THE BE YOUR OWN ECONOMIST ® BLOG
The blogger will be vacationing – on and off – until mid September. So postings will be occasional for the next eight weeks.
Enjoy your summer.
© 2008 Michael B. Lehmann
Monday, July 21, 2008
Start Bailing
THE BE YOUR OWN ECONOMIST ® BLOG
We’ve had a lot of rain, and many boats have filled with water.
Too bad the powers-that-be stand ready to help bail out the biggest boats only. The small-boat owners, especially those that have taken on the most water, must fend for themselves. Some will continue to float, but many will sink.
Since the big-boat owners had the means to most accurately forecast the weather and make provision for the approaching storm, why offer them the largest share of assistance? Perhaps many small-boat owners were foolish, in the wisdom of hindsight, not to recognize the hurricane’s approach. But now that they are in the water, struggling for shore, can we take comfort as we see them slip beneath the surface?
It was a hundred-year storm from which we all have learned a lesson. Perhaps we have even learned enough to provide adequate safeguards, counseling and warning for the small boat owners. Maybe next time we won’t let outfitters provision them for a journey that they have no hope of completing.
If we stand ready to bolster the shares of Fannie and Freddie and lend them money too……. If we’re prepared to limit short-selling the fat-cats’ stock………… Why can’t we use public funds to write down a portion of Joe and Josephine Public’s mortgage?
It seems only fair.
© 2008 Michael B. Lehmann
We’ve had a lot of rain, and many boats have filled with water.
Too bad the powers-that-be stand ready to help bail out the biggest boats only. The small-boat owners, especially those that have taken on the most water, must fend for themselves. Some will continue to float, but many will sink.
Since the big-boat owners had the means to most accurately forecast the weather and make provision for the approaching storm, why offer them the largest share of assistance? Perhaps many small-boat owners were foolish, in the wisdom of hindsight, not to recognize the hurricane’s approach. But now that they are in the water, struggling for shore, can we take comfort as we see them slip beneath the surface?
It was a hundred-year storm from which we all have learned a lesson. Perhaps we have even learned enough to provide adequate safeguards, counseling and warning for the small boat owners. Maybe next time we won’t let outfitters provision them for a journey that they have no hope of completing.
If we stand ready to bolster the shares of Fannie and Freddie and lend them money too……. If we’re prepared to limit short-selling the fat-cats’ stock………… Why can’t we use public funds to write down a portion of Joe and Josephine Public’s mortgage?
It seems only fair.
© 2008 Michael B. Lehmann
Thursday, July 17, 2008
Up 500
THE BE YOUR OWN ECONOMIST ® BLOG
No sooner did the Dow slip below 11,000 on Tuesday, it rebounded almost 500 points in the last couple of days.
Is the slump over?
Probably not. The stock market jumped because oil slipped and some financial firms did well in the second quarter. That raised hopes that inflation might subside and the financial sector rebound, and that both developments pointed the way to recovery.
But those hopes may be premature. The downturn is no longer encapsulated in housing. Autos and business capital expenditures have begun to weaken or show signs of weakness. If all three legs – housing, autos and business plant and equipment expenditures - are knocked out from under, overall spending will collapse, dragging the remainder of the economy down, too.
It’s too soon to celebrate.
© 2008 Michael B. Lehmann
No sooner did the Dow slip below 11,000 on Tuesday, it rebounded almost 500 points in the last couple of days.
Is the slump over?
Probably not. The stock market jumped because oil slipped and some financial firms did well in the second quarter. That raised hopes that inflation might subside and the financial sector rebound, and that both developments pointed the way to recovery.
But those hopes may be premature. The downturn is no longer encapsulated in housing. Autos and business capital expenditures have begun to weaken or show signs of weakness. If all three legs – housing, autos and business plant and equipment expenditures - are knocked out from under, overall spending will collapse, dragging the remainder of the economy down, too.
It’s too soon to celebrate.
© 2008 Michael B. Lehmann
Tuesday, July 15, 2008
Below 11
THE BE YOUR OWN ECONOMIST ® BLOG
Today the Dow closed below 11,000, falling to 10,962.54. Just a little more than half-a-year ago, in November 2007, it was over 14,000. The S&P, which exceeded 1550 in November, fell to 1214.91.
Fannie Mae and Freddie Mac, of course, are on everyone’s mind – as is the stability of the entire banking system. While a general banking collapse is not likely, it is true that the mortgage crisis infected many banks’ balance sheets. It will take a while for the system to work its way out of this predicament.
Of greater concern is the expenditure contraction that began in housing and is now starting to metastasize the overall economy. Many folks had become accustomed to applying their rising home equity toward the financing of automobile purchases. That avenue is now closed. And, as rising fuel prices make driving less attractive, auto sales have fallen.
