The Lehmann Letter (SM)
Stocks rallied today on word that key central banks launched a coordinated effort to shore up the euro. This is further evidence that European leaders will do what is necessary to prevent a crisis.
But that doesn’t ensure a robust economy here at home. Here’s a list of indicators that we will follow.
ECONOMIC INDICATOR PUBLICATION SCHEDULE
December 2011
Source (* below)……Series Description……Day & Date
Quarterly Data
BEA...US International Transacs…Thu, 15th
BEA……….GDP & Profits…..……Thu, 22nd
Monthly Data
ISM..Purchasing managers’ index…Thu, 1st
BLS………….Employment………… Fri, 2nd
BEA.New-vehicle sales.(Approximate).Mon, 5th
Fed. Consumer credit..(Approximate).Wed, 7th
Census…….......Inventories…….... Tue, 13th
BLS………...Producer prices……. Thu, 15th
Fed……….Capacity utilization……Thu, 15th
BLS……….Consumer prices.….. Fri, 16th
Census……...Housing starts…….Tue, 20th
NAR………Existing-home sales….Wed, 21st
Conf Bd…….Leading indicators….Thu, 22nd
Census……..New-home sales…... Fri, 23rd
Census……….Capital goods…….. Fri, 23rd
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, November 30, 2011
Friday, November 25, 2011
Capital Expenditures
The Lehmann Letter (SM)
This week the Census Bureau reported $71.6 in October new orders for nondefense capital goods:
http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
These include all kinds of business purchases of nonmilitary machinery and equipment, from trucks and trains to backhoes and bake ovens,
Nondefense Capital Goods
(Click on chart to enlarge)
(Recessions shaded)
By placing the latest number on the chart you can see that new orders have reached a plateau in the mid-to-low 70s. New orders have not returned to the 80+ level that prevailed before the recession.
You may recall from earlier editions of this letter that this is typical of so many economic indicators: They have recovered from their recession lows, but are no longer advancing toward pre-recession levels. That’s not necessarily an omen of double-dip, but neither is it a signal of strong recovery.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
This week the Census Bureau reported $71.6 in October new orders for nondefense capital goods:
http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
These include all kinds of business purchases of nonmilitary machinery and equipment, from trucks and trains to backhoes and bake ovens,
Nondefense Capital Goods
(Click on chart to enlarge)
(Recessions shaded)
By placing the latest number on the chart you can see that new orders have reached a plateau in the mid-to-low 70s. New orders have not returned to the 80+ level that prevailed before the recession.
You may recall from earlier editions of this letter that this is typical of so many economic indicators: They have recovered from their recession lows, but are no longer advancing toward pre-recession levels. That’s not necessarily an omen of double-dip, but neither is it a signal of strong recovery.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Monday, November 21, 2011
Buying and Borrowing
The Lehmann Letter (SM)
Earlier this month the Commerce Department and the Federal Reserve reported 13.2 million October new-vehicle sales and an $88.8 billion September increase in consumer credit.
New Vehicle Sales
(Click on chart to enlarge)
(Recessions shaded)
Consumer Credit
(Click on chart to enlarge)
(Recessions shaded)
These numbers appear to be healthy when placed in the context of the charts: New vehicle sales have grown since their recession bottom and so has consumer credit. But there is a real danger that they will now stall, creating a plateau that is inadequate to sustain a healthy economy.
New vehicle sales and consumer credit move in tandem because auto buyers rely on consumer credit to finance their purchases. The charts inform us that new-vehicle sales were in the 16 to 17 million range from 2002 to 2007 and that consumer credit grew by about $100 billion monthly - at a seasonally adjusted annual rate - in those years. Will they return to those robust levels?
Consider consumer confidence.
Consumer Confidence
(Click on chart to enlarge)
(Recessions shaded)
Consumer confidence hovered around 100 during the 2002 to 2007 boom years. The chart reveals that consumer confidence has been fluctuating around 50 since the depths of the recession and has now dropped to around 40. The Conference Board is scheduled to release its latest data on November 29.
Unless consumer confidence pops upward to start a new climb, it's difficult to imagine that households will be sufficiently optimistic to begin a new auto-buying and borrowing binge. Gloomy consumers scale back; they don't push forward. Why should they? Their balance sheets remain compromised and good news has been scarce lately. Households have every reason to exercise restraint.
