The Urethane Blog

Higher Propylene Costs Rolling Through the Value Chain

LyondellBasell Announced 12 cents/lb of PG increases today on top of a February  3c/lb increase.  Dow also announced a slew of increases, all for 15c/lb, as shown below.  Stay tuned to the blog for the latest market info.

 

Dear Dow Customer:

Effective March 1, 2012, or as contracts allow, The Dow Chemical Company,
(“Dow”) will increase off-list prices in North America (United States and Canada)
listfor the following products:

Propylene Oxide
DOW PuraGuard™ PG USP/EP

Propylene Glycol Industrial (PGI)

Dipropylene Glycol LO+ (DPG LO+)
Dipropylene Glycol (DPG)
pylene

Tripropylene Glycol (TPG)
ropylene
Tripropylene Glycol Acrylate Grade (TPG Ac)

In addition, 100% order control will be implemented effective immediately for
each product listed above; all monthly order volumes will be restricted to the
monthly maximum Dow is contractually obligated to sell.

 

Dow Announces Polyols Increases

January 30, 2012

POLYOL PRICE ACTION

Dear Valued Customer:

Effective March 1, 2012, or as soon thereafter as the applicable contract allows,
The Dow Chemical Company (“Dow”) will increase its price for flexible
VORANOL™, VORALUX™, and SPECFLEX™ polyols by US$0.10/pound and
for all co-polymer polyols by US$0.15/lb.

This increase is in addition to the previously announced US$0.10/lb price
increase for flexible VORANOL™, VORALUX™, and SPECFLEX™ polyols and
co-polymer polyols that is effective for February 17, 2012.

All other contract terms and conditions remain in full force and effect and orders
must comply with established monthly sales levels and contract commitments.
Your Dow sales representative will be contacting you in order to answer any
questions you might have and to review your sales plan volumes.

Dow appreciates your business, and we look forward to our continued
relationship.

Sincerely,

Polycoat Expands Organization

POLYCOAT Expands Its Sales Force

American Polymers Corporation (dba Polycoat Products), a leading manufacturer and custom formulator of high performance protective polyurethanes, polyurea, and polyaspartic coatings and linings welcomes two new important additions to its California sales staff plus eighteen independent, North American sales reps tasked with expanding sales throughout the US, Canada and Mexico.

Adriaan van der Capellen, Sales and Technical Support Manager, Waterproof Division and Steven McGrane, Technical Sales Manager, Industrial Applications, Foam Division have joined Polycoat to grow their respective division’s sales and provide sales and technical support to local distributors and contractors.

“van der Capellen and McGrane bring us strong, hands-on, sales and technical support expertise that will assist us in our explosive national growth”, said Ashish Dhuldhoya, Senior Vice President, Polycoat Products. “Their wide-ranging industry and product knowledge will assist us in advancing our core businesses and adding new and exciting solutions to our family of products”.

Joe Nichy, National Sales Manager of Polycoat Products stated, “van der Capellen and McGrane are just the first step in our nationwide sales force expansion. We’re also added eighteen experienced independent coatings sales reps that give us comprehensive brand exposure and enable us to grow and expand our product offerings nationally and throughout North America.”

Adriaan van der Capellen is a coatings industry veteran with over 34 years of sales, technical support, new business development and coatings industry experience. His knowledge in the area of waterproofing and coatings spans all facets of new and remedial construction including product sales, technical support, writing specifications, estimating, project management and application preparation of waterproofing products, deck coatings and epoxy coating systems.

Prior to joining Polycoat, van der Capellen held Technical Sales and Manager positions with Pacific Polymers, Williams Specialty Coatings and Slater Waterproofing. He is fluent in Dutch and holds a J.D. in Law from Western State University College of Law and a B. A. in Political Science degree from California State University Long Beach.