Home sales and auto sales fell simultaneously in earlier recessions. This time auto sales lagged home sales’ drop. This lag provided a false sense of security – a hope that the housing malaise could be encapsulated and not infect other sectors. But that hope was in vain, and now the contraction in autos and related industries – rubber tires, steel, glass, fuzzy dice – will help pull down the rest of the economy. More ominously, auto’s decline will reinforce the housing debacle. That is, housing will sink further because the rest of the economy is ill.
Finally, business capital expenditures have also stalled. Why should business increase investment when the marketing outlook has become increasingly cloudy? If expenditures on plant and equipment – including technology – also fall, that will be the third leg – after housing and autos - knocked out from under the economy’s three-legged stool. The consequent recession could be long and dismal.
Today’s economic news provided further cause for concern. The Census Bureau (http://www.census.gov/marts/www/marts_current.pdf) said that “… advance estimates of U.S. retail and food services sales for June …(increased)… 0.1 percent (±0.5%)* from the previous month and 3.0 percent (±0.7%) above June 2007.” That’s especially weak if one recalls that economic-stimulus rebates were intended to boost consumer spending. The economic-stimulus package may have little benefit.
At the same time the Bureau of Labor Statistics said that (http://stats.bls.gov/news.release/ppi.nr0.htm) the “… Producer Price Index for Finished Goods increased 1.8 percent in June…” Multiplying by 12 provides a 21.6% increase at an annual rate – a real cause for concern.
No wonder Fed Chairman Ben Bernanke sounded so gloomy today when he delivered his semiannual monetary policy report to the Senate’s Committee on Banking, Housing, and Urban Affairs (http://www.federalreserve.gov/newsevents/testimony/bernanke20080715a.htm).
Chairman Bernanke summarized the situation as follows:
“At present, accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policy makers. The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher. Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth. In light of the increase in upside inflation risk, we must be particularly alert to any indications, such as an erosion of longer-term inflation expectations, that the inflationary impulses from commodity prices are becoming embedded in the domestic wage- and price-setting process.”
It’s a serious dilemma.
© 2008 Michael B. Lehmann
Today the Dow closed below 11,000, falling to 10,962.54. Just a little more than half-a-year ago, in November 2007, it was over 14,000. The S&P, which exceeded 1550 in November, fell to 1214.91.
Fannie Mae and Freddie Mac, of course, are on everyone’s mind – as is the stability of the entire banking system. While a general banking collapse is not likely, it is true that the mortgage crisis infected many banks’ balance sheets. It will take a while for the system to work its way out of this predicament.
Of greater concern is the expenditure contraction that began in housing and is now starting to metastasize the overall economy. Many folks had become accustomed to applying their rising home equity toward the financing of automobile purchases. That avenue is now closed. And, as rising fuel prices make driving less attractive, auto sales have fallen.
Home sales and auto sales fell simultaneously in earlier recessions. This time auto sales lagged home sales’ drop. This lag provided a false sense of security – a hope that the housing malaise could be encapsulated and not infect other sectors. But that hope was in vain, and now the contraction in autos and related industries – rubber tires, steel, glass, fuzzy dice – will help pull down the rest of the economy. More ominously, auto’s decline will reinforce the housing debacle. That is, housing will sink further because the rest of the economy is ill.
Finally, business capital expenditures have also stalled. Why should business increase investment when the marketing outlook has become increasingly cloudy? If expenditures on plant and equipment – including technology – also fall, that will be the third leg – after housing and autos - knocked out from under the economy’s three-legged stool. The consequent recession could be long and dismal.
Today’s economic news provided further cause for concern. The Census Bureau (http://www.census.gov/marts/www/marts_current.pdf) said that “… advance estimates of U.S. retail and food services sales for June …(increased)… 0.1 percent (±0.5%)* from the previous month and 3.0 percent (±0.7%) above June 2007.” That’s especially weak if one recalls that economic-stimulus rebates were intended to boost consumer spending. The economic-stimulus package may have little benefit.
At the same time the Bureau of Labor Statistics said that (http://stats.bls.gov/news.release/ppi.nr0.htm) the “… Producer Price Index for Finished Goods increased 1.8 percent in June…” Multiplying by 12 provides a 21.6% increase at an annual rate – a real cause for concern.
No wonder Fed Chairman Ben Bernanke sounded so gloomy today when he delivered his semiannual monetary policy report to the Senate’s Committee on Banking, Housing, and Urban Affairs (http://www.federalreserve.gov/newsevents/testimony/bernanke20080715a.htm).
Chairman Bernanke summarized the situation as follows:
“At present, accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policy makers. The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher. Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth. In light of the increase in upside inflation risk, we must be particularly alert to any indications, such as an erosion of longer-term inflation expectations, that the inflationary impulses from commodity prices are becoming embedded in the domestic wage- and price-setting process.”
