Economic Outlook
Creeping optimism in U.S.
A sense of guarded optimism is creeping into many U.S. economic forecasts. This doesn’t mean robust growth is expected during 2012. Rather, it suggests that the pace of the expansion will likely pick up a bit relative to both previous projections and the lackluster performance during 2011.
Europe has slipped into recession. The best case scenario is that it is both mild and brief, at least for the stronger economies in the region. But it is not hard to envision a much worse scenario emerging as a result of some combination of falling confidence, weakening export market demand and an unmanaged sovereign debt default.
- The leading indicator recorded another strong gain during November.
- The index rose 0.6 points, with seven of the 10 components contributing favorably.
- The recent strength and ongoing rise in this indicator bodes well for 2012.
U.S. Total Industrial Production:
- Overall production declined 0.2 points in November; manufacturing fell 0.4 points.
- Much of the weakness was in durable goods production, including automotive-related and household electronics.
- Despite the November slippage, there are hints that the industrial sector is developing a bit of momentum.
Construction Machinery, New Orders:
- Real orders declined during November, but remain at healthy levels.
- Even with November’s 8.4% decline, volume remained nearly 48% above the level from a year ago.
- It also exceeded any reasonable historical benchmark from before the 2008-2009 meltdown.
Private Nonresidential New Construction:
- Private nonresidential construction in November effectively matched the revised October figure.
- Behind the overall stability were declines in office, commercial and manufacturing construction.
- These were offset by a big gain in the power component.
European Composite Leading Indicator:
- The latest leading indicator figures showed yet another index decline.
- November’s report marked the tenth consecutive decline and the third consecutive reading below 100.
- This reinforces a collection of other negative news about economic conditions in Europe.
Farm Machinery & Equipment Shipments:
- Reported real shipment volume went through the roof last summer.
- During the fall there was a pullback toward more sustainable levels.
- November’s 7.3% decline in shipments was a part of that process.
- Single-family starts rose 2.3% in November.
- At least some of this was due to mild weather that muted the normal seasonal declines.
- The single-family construction market has yet to find any real traction.
Total Public New Construction:
- November was a relatively good month for public construction.
- This meant a modest 1.6% increase that built on small upward revisions to estimates for September and October.
- Most of the major subsectors contributed to this gain.
Industrial Production, United Kingdom:
- Output fell during November in both manufacturing and the broader industrial sector.
- The near-term prospects for both the industrial sector and the overall economy are not encouraging.
- Both appear to have slipped into contraction mode as of late 2011.
Industrial Production, Germany:
- The industrial sector gains reported for October were reversed in November.
- Both industrial production and new factory orders fell.
- The German economy is now flirting with the possibility of recession.
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