Steven McGrane brings a strong sales and technical foam application background along with hands-on expertise in industrial applications. He joins Polycoat from his most recent position with Arnco Construction. Prior to that he held sales and technical positions with Henry Co. / RTC and Pro-Tech Products. McGrane’s comprehensive understanding and technical expertise of foam coatings will assist Polycoat with its emerging foam division sales and product development. His keen ability to trouble shoot technical problems and work closely with customers on large commercial industrial projects will greatly benefit Polycoat Products and its customers.

http://www.polycoatusa.com/press.shtml

Albemarle Introduces Low Odor Ethacure 300

Albemarle Improves Leading Liquid Curative, ETHACURE® 300

Easy-to-handle aromatic diamine curative recently modified to greatly reduce odor while retaining performance

 

 

BATON ROUGE, La., Jan. 30, 2012 /PRNewswire via COMTEX/ -- Albemarle Corporation ALB +0.84% announced today that it has greatly reduced the odor of its ETHACURE 300 liquid aromatic diamine curative used in both hot and room-temperature polyurethane cast elastomers and sealants.

 

"This is an advancement that will considerably increase the utility of ETHACURE 300, especially in consumer market applications where odor is critical," says Chris Knight, global business director of curatives and antioxidants. "Furthermore, we were able to maintain the high properties and performance characteristics of our safe and effective ETHACURE 300 diamine curative."

Albemarle's curatives business is part of the company's polymer solutions business segment. For more information about ETHACURE curatives, please visit www.curatives.com .

About Albemarle Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a leading global developer, manufacturer, and marketer of highly-engineered specialty chemicals for consumer electronics, petroleum refining, utilities, packaging, construction, automotive/transportation, pharmaceuticals, crop protection, food-safety and custom chemistry services. The Company is committed to global sustainability and is advancing its eco-practices and solutions in its three business segments, Polymer Solutions, Catalysts and Fine Chemistry. Corporate Responsibility Magazine selected Albemarle to its prestigious "100 Best Corporate Citizens" list for 2010 and 2011. Albemarle employs approximately 4,000 people and serves customers in approximately 100 countries. Albemarle regularly posts information to www.albemarle.com , including notification of events, news, financial performance, investor presentations and webcasts, Regulation G reconciliations, SEC filings, and other information regarding the Company, its businesses and the markets we serve.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Albemarle Corporation's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report on Form 10-K.

SOURCE Albemarle Corporation

Copyright (C) 2012 PR Newswire. All rights reserved

http://www.marketwatch.com/story/albemarle-improves-leading-liquid-curative-ethacure-300-2012-01-30

Domfoam Files For Chapter 15 Bankruptcy Protection

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Canadian Foam Maker Domfoam Seeks U.S. Bankruptcy Protection

By Katy Stech 27 January 2012

After admitting its guilt in a conspiracy that inflated the cost of polyurethane foam, top Canadian foam maker Domfoam International Inc. filed for bankruptcy protection in the U.S. to shield itself against lawsuits from angry furniture manufacturers who say they've been forced to pay higher prices for more than a decade. Domfoam filed for Chapter 15 protection in U.S. Bankruptcy Court in Toledo, Ohio, where it faced more than a dozen lawsuits over the inflated prices it charged for its foam that goes into carpet underlay, furniture and bedding. The 550-worker company's headquarters are located outside Montreal and the company and its affiliates make the foam in plants across Canada.

