The Lehmann Letter (SM)
Everyone knows that housing led us into the recent recession. But what will lead us out? Here are the key August consumer-demand indicators that you can follow for up-to-the-minute information on demand's recovery.
Go to http://www.beyourowneconomist.com/ and click on Seminars, then click on Economic Indicators to navigate the sites that provide the data and click on Charts for a visual presentation that you can update.
• Home sales and construction remain in the doldrums. Consumer confidence and consumer credit are down, too. Households won't begin to spend heavily until they are willing to borrow heavily.
• Here are the key consumer-demand indicators we'll examine and the August days and dates on which we can expect them to appear. They will give us up-to-the-minute information on demand's recovery.
• Stay tuned to future editions of this letter as the story unfolds.
Source (* below)……Series Description……Day & Date
BEA….New-vehicle sales…...(Approximate).Wed, 4th
Fed………..Consumer credit…...(Approximate).Fri, 6th
Census…….………....Retail trade…….……….Fri, 13th
Census……….……..Housing starts………….Tue, 17th
NAR………………Existing-home sales…….Tue, 24th
Census…………..New-home sales………...Wed, 25th
Conf Bd………….Consumer confidence….. Tue, 31st
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* NAR = National Association of Realtors
• We will also check on manufacturing activity and inventories as well as overall employment and capital expenditures to understand how strongly supply is responding to demand. The following indicators are key.
Source (* below)……Series Description……Day & Date
Quarterly Data
BEA……………….………GDP…………...……Fri, 27th
Monthly Data
ISM……….Purchasing managers’ index…….Mon, 2nd
BLS…………………….Employment………… Fri, 6th
BLS………………….Consumer prices….….. Fri, 13th
Census…………………...Inventories……….. Fri, 13th
Fed……………..Industrial production……….Tue, 17th
Fed…………….Capacity utilization………….Tue, 17th
BLS………………….Producer prices……. Tue, 17th
Conf Bd……….Leading indicators……….Thu, 19th
Census………….Capital goods………….. Wed, 25th
* 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
© 2010 Michael B. Lehmann
Thursday, July 22, 2010
Wednesday, July 21, 2010
July Disappoints
The Lehmann Letter (SM)
The stock market slumped today in response to Fed Chairman Ben Bernanke's congressional testimony. The Chairman let Congress know that the outlook is not rosy.
But you need not have waited for Mr. Bernanke's testimony to reach a similar conclusion. Just take a look at housing starts and auto sales.
The Census Bureau announced 549,000 housing starts in June. Picture that number in the chart below. You can see the double-dip. Housing starts fell below 600,000, then snapped back only to fall below 600,000 again. The problem is clear. The tax incentive provided a temporary stimulus that has now expired. Mortgage rates are low, but that can't offset the overhang of unsold homes on the market and the flood of foreclosed homes that will soon join them. It's difficult for builders to make and sell new homes when so many existing properties glut the market.
Housing Starts
(Click on chart to enlarge.)
Recessions shaded
Auto sales present a similar problem. The Commerce Department reported June sales of 11.1 million new vehicles at an annual rate. You can see from the chart below that new-vehicle sales are stuck in the 11 million range. That's far below the 16 or 17 million sales plateau that prevailed before the recession.
New-Vehicle Sales
(Click on chart to enlarge.)
Recessions shaded
Residential construction and automobile production are important industries. Think of the activities that depend on them: Everything from lumber and building materials to kitchen appliances and furniture and furnishings to steel, glass and rubber tires. The economy can't be healthy until this entire constellation is restored to its higher plane.
Why aren't households borrowing and spending to purchase the homes and cars? Because they're protecting their balance sheets. Most consumers are trying to conserve liquidity and reduce debt. Those goals stand in direct contradiction to additional home and auto purchases. The recovery can't turn robust until this situation takes a turn for the better.
(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.)
© 2010 Michael B. Lehmann
The stock market slumped today in response to Fed Chairman Ben Bernanke's congressional testimony. The Chairman let Congress know that the outlook is not rosy.
But you need not have waited for Mr. Bernanke's testimony to reach a similar conclusion. Just take a look at housing starts and auto sales.
The Census Bureau announced 549,000 housing starts in June. Picture that number in the chart below. You can see the double-dip. Housing starts fell below 600,000, then snapped back only to fall below 600,000 again. The problem is clear. The tax incentive provided a temporary stimulus that has now expired. Mortgage rates are low, but that can't offset the overhang of unsold homes on the market and the flood of foreclosed homes that will soon join them. It's difficult for builders to make and sell new homes when so many existing properties glut the market.
Housing Starts
(Click on chart to enlarge.)
Recessions shaded
Auto sales present a similar problem. The Commerce Department reported June sales of 11.1 million new vehicles at an annual rate. You can see from the chart below that new-vehicle sales are stuck in the 11 million range. That's far below the 16 or 17 million sales plateau that prevailed before the recession.
New-Vehicle Sales
(Click on chart to enlarge.)
Recessions shaded
Residential construction and automobile production are important industries. Think of the activities that depend on them: Everything from lumber and building materials to kitchen appliances and furniture and furnishings to steel, glass and rubber tires. The economy can't be healthy until this entire constellation is restored to its higher plane.
Why aren't households borrowing and spending to purchase the homes and cars? Because they're protecting their balance sheets. Most consumers are trying to conserve liquidity and reduce debt. Those goals stand in direct contradiction to additional home and auto purchases. The recovery can't turn robust until this situation takes a turn for the better.
(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.)
© 2010 Michael B. Lehmann
Friday, July 2, 2010
On Vacation
The blogger is taking some time off and will post intemittently through mid August.
Have a good summer!
Have a good summer!
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