Saturday, September 19, 2009

NEW DATA SHOW RECOVERY CONTINUING

       Signalling that manufacturers are leading the economy into a recovery, output from the nation's factories, mines and utilities posted widespread gains in August.
       In a further dose of good news,inflation remained essentially nonexistent as prices scarcely rose last month.
       The August gains in industrial production marked the second straight increase after the global recession dried up the appetites of customers worldwide. Output rose o.8 per cent, the Federa Reserve said on Wednesday,beating analysts' estimates.
       In part, the improvement reflected auto sales that were boosted by the government's now-ended "Cash for Clunders" programme. But analysts were impressed that output rose broadly across industries.
       "Vehicles are not the whole story,"Nigel Gault, chief US economist at IHS Global Insight, said in a note to clients. Gault noted that production rose in five out of 10 categories of durable goods, including machinery and electrical equipment.
       The pace of growth is expected to slow later this year. That's partly because the stimulative effect of the clunkers programme, which issued rebates for people who traded in older gas-guzzlers for new,fuel-efficient models, will fade.
       But industrial stockpiles are so low that production should keep rising even as consumer spending remains weak, economists said. companies had cut their stockpiles by a record $159.2 billion (Bt5.4 trillion) in the second quarter. Low inventories tend to signal higher out put ahead, because companies even tually must produce more to refill their depleted stockpiles.
       "Manufacturers are in a catch-up mode right now," Gault said. "They're adjusting for the fact that the level of demand didn't meet their worst fears."
       Factory output, the single-biggest slice of overall industrial activity, also rose for the second straight month.
       Auto production led the way, rising 5.5 per cent in August. That followed a whopping 20.1 per cent gain in July, when General Motors and Chrysler reopened many plants that had been closed as the companies restructured and emerged from bankruptcy.
       Yet even with autos and parts stripped out, manufacturing activity gained 0.4 per cent last month.
       Production of steel, aluminium and other metals rose 0.9 per cent, while electrical equipment and appliances output also increased.
       Despite the recent gains, industrial companies are still operating well below capacity. The production rate in August was 69.96 per cent, under the 80 per cent consistent with a helthy econlmy.
       Manufacturing output will likely grow more slowly later this year as the clunkers' impact wears off said Daniel Meckstroth, chief economist for the Manufactureers Alliance/MAPI, a business research group.
       "We only expect a modest pace of recovery because of the headwinds that debt-laden consumers face," he said, meaning sluggish spending is likely for months.
       Consumer spending, which accounts for about 70 per cent of the economy, is forecast by many economists to show weak growth next year. Shoppers are holding back in the face of job losses, stagnant incomes and tight credit. That contrasts with the early stages of othe r recent recoveries.
       Inflation, meanwhile, remains nowhere in sight. The Consumer Price Index rose just 0.4 per cent in August, after a flat reading in July, the government said
       Prices fell 1.5 per cent in the past year,as petrol prices dropped sharply from record levels last summer.
       The "core" CPI, which excludes volatile food and energy prices, ticked up a scant 0.1 per cent, mathing expectations. Over the 12 months ending in August, the core rate rose 1.4 per cent, the smallest such increase in more than five years.
       That means the fed faces no pressure to raise its benchmark interest rate, a step it would take to ward off high inflation. The Fed has reduced the rate it charges banks for overnight loans to a record low of nearly zero to try to revive the economy.
       AT A GLANCE
       The August gains in industrial production marked the second straight increase after the global recession dried up the appetites of customers worldwide. Output rose 0.8 per cent, the Federal Reserve said on Wednesday, beating analysts' estimates.
       "Manufacturers are in a catch-up mode right now," Gault said. "They're adjusting for the fact that the level of demand didn't meet their worst fears."
       Auto production led the way, rising 5.5 per cent in August. That followed a whopping 20.1 per cent gain in July, when General Motors and Chrysler reopened many plants that had been closed as the companies restructured and emerged from bankruptcy.

       A CONTAINER SHIP loads up at the Port of Long Beach, California. US industrial production rose for the second straight month in August, with output beating analysts' forecasts.

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