In court papers, Chief Executive Tony Vallecoccia said that the U.S. bankruptcy court's protection, which blocks the advancement of lawsuits, would create "stability to allow for the marketing and sale of its businesses" and allow the company to pay off its debts. Earlier this month, Domfoam and its affiliate, Valle Foam Industries 1995 Inc., announced their C$12.5 million ($12.48 million) settlement with Canada's antitrust agency. Both companies pled guilty to coordinating price increases with other foam manufacturers after agency investigators amassed wiretapped evidence against them. Canadian officials said that Domfoam's price-fixing conspiracy started January 1999 and ran for more than a decade. In the U.S. lawsuits, furniture manufacturers estimated that the overall price of slabstock foam has been inflated by at least 3.5% since 2001 because of the industry-wide conspiracy. One of the lawsuits against Domfoam was filed on behalf of consumers that seeks to recover money for those who purchased items made with the company's foam. Another lawsuit was brought by mattress giant Sealy Corp. The fine and subsequent lawsuits hit Domfoam during tough economic times for the polyurethane foam industry. Foreign competitors can make the product cheaper, and consumer tastes have shifted away from products made from its foam products, which range in firmness based on their chemical makeup. "In particular, the demand for carpet under-padding has been eroded by a move in construction and consumers away from carpeting in favour of hardwood flooring and tile," Vallecoccia said. Domfoam said it lost more than $5 million on $37.1 million worth of sales during its most recent fiscal year. Domfoam estimated that the value of its assets, including that held by its affiliates, tallies to about C$44.1 million. But Vallecoccia cautioned in court documents that value isn't "likely to be realized in the event of a forced or even orderly sale of the business as a result of its insolvency." "Domfoam continues to lose money on a monthly basis, although I believe it could operate at a break even basis if properly restructured and ultimately return to profitability in the future," he said in court papers. The company's Canadian-based reorganization would enable it to pay off its debts, including a C$4.5 million operating loan from Royal Bank of Canada. The company and its affiliates also owed about C$9 million in trade debt, payroll debt and taxes as of Dec. 1. Owed C$2.7 million, Bayer AG ranked among its biggest creditors for its agreement to sell a key ingredient called polyol. In the company's U.S. bankruptcy case, Judge Mary Ann Whipple granted the company's request to put lawsuits against the company and its affiliates on hold while she determines whether the company's request for protection in U.S. court system is legitimate. Companies that filed for Chapter 15 protection in the U.S. court system have to prove to a judge that, among other things, the company is restructuring its finances in a foreign court and that it should, as a result, enjoy the same protections that the court system typically gives to bankrupt companies. The company filed for Canada's equivalent of bankruptcy protection in Ontario Superior Court on Jan. 12. Domfoam also put Valle Foam and another affiliate, A-Z Sponge & Foam Products Ltd., under Chapter 15 bankruptcy protection. The lead case is numbered 12-30215.

Document DJFDBS0020120127e81rmgd3o

(c) 2012 Dow Jones & Company, Inc.   https://www.fis.dowjones.com/WebBlogs.aspx?aid=DJFDBS0020120127e81rmgd3o&ProductIDFromApplication=&r=wsjblog&s=djfdbs

China Picture

China’s very mysterious data

By Ambrose Evans-Pritchard Economics Last updated: January 26th, 2012

271 Comments Comment on this article

A quick observation.

I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.

The Shanghai Container Freight Index fell 1.4pc to a record low of 919.44 in November, after sliding relentlessly for several months. It has picked up slightly since.

Click to enlarge

The Baltic Dry Index measuring freight rates for ores, grains, and bulk goods, has fallen 44pc over the last year. Kasper Moller from Maersk in Beijing said weak Chinese demand for iron ore was the key culprit.

Cautionary warning. The BDI index also reflects the shipping glut, so it is not a pure indicator.

However, rail, road, river and air freight volume for the whole of China fell to 31780m tons in November (latest data), from 32340m tons in October. Not a big fall, but still negative. (National Bureau of Statistics of China.)

Chinese electricity use was flat in over the Autumn, with a sharp fall in the (year-on-year) growth rates from 8.9pc in September, to 8pc in October, and 7.7pc in December.

Residential investment has been contracting on a monthly basis, and of course property prices are now falling in all but two of China’s 70 largest cities.

So how did China pull off an economic growth rate of 8.9pc in the fourth quarter?

Beats me.

I strongly suspect that the trade and power data reveal the true state of China’s economy.

There clearly was a pick up in early January but I stick to my view that China has inflated its credit bubble beyond the limits of safety – an increase of 100pc of GDP in five years, or twice US credit growth from 2002-2007 – and that Beijing cannot continue to gain much traction with this sort of artificial stimulus.

Indeed, the extra boost to GDP from each extra yuan of credit has collapsed, according to Fitch Ratings.

A final point. There is a widespread misunderstanding that China’s households can easily come to the rescue by cranking up spending because they have the world’s highest savings rate, and consumption is just 36pc of GDP.

Prof Michael Pettis from Beijing University puts that one to rest. The Chinese do not have a much higher personal savings rate than other East Asians. The reason why consumption is so low is that wages are low, the worker share of GDP is low, and the whole economy is massively deformed and tilted towards excess investment.

This is deeply structural. It cannot be changed with a flick of the fingers, and contains the seeds of its own destruction.

China is a marvellous country. I wish them the best. But they have not found the secret formula for perpetual uber-growth.