It’s a serious dilemma.
© 2008 Michael B. Lehmann
Friday, July 11, 2008
We Avoided Moral Hazard, And Now Rome Burns
THE BE YOUR OWN ECONOMIST ® BLOG
Today’s near-collapse of Fannie Mae and Freddie Mac, and the accompanying erosion of stock-market values, can not be blamed on the managements of those firms. To a large extent they, and the markets generally, have suffered because of our commitment to avoiding moral hazard.
We want home buyers and lenders to suffer the consequences of their actions. No bailouts!!! They borrowed (or loaned) too much and paid (or loaned) too much. It’s their problem. If millions of homes consequently go into foreclosure and drag down everyone else’s property values, so be it. Market discipline! That’s what’s needed to wring the excesses from the system today and prevent speculation tomorrow.
It’s a fire-and-brimstone sermon. It avoids moral hazard. But the consequent debacle will burn the innocent with the guilty.
Suppose, instead, the federal government had bailed out borrowers and lenders by purchasing mortgages headed for default. The mortgages’ value could have been written down to a level that home buyers could afford, with the federal government paying the lender the difference between the old high value and the new low value. The result: Home buyers remain in their homes and make affordable payments while lenders are saved harmless and need not write down the mortgage values. The rash of foreclosures would have been dramatically reduced and the collapse in home prices contained.
The federal government, of course, would have to finance the bailout by deficit spending. But that’s exactly how the current economic stimulus plan works. The government borrows more in order to mail rebates to income-tax payers. Wouldn’t it be better, instead, to target that effort toward the real-estate market that comprises ground zero for our present problems? Why pay out money to all in the hope their purchases will stimulate demand, when we could target those funds to alleviate the real-estate crisis that is the root cause of our difficulties?
Only our moralizing stood in the way.
© 2008 Michael B. Lehmann
Today’s near-collapse of Fannie Mae and Freddie Mac, and the accompanying erosion of stock-market values, can not be blamed on the managements of those firms. To a large extent they, and the markets generally, have suffered because of our commitment to avoiding moral hazard.
We want home buyers and lenders to suffer the consequences of their actions. No bailouts!!! They borrowed (or loaned) too much and paid (or loaned) too much. It’s their problem. If millions of homes consequently go into foreclosure and drag down everyone else’s property values, so be it. Market discipline! That’s what’s needed to wring the excesses from the system today and prevent speculation tomorrow.
It’s a fire-and-brimstone sermon. It avoids moral hazard. But the consequent debacle will burn the innocent with the guilty.
Suppose, instead, the federal government had bailed out borrowers and lenders by purchasing mortgages headed for default. The mortgages’ value could have been written down to a level that home buyers could afford, with the federal government paying the lender the difference between the old high value and the new low value. The result: Home buyers remain in their homes and make affordable payments while lenders are saved harmless and need not write down the mortgage values. The rash of foreclosures would have been dramatically reduced and the collapse in home prices contained.
The federal government, of course, would have to finance the bailout by deficit spending. But that’s exactly how the current economic stimulus plan works. The government borrows more in order to mail rebates to income-tax payers. Wouldn’t it be better, instead, to target that effort toward the real-estate market that comprises ground zero for our present problems? Why pay out money to all in the hope their purchases will stimulate demand, when we could target those funds to alleviate the real-estate crisis that is the root cause of our difficulties?
Only our moralizing stood in the way.
© 2008 Michael B. Lehmann
Thursday, July 10, 2008
Moralizing at Treasury
THE BE YOUR OWN ECONOMIST ® BLOG
On July 8 Treasury Secretary Henry M. Paulson addressed the Federal Deposit Insurance Corporation’s Forum on Mortgage Lending to Low and Moderate Income Households. Excerpts from, and comments about, his remarks follow (http://www.ustreas.gov/press/releases/hp1070.htm):
“Many of today's unusually high number of foreclosures are not preventable. Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can't possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions. And in the midst of rapid price appreciation, some people bought homes anticipating an immediate profit. Now that their investments have not turned out as they had hoped, these people may walk away, even though they can afford their mortgage payment. These borrowers can and should be living up to their mortgage commitment - government intervention here would be inappropriate……….”
Comment: Some home-buyers borrowed unwisely, and they will lose their homes to foreclosure.
“Since last summer, we have been intently focused on avoiding preventable foreclosures: where homeowners, one, want to keep their homes and two, have the financial wherewithal to do so. Here, the challenge we encountered – and it was a big one - was the impending threat of a market failure arising from the complexities and difficulties of a mortgage market that had been transformed by the wide-scale securitization of mortgage financing……. “
Comment: The Treasury Department has worked with the mortgage-lending industry to avoid preventable foreclosures.
