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Paint Chemical Price Drop Signals Weak Economy

Tue, 06/16/2009 - 12:34pm

EVERTON BAILEY Jr. Associated Press Writer - June 16, 2009

WASHINGTON (AP) — The recession may not be waving a white flag just yet, but the price of a key ingredient in white paint may signal the economy's downhill slide is easing.

Titanium dioxide prices fell 5.1 percent in the 12 months ending in May, the Labor Department reported Tuesday. That followed a 5.7 percent drop in the 12 months ending in April.

It suggests that home construction and renovation activity will be subdued in the months ahead.

Economists track titanium dioxide as a barometer of the country's overall financial health. When people are building homes, remodeling, redecorating or even getting a house ready to sell, they buy paint. About 419 million gallons of paint were sold last year, and more than a third of it was white.

"The slower pace of decline in titanium dioxide prices could suggest that the economy is a little less weak," said Richard Yamarone, economist at Argus Research Corp. However, it underscores "the depressed market for manufactured goods because cars, washers, dryers, refrigerators use some form of white paint," he added.

Yamarone also predicts that despite a burst in construction activity in May, the sector will continue to struggle until the big glut of unsold homes is winnowed down.

White paint is used on a wide variety manufactured goods, including cars and household appliances, which saw production declines in May, according to a separate report issued Tuesday by the Federal Reserve.

The number of housing projects — new single-family homes and apartments — rose sharply in May to an annualized pace of 532,000 units. The pickup mostly reflected a big jump in construction of multifamily buildings, the Commerce Department said Tuesday. In April, housing activity hit a record low pace of 454,000 units.

The price for titanium dioxide, which is not seasonally adjusted, tends to be volatile and should be viewed with caution, economists say.

There have been signs that the recession, which started in December 2007 and is now the longest since World War II, is easing its grip. Many analysts predict the economy isn't sinking nearly as deeply in the current quarter as it had in the last six months, when it recorded the worst performance in 50 years.

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