No such formula exists.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014380/china%E2%80%99s-very-mysterious-data/

Wheeler Hired at SWD Urethane

SWD Urethane Hires Ian Wheeler as New Head Chemist

Mesa, AZ (PRWEB) January 30, 2012

SWD Urethane announced the recent hiring of Ian Wheeler as its Head Chemist. Ian joins the SWD Urethane team after previously working with some of the largest companies in the polyurethane industry, including his most recent experience with Carpenter.

Ian decided to join SWD as the head chemist because he “felt that the future for SWD looks very bright,” and that SWD’s market growth “is a reflection of the energy, enthusiasm and teamwork on every level of the organization. I feel a very positive vibe with SWD.”

Ian Wheeler has an extensive background as a SPF chemist. His experience began with ICI Polyurethanes in 1989. From there Ian has had successful career stops with Arkema, Dow, and Carpenter. Ian says that he is most proud of “working with systems development for applications with appliances and other OEM." These applications were extremely interesting for Ian because “they tested my technical skills to the highest degree.”

Over the last 4 years, SWD has been one of the fastest growing spray foam manufacturers for wall insulation and roofing foam. “Some of the growth is due to our recent Canadian approval for 2 lb foam. However, SWD’s growth is not just limited to walls and roofs. We have also seen an increase in our pour foams and elastomers and expect to continue our significant international growth," shared Jim Perkins, President for SWD Urethane.

Perkins also shared that “it’s great that SWD is in a position to be hiring people right now. We are looking for professionals of the highest caliber, like Ian Wheeler. Anyone who is interested in working for a rapidly emerging company like SWD should send their resume to resumes(at)swdurethane(dot)com and any high performance sales person should send their resume to salescareers(at)swdurethane(dot)com. “

SWD Urethane recently received Canadian approval for their Quik-Shield 112 2lb spray foam. This approval by the CCMC allows SWD to now sell both a 2lb and 1/2 lb insulation foam into the Canadian market.

SWD Urethane is headquartered in Mesa, Arizona and has been serving the sprayfoam market since 1972. SWD offers a full range of sprayfoam solutions for roofing and building envelope performance. SWD also offers a full line of elastomers, packaging foams and other sprayfoam solutions

Read more: http://www.digitaljournal.com/pr/564749#ixzz1kx8MiYGO

Another Attempt to Reduce Foam in Seating

'Performance' Car Seat Eliminates Steel

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Ann R. Thryft, Senior Technical Editor, Materials & Assembly
1/30/2012   1 Comment

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Plastics and chemical giant BASF and automotive supplier Faurecia have co-developed a car seat backrest that integrates the seat frame and back panel into a single structure. The composite backrest reduces the need for foam, eliminates metal almost entirely, and simplifies -- read shortens -- the trimming process. It also saves weight.

The concept Performance Seat, along with a concept 100-percent plastic wheel made of BASF's impact-resistant polyamide Ultramid Structure material, were displayed at the recent North American International Auto Show in Detroit. Paris-based Faurecia already demonstrated the Performance Seat at the LA Auto show in November.

 

 

Faurecia's high-tech Performance Seat with a body-conforming "compliant shell"
is 30 percent thinner than conventional seats and weighs 20 percent less.
(Source: Faurecia)

Aimed at smaller and midmarket vehicles, the Performance Seat weighs 20 percent less than conventional seats made with steel frames and is 30 percent thinner. It is also designed with esthetics in mind: Its materials were inspired by sportswear and fashion design.

The outer frame's composite material consists of nylon, continuous glass-fiber reinforcement, and a metal recliner adapter combined via an injection molding process. It provides the necessary support to pass crash tests and contains a thin, flexible seat area within the industry's first "compliant shell," consisting of the back panel. This shell conforms to differing body sizes, shapes, and postures of driver and passengers by changing as people move in the seat. The shell was inspired by office furniture with flexible thermoplastic support. Instead of being covered and hidden by foam and fabric, the structure is exposed to view like an architectural element. The eliminated material further reduces space and weight.

The compliant shell eliminates 75 percent of the foam used in today’s cushioning in car seats. In addition to the backrest, the Performance Seat includes a plastic cushion module, which Faurecia co-developed with Rhodia SA.

A thin pad of foam and fabric covers both the backrest and the plastic cushion module. Faurecia bonds the fabric to the foam using a technology called "cover carving," which enables the creation of complex and unique shapes that are difficult to produce with more conventional trimming methods. Along with its bonded fabric cover, the foam pad in the backrest measures 15mm. The cover and foam are installed directly on the compliant shell, snapped on with retainers. The combination of bonded fabric and foam is used only in areas where the driver or passenger's body actually touches the seat, so no foam or trim is wasted.

