Posts for July 26, 2010

July 26, 2010

All four of last week's economic indicators declined. Most of the news involved the housing sector. As expected, a negative backlash is taking place in the wake of the end of the homebuyer tax credit in April. (To read all of last week's indicators, see the Latest Economic Reports section below.)

The expectation that the end of the homebuyer tax credit would create a pendulum effect in the housing market is coming to fruition. After an initial swing into positive growth, housing activity is now swinging back in the other direction. As depicted in the chart above both housing starts (see green bars) and building permits (see brown bars) posted relatively strong gains during the first quarter of the year. However, in the three months ending in June, both of these measures of housing activity fell at the fastest rates since January 2009.

Similarly, the National Association of Home Builders (NAHB) housing market index declined to a level of 14 in July -- the lowest level since April 2009 -- after rising significantly in the April-May period (see black line in the chart above.) A level of 50 indicates growth.
As with the initial 2009 homebuyer tax credit, which temporarily boosted housing activity in the second half of last year, the extension of the credit to April 2010 had a similar temporarily positive effect on the housing market and related manufacturing industries earlier this year.

This week, a number of important indicators will be released. On Friday, the Commerce Department's initial estimate of second quarter GDP growth will likely show that the economy grew at an annual rate of about 2 percent in the second quarter, after 2.7 percent growth in the first quarter. July regional manufacturing reports and June durable goods orders will provide more evidence about how the economy is faring in the first month of the third quarter.

Dave Huether

Chief Economist

National Association of Manufacturers

UMA MEMBER COMPANIES IN THE NEWS:

RIO TINTO'S KENNECOTT AND VERITE WIN THE PRESTIGIOUS 2009 STEVIE AWARD FOR BEST PUBLIC INFORMATION PRODUCTION
July 26, 2010 – Market Wire

Rio Tinto's Kennecott Utah Copper and Kennecott Land, announced today that they were presented with a Stevie Award for the Best Public Information production in the public relations category.
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FAIRCHILD TO APPEAL INFRINGEMENT RULING

July 26, 2010 – Today in Manufacturing.net
Chip maker said Monday that it plans to appeal a federal court's ruling that Fairchild willfully infringed on Power Integrations' patents ... continue

JAPAN'S EXPORTS CONTINUE TO RISE

July 26, 2010 – Today in Manufacturing.net

Exports in the world's No. 2 economy rose for the seventh straight month in June, driven by demand for machinery and steel products ... continue