Double-Dip U.S. Recession Looks Ever Less Likely

By John S. McClenahen You can just about banish any thoughts you may have had about the U.S. economy being headed into a double-dip recession. The latest round of reports on housing, inflation, real earnings and productivity show the American economy alive and well. Far exceeding economists' expectations, starts for privately owned housing in May were at a seasonally adjusted rate of 1.733 million, a spectacular 11.6% higher than April's revised figure of 1.553 million. Data jointly released by the U.S. Commerce Department and the Department of Housing & Urban Development also show starts for single-family homes at an annual rate of 1.389 million in May, 9.6% above the revised April mark of 1.267 million. "Falling mortgage rates should keep housing robust," says Merrill Lynch & Co., New York. The May housing numbers also suggest the retail sales slowdown in May was temporary, says the securities firm. The U.S. Labor Department's Consumer Price Index (CPI) was flat in May, following a 0.5% increase in April. Lower prices for energy and food were major factors. The so-called core CPI -- which excludes relatively volatile energy and food price changes -- rose 0.2% last month (an annual rate of 2.4%), in line with economists' predictions. "We continue to look for the core CPI to cool to about 2% over the balance of the year," states Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. Meanwhile, real average weekly earnings increased 0.3% in May, a dramatic turnaround from a 0.4% decline in April, a separate set of statistics from the Labor Department show. And finally, data presented this week at a roundtable at the National Association of Manufacturers, Washington, D.C., suggest U.S. productivity gains will sustain the economic expansion now under way and that over the next several years GDP will grow at an annual average rate of 3.3%.

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