Faurecia reportedly expects to begin mainstream production of its all-composite Performance Seat backrest as soon as 2014.

 

http://www.designnews.com/document.asp?f_src=designnews_gnews&doc_id=237504&page_number=2

Ford Posts Nice 2011

Despite strong '11, Ford cautious

Material costs add to worry; workers to get rest of bonus in March

• By David Shepardson
• Detroit News Washington Bureau
• 1 Comments

Ford Motor Co. had its most profitable year in more than a decade, and its 2011 performance translated into about $6,200 in profit-sharing checks for the automaker's 41,600 hourly workers,

But investor worries about headwinds abroad in 2012 — including uncertainty in Europe and higher commodity prices — sent the company's stock tumbling Friday.

Dearborn-based Ford, first among the three domestic automakers to announce its fourth quarter and 2011 full-year earnings, reported $20.2 billion in net income for 2011. It was Ford's best year since 1998 and second-best year ever, as its results were boosted by a one-time accounting gain.

This marked Ford's third consecutive annual profit, after losing $31 billion between 2005 and 2008.

But the company's fourth-quarter results didn't meet expectations. There are concerns about Ford's hedging strategy and higher commodity costs, and Ford is cautious about 2012 — especially in Europe and South America.

Under a formula agreed to by the United Auto Workers as part of a new labor agreement, Ford's earnings generated $6,200 in annual profit sharing for each of its 41,600 hourly employees.

Those workers received payments for the first half of the year of $3,750 per person in December. For the second half of 2011, the formula generated approximately $2,450 per employee, which is to be distributed in March. Profit-sharing payments for individual employee depend on how many hours each worked.

The payments will provide a big economic boost to workers and communities.

Ford said this month that it is awarding bonuses and merit raises for the first time since 2010 to its 20,000 North America salaried employees. It hasn't paid a bonus and merit pay increase in the same year since 2008.

Salaried workers will get 2.7 percent average salary increase based on performance.

Ford's stock fell sharply on Friday's financial results, but recovered some of the losses in afternoon trading. The automaker closed down 4.2 percent to $12.21, $0.53 in very heavy trading.

The automaker reported fourth quarter earnings of $0.20, excluding the accounting change. That's below the Wall Street consensus of about $0.25 a share.

"If you get over the small disappointment over the fourth quarter, this has been a good year," Ford Chief Financial Officer Lewis Booth said in an interview, noting the economic uncertainty in Europe and Asian natural disasters.

Ford's 2011 results were boosted by a one-time, noncash gain of $12.4 billion in prior year tax losses that had been set aside starting in 2006.

Excluding the one-time tax gain, it was still Ford's best annual operating profit since it earned $11.5 billion in 1999, the company said.

Ford's pre-tax operating profit was $1.1 billion in the fourth quarter. Excluding the special item, the company earned $8.8 billion in operating income in 2011.

Ford has now reported 10 consecutive profitable quarters. For the year, Ford earned $6.2 billion in operating profits in North America, up from $5.4 billion in 2010.

But the company's results for 2012 didn't impress some analysts. JPMorgan analyst Himanshu Patel called the fourth quarter results "weak."

Morgan Stanley auto analyst Adam Jonas said in a note that Ford missed its forecasts for fourth-quarter results — especially on margins. But he said Ford's "2012 outlook for 'about equal' total company pretax profit with higher auto profit and auto margins is encouraging. 2012 may be shaping up to be a very good year for Ford."

Standard & Poor's Ratings said Ford's results were "consistent with our assumptions incorporated in the fall 2011 upgrade."

Significantly, the automaker cut its debt from $19 billion to $13.1 billion by the end of 2011. Ford's results also were boosted $400 million via the sale of its Ford Russia operations to a joint venture.

Ford said it expects its market share this year to be "about equal" to 2011 in the United States and Europe. Last year, it forecast market share gains in both the U.S. and Europe. Ford's market share was up 0.1 percent to 16.5 percent in 2011 in the U.S., but its retail share was flat at 14 percent.