“We sought to address this potential market failure, by working with the industry to facilitate a process that approximates what would be normal behavior between a bank and a struggling borrower if the borrower were dealing with a bank that had originated and held the mortgage. And so last summer, we encouraged the creation of the HOPE NOW Alliance of mortgage lenders, servicers and counselors with the urgent mission of untying the Gordian knot of complexities surrounding the mortgage workout process………. “
Comment: Treasury assisted the workout of securitized mortgages made to borrowers who could pay their debts.
“From the outset of the HOPE NOW process, I have measured success by whether a borrower who has made all the payments at the initial rate, but couldn't afford the reset and reached out for help avoids going into foreclosure. And so far, the data on this question show an unqualified success………”
“Of course, lower interest rates have significantly reduced the reset problem. Still, there is no question that because industry has acted to fast-track eligible borrowers, we are achieving our objective. Of the more than 700,000 subprime mortgage resets originally scheduled through May of 2008, only 1800 loans that were current at reset have entered foreclosure. We will continue tracking that number closely to monitor progress. Entire industries do not adjust easily or quickly, even when markets are calm. The HOPE NOW Alliance is demonstrating that an industry can, through coordination, make a difference and do so without forcing American taxpayers to pay the bill…………..”
Comment: Treasury avoided helping those who would default and go into foreclosure in order to avoid a federal subsidy of these borrowers.
“Homeowners have responsibility as well. We can't help those who aren't willing to help themselves, and we must continue to urge struggling borrowers that if they haven't already, they need to reach out for help……….”
Comment: We will help those who help themselves.
“That said, working through this correction is made more challenging by the virtual disappearance of the subprime lending market. In response to excesses, that market has probably changed unalterably – as it must. Clearly, some who took out subprime mortgages never should have been approved for a mortgage in the first place. Practices, such as low or no doc loans, minimal or no down payments and other lax credit practices, are likely, as they should be, a thing of the past. At the same time, we cannot lose sight of the fact that subprime lending gave millions of responsible Americans a chance to borrow, despite a less-than-perfect credit history. We must not lose the benefits of the subprime market as we eliminate its flaws………………….”
Comment: Subprime lenders provided funds to borrowers who would probably default, but subprime lenders did expand homeownership.
“We are also strengthening efforts to improve financial literacy, so that borrowers better understand sophisticated lending products and the obligations they carry. Through the President's Advisory Council on Financial Literacy, Treasury is identifying approaches to financial education that will help potential borrowers evaluate mortgage options and avoid commitments they cannot meet.
Comment: Some home-buyers didn’t know what they were doing when they borrowed beyond their means.
Grand conclusion: The U.S. Treasury has helped those who did not borrow unwisely, and refused to help those who borrowed unwisely in order to avoid federal subsidy.
Isn’t that a little like the fire department saying it reduced the burden on taxpayers by refusing to put out fires at those homes where residents played with matches or smoked in bed? But doesn’t that fail to recognize the consequent problem of increased burden on taxpayers because those homes left to burn started other fires that consumed entire neighborhoods?
And, returning to the housing debacle, maybe it would have been better to provide taxpayer-funded assistance to all mortgage borrowers in the hope of preventing as many foreclosures as possible and thereby preserving home values and avoiding a housing debacle.
© 2008 Michael B. Lehmann
On July 8 Treasury Secretary Henry M. Paulson addressed the Federal Deposit Insurance Corporation’s Forum on Mortgage Lending to Low and Moderate Income Households. Excerpts from, and comments about, his remarks follow (http://www.ustreas.gov/press/releases/hp1070.htm):
“Many of today's unusually high number of foreclosures are not preventable. Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can't possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions. And in the midst of rapid price appreciation, some people bought homes anticipating an immediate profit. Now that their investments have not turned out as they had hoped, these people may walk away, even though they can afford their mortgage payment. These borrowers can and should be living up to their mortgage commitment - government intervention here would be inappropriate……….”
Comment: Some home-buyers borrowed unwisely, and they will lose their homes to foreclosure.
“Since last summer, we have been intently focused on avoiding preventable foreclosures: where homeowners, one, want to keep their homes and two, have the financial wherewithal to do so. Here, the challenge we encountered – and it was a big one - was the impending threat of a market failure arising from the complexities and difficulties of a mortgage market that had been transformed by the wide-scale securitization of mortgage financing……. “
Comment: The Treasury Department has worked with the mortgage-lending industry to avoid preventable foreclosures.
“We sought to address this potential market failure, by working with the industry to facilitate a process that approximates what would be normal behavior between a bank and a struggling borrower if the borrower were dealing with a bank that had originated and held the mortgage. And so last summer, we encouraged the creation of the HOPE NOW Alliance of mortgage lenders, servicers and counselors with the urgent mission of untying the Gordian knot of complexities surrounding the mortgage workout process………. “
Comment: Treasury assisted the workout of securitized mortgages made to borrowers who could pay their debts.
