Tag Archives: industry

Double-dip Recession?

The economy seems especially fragile these days, as if the United States is teetering on the edge of recession. That’s the way it is when GDP is gaining at a rate of 2% or less, as it has been for some months: There are stronger areas — Texas, North Dakota, Milwaukee, Washington, D.C., and San Jose, Calif., for example. And some weaker areas, including much of California as well as Nevada, Phoenix, Atlanta and Tampa, Fla.

With industries, the same spotty pattern prevails. Orders roll in for makers of medical devices, earth-moving equipment and a variety of exports. But housing and real estate are still in deep distress. Similarly, job seekers face a mixed picture: More than enough jobs for petroleum engineers, accountants and medical technicians. But teachers and other public sector employees are being laid off. And for the 7 million workers who lost their jobs during the downturn and still aren’t able to find work, the recession hasn’t ended. They continue to suffer.

But the odds of actually returning to recession — at least six months of declining national production — are still relatively low. Many of the economic hits this spring were one-time events and aren’t likely to be reprised — or at least they aren’t likely to pile one on top of another again. The combination of tornadoes ripping through broad swaths of the country, widespread Mideast turmoil sending gasoline prices near $4 a gallon, and the one-two punch of disasters in Japan was extraordinary.

The next few weeks will provide key signals about what’s ahead — indications of whether growth is in real danger of reversing course or will just continue weakly. The July 8 employment report for June, for example, needs to show much more vigor. Sustained economic growth requires net job gains of about 150,000 a month. So far this year, the average is just 72,000; for May, it was only 54,000. Also critical: no further slowing of manufacturing. (A July 1 purchasing managers survey will tell the story.) And an upward tick in June auto sales indicating that Japan’s economy and supply lines are coming back.

The best to expect is probably continued wobbly, weak GDP gains, with three or four more years to go before the economy begins to feel a great deal better. It’ll take that long for employment to again reach the prerecession high-water mark of 138 million and for unemployment to fall below 6% or so.

The fact is, this last recession was different from most. It was born in a housing bubble and sparked by financial crisis. It typically takes longer to recover from downturns arising from financial crises. And housing is usually one of the chief engines of growth following recessions; the Federal Reserve lowers interest rates, encouraging demand for mortgages and housing and spurring growth. That can’t happen this time.

Recovery will be slower, as the economy shifts to rely less on consumer spending and more on exports and business investment. It’s a worthy destination, but the trip won’t be a pleasant or smooth one.

FROM: http://www.kiplinger.com/columns/dekaser-practical-economics/archives/it-just-feels-like-a-double-dip-recession.html#ixzz1QNnITcm9


Motor Industry Still Feeling Effects from Japan Tsunami

Toyota Motor Corp. and Honda Motor Co. are speeding returns to normal production after the March 11 earthquake and tsunami idled factories and created shortages of parts. The slowdown in May sales came about because limited supply of fuel-efficient cars like Toyota’s Prius lifted prices and curbed purchases.

“Consumers were being told so dramatically after Japan that there’s going to be a shortage of cars, but this is going to be a temporary situation and so many of them will just wait,” said Alan Baum, principal of industry consultant Baum & Associates, who predicts 13 million auto sales in the U.S. for 2011. “To the extent May is a reasonably poor month, I’m not going to get carried away and say that’s going to transcend through the rest of the year.”

U.S. sales of cars and light trucks may rise to 13 million this year, the average of 16 analysts’ estimates compiled by Bloomberg. That would be the most since 13.2 million in 2008.

Average U.S. gasoline prices dropped for 14 straight days since May 11 to $3.80 a gallon for regular unleaded, according to AAA. Prices earlier in May were at the highest level since 2008, reducing demand as the country’s vacation season started.

The earthquake in Japan may result in 3 million to 3.5 million units of global production that will be lost or deferred into next year, according to researcher IHS Automotive. Worldwide light-vehicle production may rise to 73.7 million units this year from 71.9 million in 2010, according to IHS.

Toyota, which built 45 percent of its cars in Japan last year, may lead declines among major automakers with a 27 percent drop in May deliveries, the average of three estimates. Honda Motor Co., the second-largest Japanese automaker by U.S. sales, may say sales fell 25 percent, the average of three estimates. Nissan Motor Co. deliveries may decrease 7.3 percent, the average of three estimates.

“Predominantly this is a supply issue,” George Magliano, a New York-based senior economist for IHS Automotive, said in a telephone interview. “The auto market was developing considerable momentum coming into this month before issues related to Japan.”

Automakers benefiting from their Japan-based rivals’ supply constraints may be led by Hyundai Motor Co. and Kia Motors Corp. Their combined U.S. sales may pass Toyota for the first time, according to Santa Monica, California-based TrueCar.com. Deliveries for Hyundai and Kia may surge 43 percent in May to 115,434, behind only General Motors Co. and Ford Motor Co., according to the auto pricing website.

Toyota, the world’s largest automaker, has said it expects production in North America to return to about 70 percent of normal levels beginning in June, from about 30 percent in May. Honda forecast last week that North American production will return to 100 percent in August for all models except Civic small cars, and said May 17 that global production will return to normal before the end of the year.