This is an unusual recession. Manufacturing production has dipped very marginally because of soaring export orders and probably the return of some manufacturing to the US to avoid the doubled rates for shipping products from Asia to the US. Employment has held up much better than in past recessions because of the surge in exports including business services to a world economy growing much faster than the US. Housing, motor vehicles and fuel intensive services have borne most of the cutbacks.

The domestic recession began last fall and will continue through the summer and possibly one or two quarters longer. The GDP growth rate through next winter is dependent on the timing of export and import shipments. Another slightly negative quarter is possible but not probable.

Goods export rose at 16.6% annual rate in the second quarter, led by capital goods, commodities and farm products. Goods imports posted a 7.6% decline. Both of these changes are extreme and not likely to be repeated. Much of the import drop was to trim inventories, including oil, in the US which are now only slightly above the norm.  Ahead, there is less need to trim import and export growth will ebb as world economic growth slows and the $US appreciates.

While the domestic US economy weakens further through the winter, the economic environment for construction improves. The key restraints on construction activity begin to ebb. Access to construction finance improves – not to “good” but only to “less bad” – as lenders progressively recapitalize.  The huge surplus of homes for sale begins to shrink as foreclosures slow and deep price discounts boost home sales.  The 21% December to July surge in construction materials prices ebbs quickly as speculators continue to reduce their long “(buy”) positions and the slowing world economy reduces demand.  This will release some over budget projects from their current delayed status. Falling oil prices boosts consumer confidence which turns some rental households into homebuyers. Congress belatedly finds some supplemental money for near bankrupt Highway Trust Fund which permits more contract awards.

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