Friday 25 September 2009

U.S.: Recession’s Tail Is Still Hurting

The U.S. economy is prudently moving out of recession, although the recovery might be different than those experienced in the recent past. Banks are very caution about lending money, while borrowing is drying up, as households are cleaning up their records. The Eurocurrency might try to explore higher levels against the U.S. dollar, if major support holds.

U.S.: sales to increase

As the economy is slowing moving out of recession supported by the recovery of the real estate market (housing starts were up 1.5% in August) and the industrial sector, employment stays very weak in the U.S. and will keep the Federal Reserve on hold for some more time. For the second straight month, industrial production rose by 0.8% month-on-month in August, overcoming expectations for a 0.5% rise, on the top of July increase of 1.0%. Gains were broad-based, albeit motor vehicle production moved up 5.5% following July’s gain of 20.1%. The cash-for-clunkers program, incentives to trade a less fuel efficient car for new fuel efficient vehicle, helped the outputs in August. However, the economy appears to be on the move again, since production rose 0.6% excluding autos. In reality, industry usage remains low at 47.4%, while capacity utilization is at 69.6% and away from the average of 82% registered the past years. Nonetheless, consumer spending might pick up again by the last part of 2009, along with an increase of the Gross Domestic Product (GDP). In August, retail sales spending jumped almost 3.0% (+2.0% expected), after having declined 0.2% in July. Here again, the auto and part components moved up 10.6%, but sales remained strong at 1.1% (+0.4% expected) excluding the auto industry.

Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

This article contains the following sections:

  • U.S.: sales to increase

  • Long term unemployment rate at record high

  • Europe: Germany continues to improve

  • USDCAD: At key support lines.
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