The Lehmann Letter (SM)
Here are September’s economic indicators. We’ll track these for signs of a Double Dip. Things are not that grim now, but growth is slow.
ECONOMIC INDICATOR PUBLICATION SCHEDULE
September 2011
Source (* below)……Series Description……Day & Date
Quarterly Data
BLS……………Productivity …..……Thu, 1st
BEA..International Transactions…Thu, 15th
BEA……….GDP & Profits…..……Thu, 29th
Monthly Data
ISM..Purchasing managers’ index…Thu, 1st
BLS………….Employment………… Fri, 2nd
BEA.New-vehicle sales.(Approximate).Tue, 6th
Fed. Consumer credit..(Approximate).Wed, 7th
Census…….......Inventories…….... Wed, 14th
BLS………...Producer prices……. Wed, 14th
BLS………….Consumer prices.….. Thu, 15th
Fed……….Capacity utilization……Thu, 15th
Census……...Housing starts…….Tue, 20th
NAR………Existing-home sales….Wed, 21st
Conf Bd…….Leading indicators….Thu, 22nd
Census……..New-home sales…...Mon, 26th
Census……….Capital goods…….. Wed, 28th
Conf Bd….Consumer confidence.. Tue, 27th
*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
© 2011 Michael B. Lehmann
Wednesday, August 31, 2011
Tuesday, August 30, 2011
Drastic Drop
The Lehmann Letter (SM)
This morning The Conference Board reported that its index of consumer confidence fell to 44.5 in August from 59.2 in July:
http://www.conference-board.org/press/pressdetail.cfm?pressid=4276
It could be that August's debt-ceiling imbroglio was a major factor and that confidence will bounce back up in September with the settlement of that issue. We'll see.
Consumer Confidence
(Click on chart to enlarge.)
Recessions shaded
But you can see for yourself that the latest reading presents a sharp setback. Consumer confidence is not growing.
It's true that there is noise in the data. Consumer confidence can vary sharply from month to month. That reduces its accuracy as a short-term forecast of economic conditions.
By taking another look at the chart, however, you can also see that the general direction of consumer confidence has been a good leading indicator for many recessions. It's hard to imagine a robust economy if this important indicator remains in the doldrums.
(The chart was taken from http://www.beyourowneconomist.com. Enroll for additional charts on the economy and a list and calendar of economic indicators.)
© 2011 Michael B. Lehmann
This morning The Conference Board reported that its index of consumer confidence fell to 44.5 in August from 59.2 in July:
http://www.conference-board.org/press/pressdetail.cfm?pressid=4276
It could be that August's debt-ceiling imbroglio was a major factor and that confidence will bounce back up in September with the settlement of that issue. We'll see.
Consumer Confidence
(Click on chart to enlarge.)
Recessions shaded
But you can see for yourself that the latest reading presents a sharp setback. Consumer confidence is not growing.
It's true that there is noise in the data. Consumer confidence can vary sharply from month to month. That reduces its accuracy as a short-term forecast of economic conditions.
By taking another look at the chart, however, you can also see that the general direction of consumer confidence has been a good leading indicator for many recessions. It's hard to imagine a robust economy if this important indicator remains in the doldrums.
(The chart was taken from http://www.beyourowneconomist.com. Enroll for additional charts on the economy and a list and calendar of economic indicators.)
© 2011 Michael B. Lehmann
Monday, August 29, 2011
No Double Dip
The Lehmann Letter (SM)
The stock market rallied today on word from the Commerce Department that personal consumption expenditures had risen strongly (0.8%) in August by considerably more than income (0.3%):
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
This encouraged those who fear a double-dip recession. If households increase their spending by more than their income, that means they are borrowing once again. Perhaps household balance sheets are repaired sufficiently to permit strong consumer spending.
We'll see.
Just keep in mind the Commerce Department's Friday GDP report: Second-quarter GDP rose by 1% after a first-quarter increase of 0.4%. That's no sign of double-dip either, but it does keep us focused on the real risk: That the economy will expand sluggishly, impeding profit and employment growth.