“From the outset of the HOPE NOW process, I have measured success by whether a borrower who has made all the payments at the initial rate, but couldn't afford the reset and reached out for help avoids going into foreclosure. And so far, the data on this question show an unqualified success………”
“Of course, lower interest rates have significantly reduced the reset problem. Still, there is no question that because industry has acted to fast-track eligible borrowers, we are achieving our objective. Of the more than 700,000 subprime mortgage resets originally scheduled through May of 2008, only 1800 loans that were current at reset have entered foreclosure. We will continue tracking that number closely to monitor progress. Entire industries do not adjust easily or quickly, even when markets are calm. The HOPE NOW Alliance is demonstrating that an industry can, through coordination, make a difference and do so without forcing American taxpayers to pay the bill…………..”
Comment: Treasury avoided helping those who would default and go into foreclosure in order to avoid a federal subsidy of these borrowers.
“Homeowners have responsibility as well. We can't help those who aren't willing to help themselves, and we must continue to urge struggling borrowers that if they haven't already, they need to reach out for help……….”
Comment: We will help those who help themselves.
“That said, working through this correction is made more challenging by the virtual disappearance of the subprime lending market. In response to excesses, that market has probably changed unalterably – as it must. Clearly, some who took out subprime mortgages never should have been approved for a mortgage in the first place. Practices, such as low or no doc loans, minimal or no down payments and other lax credit practices, are likely, as they should be, a thing of the past. At the same time, we cannot lose sight of the fact that subprime lending gave millions of responsible Americans a chance to borrow, despite a less-than-perfect credit history. We must not lose the benefits of the subprime market as we eliminate its flaws………………….”
Comment: Subprime lenders provided funds to borrowers who would probably default, but subprime lenders did expand homeownership.
“We are also strengthening efforts to improve financial literacy, so that borrowers better understand sophisticated lending products and the obligations they carry. Through the President's Advisory Council on Financial Literacy, Treasury is identifying approaches to financial education that will help potential borrowers evaluate mortgage options and avoid commitments they cannot meet.
Comment: Some home-buyers didn’t know what they were doing when they borrowed beyond their means.
Grand conclusion: The U.S. Treasury has helped those who did not borrow unwisely, and refused to help those who borrowed unwisely in order to avoid federal subsidy.
Isn’t that a little like the fire department saying it reduced the burden on taxpayers by refusing to put out fires at those homes where residents played with matches or smoked in bed? But doesn’t that fail to recognize the consequent problem of increased burden on taxpayers because those homes left to burn started other fires that consumed entire neighborhoods?
And, returning to the housing debacle, maybe it would have been better to provide taxpayer-funded assistance to all mortgage borrowers in the hope of preventing as many foreclosures as possible and thereby preserving home values and avoiding a housing debacle.
© 2008 Michael B. Lehmann
Wednesday, July 9, 2008
The Other Shoe Drops
THE BE YOUR OWN ECONOMIST ® BLOG
The residential-real-estate collapse remained a stand-alone problem for so long that some hoped that it would not infect the overall economy.
But the Commerce Department reported 13.6 million new-vehicle sales for June at a seasonally-adjusted annual rate.
Here are the figures for the past year.
June…………………...2007………………15.6
July……………………2007……………….15.2
August………………...2007……………….16.2
September……………2007……………….16.2
October……………….2007………….……16.0
November…………….2007……………….16.1
December……………2007………………..16.2
January………………2008………………..15.3
February……………..2008………………..15.3
March………………...2008………………..15.0
April…………………..2008………………...14.4
May………………..…2008………………....14.3
June………………….2008…………………13.6
While auto sales have not collapsed, you can detect a south-bound trend.
Update the following chart with the latest data, and the direction is clear.
(Click on chart to enlarge)
Few charts, however, are as dramatic as the next one. The Commerce Department reported that sales of new one-family houses were at a seasonally adjusted annual rate of 512,000 in May. You can see that’s less than half the series’ peak value.
New-home Sales
(Click on chart to enlarge)
Recessions shaded
The consumer is down and out. The slide in auto sales and home sales make that clear. What about business investment in new capital goods?
Unfortunately, new orders for nondefense capital goods have stalled, too. The Census Bureau reported May’s figure as 74.1 billion. Plug that number into the following chart, and you can see that business capital expenditures have stopped growing.
New Orders for Nondefense Capital Goods
(Click on chart to enlarge)
Recessions shaded
If auto and home sales are in the dumps, and business investment has ceased growing, from where will the economy’s continued growth arise?
The difficulty in answering that question highlights the pessimistic forecast for the economy’s direction.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of Economic Indicators.)