The company reported a $190 million loss in Europe in the fourth quarter, up substantially from its $51 million loss in the same period in 2010. The company lost $27 million in Europe for all of 2011, compared with a $182 million profit the previous year.

Ford said it has challenges to address in Europe and South America. Uncertainties about the debts of major European countries have raised fears about a major economic slowdown in Europe.

And it still faces questions — as does its rival General Motors Co., which will announce its 2011 earnings Feb. 16 — about its large pension liabilities.

Ford's pension plans worldwide are underfunded by $15.4 billion, an increase from $11.5 billion the previous year. In the U.S., its pension obligations are underfunded by $9.4 billion, up from $6.7 billion. Ford contributed $1.5 billion to its global pension plans in 2010 and plans to make $3.5 billion in contributions to those plans this year, including $2 billion to its U.S. pension funds.

JPMorgan said Ford may be considering UAW pension buyouts — a move that industry analysts have said GM may announce this year.

"Like GM, Ford is more actively discussing 'de-risking' steps for its pension, which include limiting liability growth, discretionary contributions … and 'other actions under development,' which may hint at UAW pension buyouts," said JPMorgan's Patel.

Booth said the automaker is considering unspecified "strategic actions" to address its pension underfunding and plans to fully fund them within "the next few years." He declined to answer whether Ford is considering pension buyouts.

Ford Motor Credit Co. earned $2.4 billion in profits in 2011, down from $3.1 billion in 2010, because fewer leases are being terminated.

Chrysler Group LLC is to report its 2011 earnings Feb. 1, and is expected to report a full-year profit. GM has earned about $8 billion in the first nine months of the year.

 

http://www.detroitnews.com/article/20120128/AUTO01/201280324/Despite-strong-11-Ford-cautious?odyssey=mod|newswell|text|FRONTPAGE|p

Last Week in Review

Economic Week in Review: The Fed details its slow-growth projections

January 27, 2012

Amid some encouraging signs that the economy continues to grow modestly, Federal Reserve officials gave an unprecedented look at the details of their economic expectations. In a report issued Wednesday, the Fed signaled that it expects growth to remain modest enough to allow short-term interest rates to remain near rock bottom for even longer than it had projected in recent months. For the week ended January 27, the S&P 500 Index rose 0.1% to 1,316 (for a year-to-date total return—including price change plus dividends—of about +4.8%). The yield on the 10-year U.S. Treasury note fell 12 basis points to 1.93% (for a year-to-date increase of 4 basis points).

Fed extends its ultra-low rate pledge

The Federal Reserve's policymaking committee announced that it now expects to keep its key short-term interest rate near zero until late 2014, an extension of its earlier projection. Last year, it said it intended to keep the federal funds target rate between 0% and 0.25% until at least mid-2013.

Live webcast: The outlook for 2012 and beyond

Please join us Wednesday, February 8, for a video roundtable with Vanguard's chief economist, Joe Davis, and our chief investment officer, Gus Sauter. They'll offer their economic outlook and take questions from investors around the country.

Sign up and submit a question »

In its first meeting since announcing it would issue more detailed explanations of its projections, the committee and Federal Reserve Bank presidents also disclosed their individual expectations for the rate down the road. The officials' projections were evenly spread among those who think the rate might have to be increased sooner, those who expect the rate to be raised by late 2014, and those who expect the rate to stay at its current level even longer than 2014.

The committee also said it expects the unemployment rate to fall to between 8.2% and 8.5% this year, a slight improvement over its prediction in November. But the Fed also predicted the economy will grow between 2.2% and 2.7% this year, slightly slower than it had previously thought. The committee also projected inflation would remain below its now-official long-term target of 2%, hovering between 1.5% and 1.8% this year.

Leading indicators tick upward

The Conference Board's measure of potential future economic activity rose 0.4% in December, a bit lower than expected but higher than November's 0.2% increase. Eight of the gauge's ten components were positive, with the strongest readings coming from a rising spread in interest rates and improving jobless claims.

The indicators "provide some reason for cautious optimism in the first half of 2012," said Ken Goldstein, economist at The Conference Board. "This somewhat positive outlook for a strengthening domestic economy would seem to be at odds with a global economy that is losing some steam. Looking ahead, the big question remains whether cooling conditions elsewhere will limit domestic growth or, conversely, growth in the U.S. will lend some economic support to the rest of the globe."