© 2011 Michael B. Lehman
The stock market rallied today on word from the Commerce Department that personal consumption expenditures had risen strongly (0.8%) in August by considerably more than income (0.3%):
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
This encouraged those who fear a double-dip recession. If households increase their spending by more than their income, that means they are borrowing once again. Perhaps household balance sheets are repaired sufficiently to permit strong consumer spending.
We'll see.
Just keep in mind the Commerce Department's Friday GDP report: Second-quarter GDP rose by 1% after a first-quarter increase of 0.4%. That's no sign of double-dip either, but it does keep us focused on the real risk: That the economy will expand sluggishly, impeding profit and employment growth.
© 2011 Michael B. Lehman
Thursday, August 25, 2011
Waiting for the Fed
The Lehmann Letter (SM)
Some folks are waiting for a pronouncement from Fed Chairman Ben Bernanke that will rescue the stock market: Something about expansionary monetary policy and low interest rates.
They shouldn’t set their hopes too high.
It’s true that low interest rates are good for the stock market, other things being equal. Interest-earning assets are an alternative to stocks. During the late 1970s, when inflation and interest rates were double-digit, investors abandoned stocks in favor of money-market funds. Today’s low interest rates promote stock-market investment. Low interest rates also promote borrowing and spending by households and businesses, stimulating economic activity and boosting profits. That’s why investors love low rates.
Trouble is: Rates are already low and monetary policy is expansionary. It’s true that lenders are leery of making the same errors that led to the 2008 debacle. Now borrowers must be credit-worthy, not risky. But there’s not much the Fed can do about that. After all, the Fed can’t appear to support the lax standards of 2003 – 2007.
In any event, neither high interest rates nor tightened loan standards are today’s principal impediment to robust borrowing and a booming economy. Household’s weakened balance sheet stands like a boulder in the road, preventing the rapid economic expansion required to restore full production, full employment, earnings growth and a rising stock market. Households have too few liquid assets, too much debt and too little net worth. That’s why they’re not borrowing and spending and businesses, in turn, aren’t investing in the plant and equipment required to make the goods that households are not buying. The Fed can’t fix that.
© 2011 Michael B. Lehman
Some folks are waiting for a pronouncement from Fed Chairman Ben Bernanke that will rescue the stock market: Something about expansionary monetary policy and low interest rates.
They shouldn’t set their hopes too high.
It’s true that low interest rates are good for the stock market, other things being equal. Interest-earning assets are an alternative to stocks. During the late 1970s, when inflation and interest rates were double-digit, investors abandoned stocks in favor of money-market funds. Today’s low interest rates promote stock-market investment. Low interest rates also promote borrowing and spending by households and businesses, stimulating economic activity and boosting profits. That’s why investors love low rates.
Trouble is: Rates are already low and monetary policy is expansionary. It’s true that lenders are leery of making the same errors that led to the 2008 debacle. Now borrowers must be credit-worthy, not risky. But there’s not much the Fed can do about that. After all, the Fed can’t appear to support the lax standards of 2003 – 2007.
In any event, neither high interest rates nor tightened loan standards are today’s principal impediment to robust borrowing and a booming economy. Household’s weakened balance sheet stands like a boulder in the road, preventing the rapid economic expansion required to restore full production, full employment, earnings growth and a rising stock market. Households have too few liquid assets, too much debt and too little net worth. That’s why they’re not borrowing and spending and businesses, in turn, aren’t investing in the plant and equipment required to make the goods that households are not buying. The Fed can’t fix that.
© 2011 Michael B. Lehman
Friday, August 19, 2011
The Root of the Problem
The Lehmann Letter (SM)
Yesterday the National Association of Realtors reported 4.67 million existing homes sold in July:
http://www.realtor.org/press_room/news_releases/2011/08/july_ehs
Past issues of this letter have focused on new home sales and new construction. But the Realtors' report gets to the heart of the current economic problem.
The latest data coupled with the chart don't indicate a slump and don't indicate growth. We see fluctuation in a range that is too high to bring on recession but not high enough to spark full employment.