© 2008 Michael B. Lehmann
The residential-real-estate collapse remained a stand-alone problem for so long that some hoped that it would not infect the overall economy.
But the Commerce Department reported 13.6 million new-vehicle sales for June at a seasonally-adjusted annual rate.
Here are the figures for the past year.
June…………………...2007………………15.6
July……………………2007……………….15.2
August………………...2007……………….16.2
September……………2007……………….16.2
October……………….2007………….……16.0
November…………….2007……………….16.1
December……………2007………………..16.2
January………………2008………………..15.3
February……………..2008………………..15.3
March………………...2008………………..15.0
April…………………..2008………………...14.4
May………………..…2008………………....14.3
June………………….2008…………………13.6
While auto sales have not collapsed, you can detect a south-bound trend.
Update the following chart with the latest data, and the direction is clear.
(Click on chart to enlarge)
Recessions shaded
Few charts, however, are as dramatic as the next one. The Commerce Department reported that sales of new one-family houses were at a seasonally adjusted annual rate of 512,000 in May. You can see that’s less than half the series’ peak value.
New-home Sales
(Click on chart to enlarge)
Recessions shaded
The consumer is down and out. The slide in auto sales and home sales make that clear. What about business investment in new capital goods?
Unfortunately, new orders for nondefense capital goods have stalled, too. The Census Bureau reported May’s figure as 74.1 billion. Plug that number into the following chart, and you can see that business capital expenditures have stopped growing.
New Orders for Nondefense Capital Goods
(Click on chart to enlarge)
Recessions shaded
If auto and home sales are in the dumps, and business investment has ceased growing, from where will the economy’s continued growth arise?
The difficulty in answering that question highlights the pessimistic forecast for the economy’s direction.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of Economic Indicators.)
© 2008 Michael B. Lehmann
Tuesday, July 1, 2008
On Vacation
THE BE YOUR OWN ECONOMIST ® BLOG
The Be Your Own Economist (R) blog will go on vacation for a few days and plans to return on July 9.
© 2008 Michael B. Lehmann
The Be Your Own Economist (R) blog will go on vacation for a few days and plans to return on July 9.
© 2008 Michael B. Lehmann
July Publication Schedule & Web Sources
THE BE YOUR OWN ECONOMIST ® BLOG
Here’s July’s tentative economic-indicator publication schedule, followed by a list of web sources. Future postings will discuss these indicators.
You can use the WEB SOURCES listing (below) to find the data on your own and read the accompanying press release. The addresses take you to the source’s home page and the steps tell you how to navigate the site. That way (rather than provide a direct link to the data) you can become familiar with these sites and find additional information on your own.
PUBLICATION SCHEDULE
July 2008
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BEA…………………………GDP……………………...……Thu, 31st
Monthly Data
ISM………………….Purchasing managers’ index……….Tue, 1st
Fed…………………………..Consumer credit……..……….Tue, 8th
BLS………………………….Employment………………… Thu, 3rd
Census……………………...Balance of trade………………Fri, 11th
Census……………………...Retail trade…………………….Tue, 15th
Census……………………...Inventories……………………..Tue, 15th
BLS………………………….Consumer prices……………...Wed, 16th
Fed…………………………..Industrial production………….Wed, 16th
Fed………………………….Capacity utilization…………….Wed, 16th
Census……………………..Housing starts………………….Thu, 17th
BLS………………………….Producer prices……………….Tue, 15th
Conf Bd…………………….Leading Indicators…………….Mon, 21st
Conf Bd…………………….Consumer confidence…………Tue, 29th
Census…………………….Capital goods……………….…..Fri, 25th
Census……………………..New-home sales……………….Fri, 25th
NAR…………………………Existing-home sales…….…….Thurs, 24th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
WEB SOURCES
Index of Leading Economic Indicators: http://www.conference-board.org/
Step 1: Click on "Economics" in the left-hand menu
Step 2: Click on "Economic Indicators" under "Economics" in the left-hand menu bar
Step 3: Click on link under "U.S. Leading Indicators
Gross Domestic Product: http://www.bea.gov/
Step 1: Click on "Gross Domestic Product" under "National"
Step 2: Click on "National Income and Product Accounts Tables" under "Gross Domestic Product (GDP)"
Step 3: Click on "list of all NIPA Tables"
Step 4: Click on "Table 1.1.6. Real Gross Domestic Product..." and "Table 1.1.1. Percent Change..."
