The Pace Of Economic Activity Decelerates
By Dr. Constantine G. Soras, Economics Editor
Industrial Output Continues To Rise With Largest Monthly Gain Since March
Industrial output surged 0.7 percent in July, after edging up 0.1 percent in June and rising 0.2
percent in May. This was the largest monthly gain since March. Factory output was up 0.6 percent in
July, despite a 2.0-percent drop in production of motor vehicles and parts. The July operating rate
moved up to 80.7 percent of capacity from 80.3 percent in June.
Even though mortgage rates went over 8 percent recently to the highest level in two years, rising incomes and employment combined to lift the July housing starts up 5.7 percent to 1.661 million units at an annual rate. Single family units rose 4.4 percent to 1.328 million units. By region, starts soared 22.7 percent in the West, gained 11.5 percent in the Northeast and rose 8.5 percent in the South. Housing construction, however, weakened 16.8 percent in the Midwest.
The nation’s trade deficit in goods and services ballooned to a record $24.62 billion in June from $21.17 billion in May. U.S. exports grew 0.5 percent to $78.37 billion, while imports soared 3.9 percent to $102.99 billion, crossing the $100 billion mark for the first time. The combined trade deficit in the first half of 1999 was $118.14 billion up 56.9 percent from $75.3 billion from a year ago.
Business sales grew 0.9 percent in June. Inventories rose 0.3 percent. As a result, the June inventories-to-sales ratio slipped to 1.34 from 1.35.
Government Reports Point To Healthy Growth With No Signs Of Inflationary Pressures
The overwhelming evidence from the latest set of government reports points to healthy growth
with no signs of inflationary pressures.
The pace of economic activity decelerated in the second quarter as imports outpaced exports, inventory investment declined and federal government spending fell. Real GDP grew at a modest annual rate of 2.3 percent in the April-June quarter, following a robust gain of 4.3 percent in the first quarter. Domestic demand was strong with consumer spending rising 4.0 percent on top of the first quarter gain of 6.7 percent. Business investment in equipment stayed on the fast lane rising by 15.3 percent.
The employment report indicates that the U.S. economy is strong. The jobless rate held steady at 4.3 percent in July. Nonfarm payrolls surged 310,000 jobs in July after rising by 273,000 jobs in June, adding pressure in the labor markets and forcing the Federal Reserve to raise interest rates.
The producer price index for finished goods rose a modest 0.2 percent in July after falling 0.1 percent in June. Despite tight labor markets, strong economic growth and sharply higher energy costs inflation in the goods-producing sector of the economy is up only 1.5 percent from the year ago level.
Consumer prices moved up 0.3 percent in July following two months with no change. Despite a tight labor market, the core inflation-which excludes prices of food and energy-rose only 0.2 percent, after gaining 0.1 percent in June and in May.
Jobless Rate For Textile Mill Workers Jumps In July; Output Rises While Sales By Textile Producers Fall
Results for textiles and apparel were mixed. The industry’s payrolls declined 1.4 percent in
July after edging down 0.1 percent in June. The volatile jobless rate for textile mill workers
jumped to 5.3 percent from 3.6 percent in June.
Textile output rose 0.5 percent in July, following a modest 0.2-percent gain in June. The utilization rate for textiles improved to 83.0 percent from 82.5 percent in June.
Sales by textile producers fell 1.7 percent in June, while inventories grew 0.9 percent. Thus, the inventory-to-sales ratio rose to 1.58 from 1.54 in May.
U.S. retail sales led by strong auto sales surged 0.7 percent in July, after slipping 0.2 percent in June. July’s motor vehicle sales shot up 2.3 percent, after falling 0.8 percent in June. Retail sales excluding autos were up a modest 0.3 percent in July, an indication that consumers spending has decelerated. Department stores rang up a 0.7-percent gain. At apparel and accessory stores sales eased 0.4 percent in July.
Producer prices of textiles and apparel came down 0.2 percent in July. Prices for synthetic fibers dropped 1.8 percent, fell 0.4 percent for carpets, and for gray fabrics, eased 0.3 percent for processed yarns and threads, came down 0.2 percent for finished fabrics and edged down 0.1 percent for home furnishings.