Existing Home Sales
(Click on chart to enlarge)
(Recessions shaded)
We remain somewhere in between: Neither bust nor boom. The chart illustrates the problem. We had a terrific run for over a decade. Now we want to retake those heights. But that desire conflicts with what happened to household balance sheets during the fat years. We stretched thin both liquidity and equity while piling on debt. It is true that households are making a valiant effort to unring that bell, and many bad debts are being written off. But that doesn't mean that household balance sheets are in good shape or that the good old days have returned.
Lenders are picky and have escalated standards. Home prices have fallen and remain in the doldrums, removing a key incentive to buy. And households are far more protective of their liquidity and reluctant to take on debt than they once were. It's not enough to generate a slump, but it is enough to inhibit robust growth.
(The chart was 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.)
© 2011 Michael B. Lehmann
Yesterday the National Association of Realtors reported 4.67 million existing homes sold in July:
http://www.realtor.org/press_room/news_releases/2011/08/july_ehs
Past issues of this letter have focused on new home sales and new construction. But the Realtors' report gets to the heart of the current economic problem.
The latest data coupled with the chart don't indicate a slump and don't indicate growth. We see fluctuation in a range that is too high to bring on recession but not high enough to spark full employment.
Existing Home Sales
(Click on chart to enlarge)
(Recessions shaded)
We remain somewhere in between: Neither bust nor boom. The chart illustrates the problem. We had a terrific run for over a decade. Now we want to retake those heights. But that desire conflicts with what happened to household balance sheets during the fat years. We stretched thin both liquidity and equity while piling on debt. It is true that households are making a valiant effort to unring that bell, and many bad debts are being written off. But that doesn't mean that household balance sheets are in good shape or that the good old days have returned.
Lenders are picky and have escalated standards. Home prices have fallen and remain in the doldrums, removing a key incentive to buy. And households are far more protective of their liquidity and reluctant to take on debt than they once were. It's not enough to generate a slump, but it is enough to inhibit robust growth.
(The chart was 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.)
© 2011 Michael B. Lehmann
Monday, August 8, 2011
Stocks Down
The Lehmann Letter (SM)
Stocks are down again this morning.
Lately the stock market has fallen to a level below its 2000 peak: The market has fluctuated in a range for the past decade. There’s been no progress.
S&P’s downgrade of U.S. debt is the proximate cause of this morning’s rout. But keep the big picture in mind: Stocks rode margins upward since the trough of the 2008 recession, and are now suffering because there’s little hope of rising sales volume.
© 2011 Michael B. Lehman
Stocks are down again this morning.
Lately the stock market has fallen to a level below its 2000 peak: The market has fluctuated in a range for the past decade. There’s been no progress.
S&P’s downgrade of U.S. debt is the proximate cause of this morning’s rout. But keep the big picture in mind: Stocks rode margins upward since the trough of the 2008 recession, and are now suffering because there’s little hope of rising sales volume.
© 2011 Michael B. Lehman
Friday, August 5, 2011
Employment Report
The Lehmann Letter (SM)
Stocks stabilized this morning as the Bureau of Labor Statistics reported that July’s unemployment rate remained virtually unchanged at 9.1% and that nonfarm employment grew by 117,000:
http://stats.bls.gov/news.release/empsit.nr0.htm
We’ll see if stocks hold steady through the close.
Job growth
(Click on chart to enlarge.)
Recessions shaded
A glance at the chart reveals that 117,000 new jobs, while better than some recent reports, is not up to the 200,000 – 300,000 usually associated with periods of expansion. The economy remains weak.
(The chart was 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.)
© 2011 Michael B. Lehmann
Stocks stabilized this morning as the Bureau of Labor Statistics reported that July’s unemployment rate remained virtually unchanged at 9.1% and that nonfarm employment grew by 117,000:
http://stats.bls.gov/news.release/empsit.nr0.htm
We’ll see if stocks hold steady through the close.
Job growth
(Click on chart to enlarge.)
Recessions shaded
A glance at the chart reveals that 117,000 new jobs, while better than some recent reports, is not up to the 200,000 – 300,000 usually associated with periods of expansion. The economy remains weak.
