Plus: Industrial Production Posts Strong Growth, U.S. Economic Indicators Improve, WTO Bans China Steel Tariffs and Jobless Claims Soar.
Industrial Production Increases
Total output from United States factories, mines and utilities rose 0.4 percent in September, as companies resumed oil production in the Gulf of Mexico and stronger demand for a range of manufactured goods and equipment boosted overall production rates, according to the U.S. Federal Reserve.
Following a decrease of 1.4 percent in August and an increase of 0.7 percent in July, growth in industrial production accelerate last month largely due to the resumption of oil production that had been stalled last month in response to Hurricane Isaac. Manufacturing production inched up 0.2 percent last month, but declined at an annual rate of 0.4 percent for the third quarter. Mining output increased 0.9 percent in September and utilities output climbed 1.5 percent.
“The biggest back-to-back gain in retail sales in almost two years points to a pickup in consumer spending that may help offset a pullback in business investment,” Bloomberg News reports. “At the same time, a global slowdown that is hurting exports represents a hurdle for manufacturing.”
For the third quarter as a whole, industrial production declined at an annual rate of 0.4 percent. At 97 percent of its 2007 average, total industrial production in September was 2.8 percent above its year-earlier level. Meanwhile, the capacity utilization rate, which indicates how much of the industrial sector’s production capabilities are in use, rose 0.3 percentage points to 78.3 percent, but 2 percentage points below the long-run average from 1972 to 2011.
“We believe that manufacturing activity will grow at a modest 2.3 percent annual rate in the fourth quarter of this year, slightly faster than the overall economy,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), said in an analysis. “Housing starts and motor vehicles sales continue to post relative strong gains thanks to pent-up demand, capital goods makers have order backlogs that they are working down until we can get more clarity in fiscal policy, and the emerging countries are rebounding from a spring slump, which should improve export opportunities. The good news in the report is that manufacturing has returned to growth; the bad news is that the pace of growth is definitely much slower.”
Global Smartphone Users Top 1 Billion
The smartphone industry is growing at a fast pace, with over 1 billion units in use worldwide for the first time ever in the third quarter of 2012, according to research firm Strategy Analytics. Globally, one in seven of the world’s population owned a smartphone during the latest reported quarter.
There were 1.038 billion smartphone units used in the third quarter of this year, a jump from 959 million smartphone units during the second quarter. By comparison, there were an estimated 708 million smartphones in use worldwide last year.
The industry has continued to grow since the introduction of the first modern smartphone device — the Nokia Communicator, which made its debut in 1996 — and is projected to add another billion users by 2015, according to the research company.
Much of the smartphone user growth this year is attributed to Android and Apple iOS platforms, which are in-demand and have outpaced sales of other devices, such as Blackberry smartphones, which are struggling to sell. Apple has sold over five million units of its newest smartphone, the iPhone 5, since its retail debut last month, according to IndustryWeek.
While device growth has been significant in the past few years, global smartphone penetration is “relatively low,” Strategy Analytics notes, which points to emerging markets in China, India and Africa as potential areas for future growth.
Leading Economic Indicators Improve
The index of U.S. leading economic indicators rose in September at the fastest rate in seven months, reversing declines from the prior month. The Conference Board’s Leading Economic Index (LEI) for the U.S. rose 0.6 percent last month, following a 0.4 percent decline in August and a 0.4 percent in July.
August’s 0.6 percent expansion exceeded expectations for the month, as economist polled by MarketWatch had forecast the LEI to rise by just 0.2 percent.
“The LEI has been signaling an economy that is fluctuating around a slow growth trend,” Ataman Ozyildirim, an economist at the Conference Board, noted. “The six-month growth rate has slowed substantially, but still remains in growth territory due to positive contributions from the housing and financial components. Meanwhile, the coincident economic index also increased in September.”
The LEI is a weighted gauge of 10 indicators designed to track business cycle peaks and troughs. Six of the 10 indicators improved in September, led by applications for building permits, which hit a four-year high, as well as low interest rates and rising stock prices. However, consumption, new orders, and labor market conditions remained flat or weaker than in the prior month.
“A recovery in the housing market and a surge in stock prices may also be fueling optimism among consumers, whose spending accounts for about 70 percent of the economy,” Bloomberg News explains. “At the same time, the so-called fiscal cliff — $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless Congress acts — is a hurdle for business investment and hiring.”
WTO Backs U.S. in China Steel Dispute
The World Trade Organization (WTO) Thursday rejected China’s appeal against an earlier ruling that the Chinese government was unfairly imposing anti-dumping tariffs on some U.S. steel, the BBC reports.
On June 15, the WTO’s dispute panel ruled that Beijing had improperly imposed tariffs on high-technology U.S. steel it alleged was receiving government subsidies. Confirming the earlier ruling, the WTO appellate body found that their dispute panel “did not improperly disregard the parallel price trends of subject imports and domestic products.” In other words, China imposed duties inconsistently.
“Today we are again plainly stating that we will continue to take every step necessary to ensure that China plays by the rules and does not unfairly restrict exports of U.S. products,” U.S. Trade Representative Ron Kirk said.
This dispute between the U.S. and recent WTO member China is one in a series of trade conflicts. Washington has also protested China’s rare earth export restrictions and another anti-dumping tariff imposed by China on American cars.
Policy analysts and foreign policy experts expect China to be a central point of dispute in the third and final U.S. Presidential debate between former Massachusetts Governor Mitt Romney and President Barack Obama tonight.
The appeal ruling requires that China follow the earlier panel’s recommendations to ensure compliance with WTO rules, according to Agence France-Presse. The appellate body’s full ruling can be found HERE.
Jobless Claims Surge
New initial jobless claims increased sharply in the latest week reported, signaling that seasonal factors responsible for temporary swings in the labor market at the start of the quarter are winding down. According to the U.S. Department of Labor, unemployment claims for the week ending October 13 rose by 46,000 to a total of 388,000, reversing a steep drop from the prior week.
The four-week moving average, which smoothes out volatility and provides a clearer long-term picture of the job market, inched up by 750 to 365,500.
“Claims around that level suggest layoffs remain low — an encouraging sign for the economy — but don’t necessarily mean hiring has picked up,” CNN Money explains. “Meanwhile, about 3.3 million Americans continued to file for their second week of unemployment benefits in the week ended October 6, the most recent data available.”
Large increases in unadjusted claims typically occur at the start of a new quarter, but the pattern shifted by a week in one state, skewing the data and increasing volatility in labor market readings. Despite the wide swings in jobless claims, layoffs have remained relatively static in recent weeks, indicating that sluggish hiring is the primary reason for slow growth in payrolls.