US economic sentiment dips in the week - ACC

08 August 2008 19:57  [Source: ICIS news]

HOUSTON (ICIS news)--US economic sentiment eroded slightly in the week that ended on Friday, with mixed reports leading the American Chemistry Council (ACC) to maintain a cautionary banner for the economy.

“Our running tab of positive indicators slipped by one to 10 out of 20 this week,” the ACC said in its weekly economic commentary.

The less-than-enthusiastic outlook for the economy reflected a view held by some analysts that rising consumer prices and trouble in the automotive sector might continue to rein in signs of growth in manufacturing.

“The factory orders report showed gains in capital spending, and unfilled orders set a new record, suggesting some strength in the manufacturing pipeline,” the ACC said.

Other positive signs were the gains in personal income and consumer spending, and even though inventories were higher than expected, sales grew at over twice the rate of growth in wholesale stocks.

“Inflation, however, eroded much of the headline gains in these reports,” the ACC said.

On Tuesday’s meeting of Federal Reserve (Fed) officials, the US central bank announced that it would leave its key federal funds rate unchanged, faced with the conundrum of either pouring money into the economy to spur growth or tightening fiscal policy to keep consumer prices from getting out of hand.

The Fed had given glimmers of hope in July that risks were diminishing for the financial markets, but a soft labour market continued to weigh down the economy this week with more US workers joining the ranks of the unemployed.

At the same time, the ACC observed that Germany’s new orders slipped 2.9%, suggesting that the risk of a recession in Europe’s largest economy could be rising. Even so, the Bank of England and the European Central Bank kept interest rates unchanged, following the decision by their US counterpart.

Consumer debt accelerated in May in the US even as economic stimulus checks issued by the government began turning up in the mail. The increase in debt may also reflect consumers turning to debt to finance their increasingly expensive lifestyles amid a weak labour market, the ACC said.

On a positive note, June chemical shipments were reported in the week with strong gains for the industry in general.

“Chemical inventories fell and the inventories-to-shipments ratio for chemicals slipped to the lowest level in two years,” the ACC said. “Chemical wholesalers were also running lean as inventories dipped in June, reflecting the cautious environment and perhaps suggesting room for future growth.”

Economic reports to be released in the week ahead include international trade, import prices, business inventories, consumer prices, industrial production and capacity utilisation.

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By: John Waggoner
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