Manufacturing Sector Activities Decline While Housing Sector Continues to Improve

The world’s leading economy continues to show further improvement in overall activities especially the manufacturing and housing sector which suffered the most from the worst financial crisis since the Great Depression.

The Institute of Supply and Management released its manufacturing index for the month of October showing an unexpected drop reaching 53.6 compared with the previous reported estimate of 55.7, coming in below markets expectations of 55.0 but overall It is still considered an expansion in the sector which has been ongoing since August when the ISM manufacturing index expanded for the first time since February 2008.

In addition, the ISM prices paid index was projected by analysts of preserving its last reported estimate of 65.0 but the index surprised the market by dropping 10 figures reaching 55.0 from the previous and the expected 65.0.

The index also showed that production declined to 59.9 from 63.3, while new orders inclined in November to 60.3 from October’s 58.5 figure, Suppliers deliveries dropped slightly to 55.7 from the previous 56.9, while inventories continued to decline as it reached 41.3 from the previous 46.9 while employment declined to 50.8 from the previous 53.1.

The major setback for the sector is shown throughout the index sub indices where manufacturers continue to lower their inventory levels to cope with consumers weak demand, in addition manufacturers concern regarding recovery and anticipation for better economical conditions halts them from hiring until recovery establish a solid base for growth and the economy to return to its long term growth potentials.

Thus with weak economical conditions, unemployment will continue to hover around record highs as it managed to reach a 26 year record high in October at 10.2%, and fail to decline before conditions stabilize and recovery is validated, which is likely to happen by the start of the second half of 2010.

The manufacturing sector is seemingly recovering from the worst financial conditions since the early 1980’s where analysts project that the sector might be able to recover faster than any other sector in the economy and expand to contribute more in the anticipated recovery process for the economy.

Construction spending report as well was released, showing a decline in the month of October to 0.0% compared with the previous reported estimate of 0.8% which got revised to -1.6% but higher than markets expectations of -0.5%.

meanwhile, the sector that initiated the global turmoil; the housing sector, reported that sales for pending houses inclined in the month of October reaching 3.7% but comes lower than the previous reported rise of 6.1% that got to 6.0, while market expected a drop of -1.0% meanwhile on the yearly scale the index showed that sales jumped by 28.6% from the previous 19.8%.

The U.S housing sector has benefited severely from governmental help; especially credit tax program that aimed to boost sales by refunding first time home buyers with tax money totaled at $8.000, meanwhile cheap house prices lured consumers to look for bargains in the market that helped boost economical activities in the sector.

The housing sector is recovering from the worst financial crisis since the Great Depression but threats and challenges still lays ahead against the sector and the economy as whole before reaching growth and stabilizing conditions, threats such as high unemployment, tight credit conditions and inflation stalls the recovery process and might weaken the economy over the upcoming period.

As with high unemployment and tight credit conditions, consumers will feel the effect of both on their income which will surely trim off and affect their spending patterns that contributes to nearly 2/3 of growth in the United States.

Ecpulse

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