Step 5: Scroll down to line 1 in both tables and go to the last column on the right
Industrial Production & Capacity Utilization: http://www.federalreserve.gov/
Step 1: Click on "All Statistical Releases" under "Recent Statistical Releases" and then click on "Industrial Production and Capacity Utilization" under "Principal Economic Indicators" in the upper left
Step 2: Find the latest monthly data in the table next to "Total index" and "Total industry"
Institute For Supply Management Index: http://www.ism.ws/
Step 1: Click on "ISM Report on Business" in left-hand menu bar
Step 2: Click on “Latest Manufacturing ROB” and find the latest PMI
Producer Prices: http://stats.bls.gov/
Step 1: Click on “Producer Price Indexes” under “Inflation & Consumer Spending” in left-hand menu bar
Step 2: Note "Finished goods" under "Latest Numbers" in upper right and multiply by 12 to put the data on an annual basis
Business Capital Expenditures (Nondefense Capital Goods): http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Advance Report on Durable Goods Manufacturers' Shipments and Orders"
Step 3: Scroll down to Table 1 and find new orders for nondefense capital goods near the bottom
Inventories, Sales & Inventory/Sales Ratio: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "HTML" on the left under "Manufacturing and Trade Inventories and Sales" …Step 3: Scroll down to Table 1 and subtract previous month's inventories from latest month's and multiply by 12 to obtain inventory change, and then obtain the most recent inventory/sales ratio
Consumer Price Index: http://stats.bls.gov/
Step 1: Click on “Consumer Price Index” under “Inflation & Consumer Spending” in left-hand menu bar
Step 2: Note "CPI-U..." at the top under "Latest Numbers" in upper right and multiply "SA" by 12 to put the data on an annual basis
Employment Data (Total Non-farm Payroll Employment) (Unemployment Rate) (Manufacturing Workweek): http://stats.bls.gov/
Step 1: Click on “National Employment” under “Employment & Unemployment” in right-hand menu bar
Step 2: Click on (HTML) following “Employment Situation Summary” under "Economic News Releases"
Step 3: Click on “Employment Situation Summary” under “Table of Contents”
Step 4: Scroll down to Table A and find the unemployment rate for all workers in the latest month, the change in nonfarm employment in the last column and manufacturing hours of work for the latest month
Personal Income: http://www.bea.gov/
Step 1: Click on "Gross Domestic Product" under "National"
Step 2: Click on "National Income and Product Accounts Tables" under "Gross Domestic Product (GDP)"
Step 4: Click on "Table 2.6 Personal Income..."
Step 5: Scroll down to line 1
Consumer Confidence: http://www.conference-board.org/.
Step 1: Click on the "Economics" in the left-hand menu bar
Step 2: Click on "Economic Indicators" under "Economics" in the left-hand menu bar
Step 3: Click on link under "Consumer Confidence Index"
Consumer Credit: http://www.federalreserve.gov/
Step 1: Click on "All Statistical Releases" under "Recent Statistical Releases" and then click on "Consumer credit -- G19" under "Household Finance" in the upper right
Step 2: Click on "Current Release"
Step 3: Go to "Amount ... billions of dollars" and subtract previous month from current month & multiply by 12 to obtain seasonally adjusted dollar amount at annual rate
Housing Starts: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Current Press Release" under "Housing Starts/Building Permits"
Step 3: Scroll down to "Housing Starts"
Home Sales (Existing-Home Sales): http://www.realtor.org/
Step 1: Click on "Research" in the left-hand menu bar
Step 2: Find "Existing-Home Sales" under "Housing Indicators"
Home Sales (New-Home Sales): http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Current Press Release" under "New Home Sales"
Retail Sales: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Scroll down to "Advance Monthly Sales for Retail and Food Services" and click on "HTML" on the left under "Current Press Release"
© 2008 Michael B. Lehman
Here’s July’s tentative economic-indicator publication schedule, followed by a list of web sources. Future postings will discuss these indicators.
You can use the WEB SOURCES listing (below) to find the data on your own and read the accompanying press release. The addresses take you to the source’s home page and the steps tell you how to navigate the site. That way (rather than provide a direct link to the data) you can become familiar with these sites and find additional information on your own.
PUBLICATION SCHEDULE
July 2008
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BEA…………………………GDP……………………...……Thu, 31st
Monthly Data
ISM………………….Purchasing managers’ index……….Tue, 1st
Fed…………………………..Consumer credit……..……….Tue, 8th
BLS………………………….Employment………………… Thu, 3rd
Census……………………...Balance of trade………………Fri, 11th
Census……………………...Retail trade…………………….Tue, 15th
Census……………………...Inventories……………………..Tue, 15th
BLS………………………….Consumer prices……………...Wed, 16th
Fed…………………………..Industrial production………….Wed, 16th
Fed………………………….Capacity utilization…………….Wed, 16th
Census……………………..Housing starts………………….Thu, 17th
BLS………………………….Producer prices……………….Tue, 15th
Conf Bd…………………….Leading Indicators…………….Mon, 21st
Conf Bd…………………….Consumer confidence…………Tue, 29th
Census…………………….Capital goods……………….…..Fri, 25th
Census……………………..New-home sales……………….Fri, 25th
NAR…………………………Existing-home sales…….…….Thurs, 24th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
WEB SOURCES
Index of Leading Economic Indicators: http://www.conference-board.org/
Step 1: Click on "Economics" in the left-hand menu
Step 2: Click on "Economic Indicators" under "Economics" in the left-hand menu bar
Step 3: Click on link under "U.S. Leading Indicators
Gross Domestic Product: http://www.bea.gov/
Step 1: Click on "Gross Domestic Product" under "National"
Step 2: Click on "National Income and Product Accounts Tables" under "Gross Domestic Product (GDP)"
Step 3: Click on "list of all NIPA Tables"
Step 4: Click on "Table 1.1.6. Real Gross Domestic Product..." and "Table 1.1.1. Percent Change..."
