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Heavy Duty Truck & Trailer
Executive Summary
The economy improved broadly in
April. Almost every sector showed signs of recovery. Only
employment continued to show lack of improvement. Even though
over 100,000 permanent jobs were added unemployment rose from
9.7% to 9.9% as more people were looking for work. Employment in
both the manufacturing and non-manufacturing sectors improved;
both showing expansion for the first time since the recession
started. The public employee sector specifically state and local
employment was the only area continuing to show significant
retrenchment.
Both the manufacturing and
non-manufacturing sectors of the economy according to the
Institute of Supply Management’s Purchasing Managers Index (PMI)
showed continued strong expansion. The manufacturing index was
60.4 up .8% from March. An expanding economy is anything above
50. This is the ninth successive month of growth. The continued
strength came from new orders up 4.2%, production up 5.8% and
employment up 3.4% from March. The average factory work week
reached 41 hours continuing 12 straight months of improvement.
Capacity utilization reached 73.2% up from 69.2% at the bottom
of the recession. A normal economy would expect factory
utilization to be above 81%. The improvement in the non
manufacturing economy was driven by business activity up 5.2%,
new orders up 7.3% and employment up 12.2% since March. This is
the third straight month of expansion in the index. The
Conference Board’s index of leading, coincident and lagging
indicators all showed improvement in March. The leading economic
indicators have shown improvement for 12 months. The leading
index improved 1.4% and was driven by average weekly
manufacturing hours, vendor performance, stock prices, building
permits and new orders, among other factors. The coincident
indicators improved to 100.2 or .2%; lead by employment,
personal income and industrial production. This is the ninth
consecutive month of improvement. This indicator is still below
the index of 104 seen at the beginning of the recession. The
lagging economic indicators improved the first time since the
recession began increasing from 107.7 to 107.9 or .2%. This
still remains significantly below the index of 115 seen at the
start of the recession. Major contributors to the improvement
included commercial and industrial loans outstanding and labor
cost per unit of output. The largest drags remain the average
duration of unemployment followed by consumer debt versus
income.
Credit, Consumer confidence,
along with automobiles sales and housing, key factors driving
the economy, have shown improvement. Even with these gains the
sectors need significant recovery before we see a major
employment resurgence. Auto sales in April annualized at 11.2
million units. Although this is up over 15% above a year ago, it
needs to return to 14 million units annualized which is normal
in a strong economy. Sales of existing homes also remain strong
at 4.58 million units annualized. New home sales remained
distressed at 411,000 units, well below the 1,000,000 homes in a
normal market. Combined in a normal market these numbers need to
exceed 4,000,000. The median sale price of an existing home was
$170,000. This would be $200,000 in a normal market. The median
price of a new home was $210,000. This should exceed $250,000 in
a normal market. The low sales prices continue to depress new
home loan availability and force banks to keep excess reserves.
New home permits, starts, and completions came into balance for
the first time since the recession began. New home permits
annualized at 685,000 up 7.5% from the prior month and 174,000
from the low earlier in the recession. Housing starts annualized
at 626,000 up 1.6% from the prior month and up over 25% from the
bottom of the recession. New home completion annualized at
656,000 units. This is the first time since the recession began
that permits starts and completions have come into balance
stopping the continuing glut of new homes entering the market.
This is a significant improvement over the 833,000 home
completions annualized rate of a year ago. These numbers are
still well below the 1,000,000 units of permits and starts one
would expect in a normal market and represents an eight month
supply of existing homes and a 6.7 month supply of new homes at
existing sales rates. A normal market would expect 90 to 120
days supply. The other major concern about housing is the end of
government purchase incentives at the end of April. Many experts
predict that without additional sales support housing sales
could lapse back into a deep decline further exacerbating
housing’s impact on the economic recovery.
If you would like to read the
rest of this article contact steve.caudill@businessperspectives.net.
This summary is offered
for information only. It is compiled from several governmental
and industry resources. The origin of the information is given
where possible. Any actions taken as a result of this summary is
the sole responsibility of the readers. Business Perspectives
takes no liability for the use of the information above its
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