US economy not as critical as many feared - ACC

02 May 2008 20:07  [Source: ICIS news]

WASHINGTON (ICIS news)--The US economy remains troubled and the country’s consumers - the driving force of commerce - are still uneasy, but there are growing indications that the downturn may have bottomed, economists said on Friday.

 

“Economic storm clouds continued to gather this week, but several reports suggest we’re in a rain shower rather than the edge of a hurricane,” said Emily Sanchez, economic statistics manager at the American Chemistry Council (ACC).

 

In the council’s weekly economic outlook, Sanchez noted that the US workforce saw fewer job losses in April than had been anticipated. 

 

The Labor Department said that 20,000 jobs were lost in April compared with March. However, many analysts had been expecting job losses of 75,000 or even 100,000, and a one-month reduction of 20,000 positions in a total workforce of nearly 138m is regarded as essentially even with the previous month’s total.

 

Although April marked the fourth straight month of job losses, “the pace of decline may be moderating”, Sanchez said.

 

Among other signs of bottoming, if not necessarily a recovery, US factory orders rose 1.4% in March following a nearly 1% decline in February. 

 

While the Institute of Supply Management’s closely watched purchasing managers index (PMI) was down in April at 48.6%, it was even with the March PMI, suggesting that business in the broad manufacturing sector may have stabilised.

 

In addition, US consumer spending rose 0.4% in March, followed by a 0.3% increase in personal income in April, suggesting that households may be willing to spend even more.

 

Sanchez noted too that US first quarter gross domestic production grew at 0.6% - very modest growth to be sure but better than the negative growth that many analysts had been expecting. That modest economic expansion in the first quarter “has quelled some discussion about a recession,” Sanchez said.

 

Even so, consumer confidence remains low, weighed down by high gasoline and food prices, falling home values and diminished job prospects, she pointed out.

 

However, the first income tax rebates are beginning to flow out to US consumers - the first wave in a $168bn (€109bn) federal stimulus package approved earlier this year by Congress and President George Bush. 

 

Those rebates should improve consumer moods in May, Sanchez said, although “that boost to consumer spending is likely to prove short-lived” unless the housing market begins to show some recovery and record high fuel prices moderate.

 

($1 = €.65)

By: Joe Kamalick
+1 713 525 2653

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