GDP turns upward in 4th quarter

The first estimate of the nation's gross domestic product (GDP) for the fourth quarter showed the U.S. economy grew at an annualized rate of 2.8%, which was a bit lower than expected but the strongest showing since the second quarter of 2010. The improvement in the most recent quarter came almost entirely from increased inventory investment, which is unlikely to be sustainable in the early part of 2012. Consumer spending improved slightly, fixed investment slowed considerably, international trade went from a net positive to a slight drag, and government spending became a bigger brake on growth.

For the year, the U.S. economy grew 1.7%, down from a 3% rise in 2010. A spike in commodity prices during the first part of 2011, the earthquake disaster in Japan, sovereign debt worries in the Eurozone, and political bickering in Washington, D.C., combined to slow the U.S. economy. Investment and exports were the strong points in the data for the year.

"This latest GDP report reflects what we expect for 2012: government spending becoming more of a drag as fiscal consolidation kicks in, consumer spending contributing less than its normal two-thirds share of the economy as households continue to work down their debt loads, and businesses holding back on spending plans until the future looks more certain," said Roger Aliaga-Díaz, senior economist at Vanguard. "As a result, we're expecting a sustained period of positive but below-average growth."

GDP: Under the hood
	4Q	2011
Real GDP	+2.8%	+1.7%
Contributions of major components (percentage points)
Consumer spending	+1.45	+1.53
Business spending	+2.35	+0.58
Trade (exports minus imports)	–0.11	+0.05
Federal, state, and local government spending	–0.93	–0.45

Quarterly figures annualized.

Get a closer look at GDP and its components.

New-home sales post record low for year

Sales of new single-family homes fell 2.2% in December compared with November. Sales were lower than expected, registering an annual rate of 307,000. For the year, total new home sales dropped 7.3%, hitting an all-time low going back to 1963, the first year this data was compiled. On the bright side, fourth-quarter sales rose an annualized 20% from the previous quarter, and were 3% higher when compared with the fourth quarter of 2010. When seasonally adjusted, the median new-home price of $201,100 was 7% lower than November's and 13% lower than that of one year ago. The supply of available new homes remained near the six-month mark, which is considered a good balance of supply and demand.

Durable goods orders continue to grow

New orders for durable manufactured goods rose a better-than-expected 3% in December. The increase, the fifth in the last six months, followed a 4.3% rise in November. Transportation equipment, up for two consecutive months, posted the largest increase at 5.5%, notably because of orders for nondefense aircraft and parts. Excluding transportation, new orders increased 2.1%. Excluding defense, new orders increased 3.5%.

The economic week ahead

Next week, personal income will be reported on Monday, the employment cost index and consumer confidence reports come out on Tuesday, construction spending and manufacturing will be updated on Wednesday, and a reading on productivity and costs will be released on Thursday. Friday will bring the highly anticipated monthly employment update, along with factory orders data and the ISM's nonmanufacturing index.

Summary of major economic reports
Date	Report	Actual value	Consensus expected value	10-year note yield	S&P 500 Index
January 23				+4 bp	0%
January 24				–1 bp	–0.1%
January 25	FOMC meeting ends with no change in current monetary policy. Source: Federal Reserve Board	—	—	–7 bp	+0.9%
January 26	Initial Jobless Claims (week ended January 21) Source: Labor Department	377,000	370,000	–5 bp	–0.6%
	Durable Goods Orders (December) Source: Commerce Department	+3.0%	+2.0%
	New-Home Sales (December, annualized) Source: Commerce Department	307,000	321,000
	Leading Economic Indicators (December) Source: The Conference Board	+0.4%	+0.7%
January 27	Real Gross Domestic Product (4Q annual rate) Source: Commerce Department	+2.8%	+3.0%	–3 bp	–0.2%
			Weekly change	–12 bp	+0.1%

bp=basis points. 100 basis points equal 1%. For example, if a bond's yield rises from 5% to 5.5%, the increase is 50 basis points.

Notes

• The economic statistics presented in this report are subject to revision by the agencies that issue them. For more information on the reports mentioned in this article, read Guide to major U.S. economic reports.
• All investments are subject to risk.
• Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

https://personal.vanguard.com/us/insights/article/economic-week-review-01272012