July 2010 Macro Pulse -- More Economic “Stall” Warnings

Executive Summary

The second downward revision of 1Q2010’s change in gross domestic product (GDP) to 2.7 percent is one warning indicator that the U.S. economy may be in the process of stalling. Moreover, it is becoming increasingly evident that a significant share of consumer spending since late 2008 resulted from government transfer payments and tax breaks. But even that government-induced growth was not sufficient to materially lower the jobless rate. Manufacturing appears to be providing some lift for now, as industrial production and capacity utilization both rose in May. However, two other indicators are possibly sending warning signals: New factory orders declined in May and growth in the Institute for Supply Management’s purchasing managers’ index slowed during June

More time will be required to determine whether the downturn in world trade during April was just a false alarm or something about which to be genuinely concerned. Exchange rates could frustrate U.S. exporters’ attempts to expand market share, as the dollar strengthened against the euro in June. The monthly average price of West Texas Intermediate crude oil ticked higher in June despite a stronger dollar, the lagged impacts of a slight setback in consumption in April, and crude stocks that are well above the average five-year range.

Construction in the United States, including the housing market, is sounding the loudest warning. The value of construction put in place declined across nearly all categories during May – public works projects excepted. Hence, the contribution to GDP of private residential fixed investment is at its lowest level since the 1940s.

Click here to read the entire July 2010 Macro Pulse.


Macro Pulse is a compilation of economic developments over the past month that provide context for our complete, 24-month forecast, which is contained in the Economic Outlook newsletter available through Forest2Market. While we note developments on the Macro Pulse blog as they occur, the monthly Macro Pulse newsletter provides a summary and point-of-access to economic conditions over the past 30 days affecting the forest products industry.