Step 5: Scroll down to line 1 in both tables and go to the last column on the right
Industrial Production & Capacity Utilization: http://www.federalreserve.gov/
Step 1: Click on "All Statistical Releases" under "Recent Statistical Releases" and then click on "Industrial Production and Capacity Utilization" under "Principal Economic Indicators" in the upper left
Step 2: Find the latest monthly data in the table next to "Total index" and "Total industry"
Institute For Supply Management Index: http://www.ism.ws/
Step 1: Click on "ISM Report on Business" in left-hand menu bar
Step 2: Click on “Latest Manufacturing ROB” and find the latest PMI
Producer Prices: http://stats.bls.gov/
Step 1: Click on “Producer Price Indexes” under “Inflation & Consumer Spending” in left-hand menu bar
Step 2: Note "Finished goods" under "Latest Numbers" in upper right and multiply by 12 to put the data on an annual basis
Business Capital Expenditures (Nondefense Capital Goods): http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Advance Report on Durable Goods Manufacturers' Shipments and Orders"
Step 3: Scroll down to Table 1 and find new orders for nondefense capital goods near the bottom
Inventories, Sales & Inventory/Sales Ratio: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "HTML" on the left under "Manufacturing and Trade Inventories and Sales" …Step 3: Scroll down to Table 1 and subtract previous month's inventories from latest month's and multiply by 12 to obtain inventory change, and then obtain the most recent inventory/sales ratio
Consumer Price Index: http://stats.bls.gov/
Step 1: Click on “Consumer Price Index” under “Inflation & Consumer Spending” in left-hand menu bar
Step 2: Note "CPI-U..." at the top under "Latest Numbers" in upper right and multiply "SA" by 12 to put the data on an annual basis
Employment Data (Total Non-farm Payroll Employment) (Unemployment Rate) (Manufacturing Workweek): http://stats.bls.gov/
Step 1: Click on “National Employment” under “Employment & Unemployment” in right-hand menu bar
Step 2: Click on (HTML) following “Employment Situation Summary” under "Economic News Releases"
Step 3: Click on “Employment Situation Summary” under “Table of Contents”
Step 4: Scroll down to Table A and find the unemployment rate for all workers in the latest month, the change in nonfarm employment in the last column and manufacturing hours of work for the latest month
Personal Income: http://www.bea.gov/
Step 1: Click on "Gross Domestic Product" under "National"
Step 2: Click on "National Income and Product Accounts Tables" under "Gross Domestic Product (GDP)"
Step 4: Click on "Table 2.6 Personal Income..."
Step 5: Scroll down to line 1
Consumer Confidence: http://www.conference-board.org/.
Step 1: Click on the "Economics" in the left-hand menu bar
Step 2: Click on "Economic Indicators" under "Economics" in the left-hand menu bar
Step 3: Click on link under "Consumer Confidence Index"
Consumer Credit: http://www.federalreserve.gov/
Step 1: Click on "All Statistical Releases" under "Recent Statistical Releases" and then click on "Consumer credit -- G19" under "Household Finance" in the upper right
Step 2: Click on "Current Release"
Step 3: Go to "Amount ... billions of dollars" and subtract previous month from current month & multiply by 12 to obtain seasonally adjusted dollar amount at annual rate
Housing Starts: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Current Press Release" under "Housing Starts/Building Permits"
Step 3: Scroll down to "Housing Starts"
Home Sales (Existing-Home Sales): http://www.realtor.org/
Step 1: Click on "Research" in the left-hand menu bar
Step 2: Find "Existing-Home Sales" under "Housing Indicators"
Home Sales (New-Home Sales): http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Click on "PDF" on the left under "Current Press Release" under "New Home Sales"
Retail Sales: http://www.census.gov/
Step 1: Click on "Economic Indicators" in the lower right
Step 2: Scroll down to "Advance Monthly Sales for Retail and Food Services" and click on "HTML" on the left under "Current Press Release"
© 2008 Michael B. Lehman
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