The U.S economy continues to seek stability amidst the current economical weakness that continues to affect economic activities in various sectors around the U.S where the import price index along with housing data showed that the economy is still being affected from the worst financial decades in years.
Starting with the import price index, which evaluate the price of imported goods to the United States, showed that prices dropped on the monthly and yearly scale on manufacturers throughout the month of February; where the index dropped from the previous 1.4% rise that got revised to 1.3% to reach -0.3%, while on the yearly scale the index reached 11.2% compared with the previous reported estimate of 11.5%. The median estimate of markets was set for the monthly scale at -0.2% while on the yearly scale they were set at 11.3%.
Imported petroleum prices dropped in February by 2.2% from the previous 4.4% indicating a slight decline on energy demand throughout the world’s top oil consuming country thus easing off some pressure on prices which can be translated into NO inflation threats that might spread among investors in near future despite the fact that energy prices have been rising over the globe, yesterday’s news from the manufacturing sector continued to show further expansion in the sector thus with the decline in import prices, the sector will benefit gradually from the decline of imported good prices and help activities in the sector to rise further and continue with the expansion that started eight months ago.
But the decline in import prices could interoperate that high unemployment and tight credit conditions still hammers down demand on foreign goods by U.S consumers thus the decline could send mixed signals to investors about the outlook of the U.S economy throughout the upcoming period and signal further delay for the recovery process.
Sub indices in the report showed that imports excluding petroleum rose to 0.2% from the previous 0.5%, while imports excluding fuel rose the same compared with the previous 0.5% rise in January, meanwhile industrial supplies declined by -0.8% from the previous rise of 3.6% while capital goods remained unchanged at -0.1%, in addition imported autos and parts were flat in February from the previous drop of -0.3%, which could be affected by Toyota’s pulling some models off the market over the past period.
As for Exports, it dropped by -0.5% from the previous 0.7% rise; where food and beverages exports sank by -3.8% from the previous 1.5% rise along with industrial supply that declined by -0.5% from the previous 1.6%, in addition capital goods declined by -0.3% compared with the previous rise of 0.2%. On the other hand exported autos and parts rose by 0.1% from 0.3% along with consumer goods that rose by 0.3% from 0.1%.
Weak demand from U.S consumers on foreign goods comes as a result from elevated unemployment along with tight credit condition, where the sink in exported prices comes as a natural result from the rise in the value of the Dollar over the past period which hammers down exports from the U.S to the rest of the world, not to mention weak global demand as the aftermath of the recession continues to affect various countries and stall global recovery.
Meanwhile, the housing sector in the united states continue to seek stability amidst the current economical improvement the U.S economy is going under whereas expectations show that the economy will continue to recover throughout the course of this year in order to meet its long term growth potentials by next year, but the near termination of various stimulus plans affected the performance of the sector to recover from the worst financial crisis in decades thus sales of housing starts and permits dropped in February.
Housing starts report showed that the number of sold houses dropped in the month of February to 575 thousand units where it comes above the expected 570 thousand while below the previous reported estimate of 591 thousand that got revised to 611 thousand, the report showed that house sales dropped on the monthly scale by 5.9% compared with the previous revised 6.6 percent, and worse than market expectations of -3.6 percent.
Meanwhile building permits report, which provides a slight future outlook for house demands in the U.S; it reported a slight drop in permits reaching 612 thousand coming in slightly above market expectations of 601 thousand while below the previous revised 622 thousand applications, the reason for future demand on house permits might be highly related to the near termination government program “the Tax Credit” which is due to expire by the end of the first quarter of this year as the index showed that permit demand dropped by -1.6% compared with the previous revised -4.7%, while markets were expecting a decline of -3.4%.
Even though, the sector that initiated the worst financial conditions in more than seven decades are on the verge of recovery whereas economical conditions rose over the past few months especially by the start of the second half of 2009 as government support helped the sector recover in a gradual pace and follow the rest of recovering sectors at that time such as the manufacturing, services and industrials sectors, but the sector will need more time to stabilize and recover but the government would need to address the most important issue in the sector which is rising foreclosures that will continue to hammer down economical activities in the sector which comes as a natural cause from elevated unemployment along with tight credit conditions and weak demand in diverse parts of the sector, therefore it could take some time for the housing sector to recover from the worst slump it witnessed since WWII.
The news will have huge effect on markets as investors will most probably target higher yielding assets and riskier investments as stocks and commodities but that could change dramatically as minutes pass closer to the release of today’s Rate Decision by the Federal Reserve, where expectations show that law makers are moving towards limiting bank’s ability in trading thus it could affect financial shares even more and send indices down as they would lead the decline in stock markets today. But overall stock futures are still pointing north ahead of Fed Meeting where the DJIA future added 0.1% to trade at 10578 while the S&P 500 futures rose by 0.2% to 1147.70 while the NASDAQ 100 futures rose by 0.3% to trade at 1922.00.
