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)

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