Overall Economy: "growing" for the 15th straight month