(The chart was 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.)
© 2011 Michael B. Lehmann
Thursday, August 4, 2011
Doom & Gloom
The Lehmann Letter (SM)
The chickens are coming home to roost.
As this blog has stated, rising profit margins have buoyed earnings. Now we need growing sales volume to carry earnings forward. But sales volume can’t grow in a weak economy. Residential construction must expand to transform weakness into strength. And that won’t happen until household balance sheets recover. Which won’t be soon…………
© 2011 Michael B. Lehman
The chickens are coming home to roost.
As this blog has stated, rising profit margins have buoyed earnings. Now we need growing sales volume to carry earnings forward. But sales volume can’t grow in a weak economy. Residential construction must expand to transform weakness into strength. And that won’t happen until household balance sheets recover. Which won’t be soon…………
© 2011 Michael B. Lehman
Wednesday, August 3, 2011
August Economic Indicators
The Lehmann Letter (SM)
The blogger is on vacation, returning to the office on August 15.
But he’s not too far away to escape the news. Now that the debt increase has been resolved for the moment, some are making dire forecasts that reflect their view of the settlement.
As this letter has observed throughout the year, the economy is in a fragile state. It is hard to imagine that – under the current political circumstances – we could have reasonably expected an outcome sufficiently expansionary to overcome the economy’s inherent weakness. Growth will be weak until household balance sheets are repaired. That will take a while.
Here are August’s economic indicators.
ECONOMIC INDICATOR PUBLICATION SCHEDULE
August 2011
Source (* below)……Series Description……Day & Date
Quarterly Data
BLS……………Productivity …..……Tue, 9th
BEA…………………….GDP …..……Fri, 26th
Monthly Data
ISM..Purchasing managers’ index…Mon, 1st
BEA.New-vehicle sales.(Approximate).Wed, 3rd
BLS………….Employment………… Fri, 5th
Fed Consumer credit..(Approximate).Fri, 5th
Census…….......Inventories…….... Fri, 12th
Fed……….Capacity utilization……Tue, 16th
Census……...Housing starts…….Tue, 16th
BLS………...Producer prices……. Wed, 17th
BLS………….Consumer prices.….. Thu, 18th
NAR………Existing-home sales….Thu, 18th
Conf Bd…….Leading indicators….Thu, 18th
Census……..New-home sales…...Tue, 23rd
Census……….Capital goods…….. Wed, 24th
Conf Bd….Consumer confidence.. Tue, 30th
*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
© 2011 Michael B. Lehman
The blogger is on vacation, returning to the office on August 15.
But he’s not too far away to escape the news. Now that the debt increase has been resolved for the moment, some are making dire forecasts that reflect their view of the settlement.
As this letter has observed throughout the year, the economy is in a fragile state. It is hard to imagine that – under the current political circumstances – we could have reasonably expected an outcome sufficiently expansionary to overcome the economy’s inherent weakness. Growth will be weak until household balance sheets are repaired. That will take a while.
Here are August’s economic indicators.
ECONOMIC INDICATOR PUBLICATION SCHEDULE
August 2011
Source (* below)……Series Description……Day & Date
Quarterly Data
BLS……………Productivity …..……Tue, 9th
BEA…………………….GDP …..……Fri, 26th
Monthly Data
ISM..Purchasing managers’ index…Mon, 1st
BEA.New-vehicle sales.(Approximate).Wed, 3rd
BLS………….Employment………… Fri, 5th
Fed Consumer credit..(Approximate).Fri, 5th
Census…….......Inventories…….... Fri, 12th
Fed……….Capacity utilization……Tue, 16th
Census……...Housing starts…….Tue, 16th
BLS………...Producer prices……. Wed, 17th
BLS………….Consumer prices.….. Thu, 18th
NAR………Existing-home sales….Thu, 18th
Conf Bd…….Leading indicators….Thu, 18th
Census……..New-home sales…...Tue, 23rd
Census……….Capital goods…….. Wed, 24th
Conf Bd….Consumer confidence.. Tue, 30th
*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
© 2011 Michael B. Lehman
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