US housing slump weakens economy

04 May 2007 17:52  [Source: ICIS news]

WASHINGTON (ICIS news)--Manufacturing sector economists warned on Friday that the US housing decline has begun to affect other parts of the economy and is chilling consumer demand, the driving force of American commerce.

 

David Huether, chief economist at the National Association of Manufacturers (NAM), cited data issued earlier on Friday by the US Labor Department indicating that US unemployment edged up to 4.5% in April, including a loss of 19,000 jobs in the manufacturing sector.

 

The weakening employment picture, said Huether, shows “the resonating effects of a downturn in housing as well as a slowdown in demand for motor vehicles and industrial equipment”.

 

“Slumps in specific manufacturing sectors and the housing slump are resonating into various industries,” Huether said.

 

Along with the loss of 19,000 jobs in manufacturing - with half of those in the automotive and machinery segments - there was a loss of 11,000 jobs in construction last month, Huether noted.

 

He also pointed to the loss of 26,000 jobs in the nation’s retail sales sector in April as a particularly ominous omen for the broad economy.

 

“You cannot overlook the drop in retail trade,” Huether said.  “This indicates that the ongoing downturn in housing is beginning to negatively affect consumer demand.”

 

Consumer spending accounts for two-thirds of US economic activity.

 

“This is a clear signal that the strong pace of consumer spending posted in the first quarter will likely not continue into the second,” Huether said.

 

New home construction, automotive production and machinery manufacturing are key downstream consuming sectors for chemicals and chemical-based products.

 

Huether said that with inflationary pressures beginning to ease and with the housing downturn clearly infecting broader segments of the economy, there are increased odds for an interest rate cut later this year by the Federal Reserve Board, the US central bank, as a means of stimulating economic growth.

 

The 14,000 member firms of NAM include many US chemical and plastics manufacturers.

By: Joe Kamalick
+1 713 525 2653

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