At this time last year, as the government ran to the rescue to Fannie Mae and Freddie Mac, as AIG and Citigroup crumbled, the country was mired in economic gloom. The downturn that began in late 2007 had blossomed into a full-blown crisis, with housing prices going down the drain and sub-prime mortgages claiming victims on a massive scale. Every piece of data released was pored over for the bad news. Those days now seem to be falling further behind in the rearview mirror.
Over the last couple days, more evidence has trickled out that brighter days are ahead for the United States, bolstering confidence in the economy. The trade deficit has widened, but the declines in exports and imports have slowed dramatically. In June, wholesale inventories continued to fall for the 10th straight month, but sales ticked upwards for the first time in a year. Consumer spending is still feeling the pressure from job losses and tightened credit conditions, but there are signs of stabilizing. The Federal Reserve Board’s Federal Open Market Committee (FOMC) released that it sees evidence “that economic activity is leveling out” and that conditions in the financial markets have continued to improve over the last several weeks.
But the U.S. isn’t out of the weeds yet.
“Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability,” stated the FOMC.
The Committee added that although the prices for energy and commodities have mostly rebounded recently, the slack in demand will likely keep inflation in check for the time being. As such, the Central Bank will keep the federal funds target rate between 0 and 0.25%.
Discouraging news did come via retail sales, which, after a nearly 1% increase in June, edged lower in July by 0.1%. Though the slip caught most off-guard, the total increase seen during the last three months has been the strongest three-month performance since December 2007.
“Despite the slight decline in retail sales we remain encouraged that the Recovery Act and other economic initiatives have stabilized conditions and help those harmed by the economic crisis,” said U.S. Commerce Secretary Gary Locke, adding that the cash-for-clunkers trade-in program has led to a spark in sales in the automotive industry. “And stimulus dollars boosted disposable income in the first half of this year, signaling a bottoming out of the recession. The road to recovery is long, but with every Recovery dollar we spend and project we start, we are one step closer to getting there.”
The move towards turnaround and perspective is also visible in the labor markets. In July, seasonally adjusted unemployment initial claims saw a slight increase of 4,000 to 558,0000, but, as the Department of Labor reported earlier this month, the unemployment rate in July leveled out at 9.4% from 9.5% in June. There were 247,000 jobs losses last month—not a number to be ignored— though the up side is that the average number of monthly job losses from May to July was 331,000, almost half the average monthly decline of 645,000 seen from November to April.
Even the beef and pork export industry—coming off a record year in 2008 to a brow beating this year because of the global downturn—is seeing the positive. The U.S. Meat Export Federation (USMEF) released that through the first half of the year, it looks like 2009 will wind up as the second-best year for U.S. pork exports. The fears of H1N1 hammered pork exports as more than a dozen countries instituted bans, but so far, pork and pork variety meat exports have topped $2 billion.
“The H1N1 influenza virus has been an important factor for U.S. pork exports,” said USMEF Chairman Jon Caspers. “We have had market access issues in two of our top six export markets [China and Russia], which makes it all the more important to maintain a strong presence in our other key markets.”
And that lock out of major markets has been considerable. Compared to the first six months of 2008, pork exports to China are down 52% in volume to 267.7 million pounds and 54% in value to $203 million, while the volume of exports to Russia have fallen 35% in volume to 134 million pounds and 37% in value to $123.9 million. The other side of the coin is that pork exports to Mexico—the No. 1 consumer of U.S. pork and pork variety meats—is up 52% in volume and 37% in value to $369.6 million.
U.S. beef exports have been on a slightly better track than pork, declining 2% in volume and 6% in value compared to the first six months of last year. But for the month, they are down 13% in volume and 16% in terms of value.
“In challenging economic conditions like these, there is no one silver bullet that will drive exports,” said USMEF President and CEO Philip Seng , adding that USMEF has employed a number of educational and marketing programs to maximize U.S. potential in foreign markets.
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National