THE US: Recovery, What Recovery?



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By John Richardson

CORE consumer prices in the US declined for the first time in December since 1982, according to the latest American Chemistry Council (ACC) Weekl;y Chemistry and Economic Trends report.

And the ACC’s latest monthly set of forecasts – compiled through averaging the predictions of “a number of economic professionals who have a track record for accuracy and expert knowledge of manufacturing” – point to a weak recovery.

“Average unemployment expectations slipped 0.1 percentage points to 9.2%, reflecting the expectations of a jobless recovery,” continued the report.

The 2010 estimate for light vehicle sales remained unchanged this month compared with January at 11.7m. This would be a big improvement on last year’s actual sales of 10.4m, but a big distance from the 2005 total of 17m.

Expectations for housing starts slipped by 12,000 units to 778,000 for 2010, which again would be a considerable pick-up over last year’s 556,000. But in 2007, housing starts totalled 1.76m.

New home sales fell by 11.2% in January to annual rate of 309,000, according to data released separately by the US Commerce Department.

Weak auto, housing and other consumer-goods markets have led to a great deal of lost chemicals and polymers demand.

Exports to China and other emerging markets are now more important than ever.

However, the same ACC report recorded a seventh consecutive weekly gain in industrial production with the most recent data representing the first positive year-on-year gain for two years.

“The strong V-shaped recovery in the industrial sector seems to have retained its momentum as lean inventories across the supply chain have spurred restocking, and greater confidence in the recovery has emerged,” the report said.

A couple of key manufacturing indices quoted by the ACC – the Empire State Manufacturing Survey prepared by the New York Federal Reserve and the Business Outlook Survey prepared by the Philadelphia Fed – also point to restocking.

But how excited we should get about this restocking process remains to be seen.

It seems to be from an incredibly low base resulting from late 2008 inventory losses, which forced manufacturers up and down every supply chain to run on exceptionally lean stock levels.

Once manufacturers have finished edging up their production and storage levels, further improvements in industrial output are surely going to depend on what’s happening in the High Street.

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