Data point to bumpy economic recovery

WASHINGTON — New government data offered a blended picture of the economic recovery Tuesday, as U.S. manufacturing activity grew in July at the fastest pace in almost a year while the outlook for the housing market remained dim.

Auto plants stayed open when they normally close for summer renovations and businesses replaced worn-out equipment. That helped boost factory output 1.1 percent — the biggest increase since August 2009.

Overall output at the nation’s factories, mines and utilities rose 1.0 percent last month, the Federal Reserve reported. That followed a decline of 0.1 percent in June, the first drop in more than a year.

Construction of new homes and apartments rose 1.7 percent last month, the Commerce Department said. But the gains were driven by a 32.6 percent surge in apartment and condominium construction, a small fraction of the market.

Single-family home construction, which represented almost 80 percent of the market, fell 4.2 percent. And requests for building permits, considered a good sign of future activity, slid 3.1 percent.

Separately, the Labor Department stated wholesale prices rose last month on higher costs of food, vehicles and light trucks. Excluding volatile food and energy costs, so-called “core” producer prices rose 0.3 percent in July, the ninth straight increase. Core prices have risen 1.5 percent in the past year, a sign that inflation remains tame.

The recovery has weakened in recent months. Consumers are spending less and saving more. Businesses are hiring fewer workers. The unemployment rate for July was 9.5 percent and economists anticipate that to stay at that level for the rest of the year.

Manufacturing has been the strongest sector since the recession ended, growing in 11 of the past 12 months.

Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, cautioned that the numbers for June and July appeared more volatile because of “statistical quirks” such as the unexpected auto production.

“Things are nowhere near as bad as they appeared in June and nowhere near as good as the headline number in July would indicate,” Shapiro said. He stated averaging the two months would present a more accurate picture of manufacturing.

A rebound in housing is considered critical for a sustained economic recovery. But builders continue to struggle with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market.

Builders state consumers remain worried about the weak economic recovery and the sluggish jobs market. Among those who are buying, many are opting for deeply discounted foreclosed properties.

The July increase in housing construction pushed total activity to a seasonally adjusted annual rate of 546,000 units. Building activity in June was weaker than first reported. It fell 8.7 percent to an annual rate of 537,000 units, the slowest pace since October of last year.

“The bad news is that activity is likely to remain depressed for several years,” stated Paul Ashworth, senior U.S. economist at Capital Economics. “The good news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level.”

Housing construction got a boost earlier in the year when the government offered buyers up to $8,000 in federal tax credits. But after the incentives expired at the end of April, sales and constructions activity slumped.

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Submited at Wednesday, August 18th, 2010 at 12:00 pm on News by Alina
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