That's why it's hard to imagine a healthy level of auto buying and financing and a return to a robust economy.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Earlier this month the Commerce Department and the Federal Reserve reported 13.2 million October new-vehicle sales and an $88.8 billion September increase in consumer credit.
New Vehicle Sales
(Click on chart to enlarge)
(Recessions shaded)
Consumer Credit
(Click on chart to enlarge)
(Recessions shaded)
These numbers appear to be healthy when placed in the context of the charts: New vehicle sales have grown since their recession bottom and so has consumer credit. But there is a real danger that they will now stall, creating a plateau that is inadequate to sustain a healthy economy.
New vehicle sales and consumer credit move in tandem because auto buyers rely on consumer credit to finance their purchases. The charts inform us that new-vehicle sales were in the 16 to 17 million range from 2002 to 2007 and that consumer credit grew by about $100 billion monthly - at a seasonally adjusted annual rate - in those years. Will they return to those robust levels?
Consider consumer confidence.
Consumer Confidence
(Click on chart to enlarge)
(Recessions shaded)
Consumer confidence hovered around 100 during the 2002 to 2007 boom years. The chart reveals that consumer confidence has been fluctuating around 50 since the depths of the recession and has now dropped to around 40. The Conference Board is scheduled to release its latest data on November 29.
Unless consumer confidence pops upward to start a new climb, it's difficult to imagine that households will be sufficiently optimistic to begin a new auto-buying and borrowing binge. Gloomy consumers scale back; they don't push forward. Why should they? Their balance sheets remain compromised and good news has been scarce lately. Households have every reason to exercise restraint.
That's why it's hard to imagine a healthy level of auto buying and financing and a return to a robust economy.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Thursday, November 17, 2011
Housing Starts
The Lehmann Letter (SM)
Last month this letter reported that September housing starts had increased by 15% to 658,000. That was good news.
Unfortunately this morning's Census Bureau release says that figure was revised downward to 630,000 and that October starts were 628,000:
http://www.census.gov/const/newresconst.pdf
Housing Starts
(Click on chart to enlarge)
(Recessions shaded)
In any event the chart makes clear that housing starts have been hanging out at around 600,000 for some time. You can see where we have to go in order to return to a sense of normal.
And there is no sign that will happen anytime soon.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Last month this letter reported that September housing starts had increased by 15% to 658,000. That was good news.
Unfortunately this morning's Census Bureau release says that figure was revised downward to 630,000 and that October starts were 628,000:
http://www.census.gov/const/newresconst.pdf
Housing Starts
(Click on chart to enlarge)
(Recessions shaded)
In any event the chart makes clear that housing starts have been hanging out at around 600,000 for some time. You can see where we have to go in order to return to a sense of normal.
And there is no sign that will happen anytime soon.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Wednesday, November 16, 2011
Strong Production
The Lehmann Letter (SM)
Today the Federal Reserve reported solid growth in its October index of industrial production:
http://www.federalreserve.gov/releases/g17/current/
Capacity utilization measures current production as a percentage of maximum output. You can see from the chart that capacity utilization dipped below 70% in the depths of recession. That was the worst performance since World War II. More than 30% of America's industrial capacity went unused.
Capacity Utilization
(Click on chart to enlarge)
(Recessions shaded)
Capacity utilization rose to 77.8% in October. That signals continued expansion after a sharp bounce-back followed by a spell of stagnation in the summer. It would be nice to see the upward trend resume.
Inventory restocking generated the strong post-recession bounce. Now the core question is: Will aggregate demand grow quickly enough to send capacity utilization through 80% anytime soon. That depends to a large extent on household demand for new residential construction and motor vehicles.
At least there is no sign of a double dip.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Today the Federal Reserve reported solid growth in its October index of industrial production:
http://www.federalreserve.gov/releases/g17/current/
Capacity utilization measures current production as a percentage of maximum output. You can see from the chart that capacity utilization dipped below 70% in the depths of recession. That was the worst performance since World War II. More than 30% of America's industrial capacity went unused.
Capacity Utilization
(Click on chart to enlarge)
(Recessions shaded)
Capacity utilization rose to 77.8% in October. That signals continued expansion after a sharp bounce-back followed by a spell of stagnation in the summer. It would be nice to see the upward trend resume.
Inventory restocking generated the strong post-recession bounce. Now the core question is: Will aggregate demand grow quickly enough to send capacity utilization through 80% anytime soon. That depends to a large extent on household demand for new residential construction and motor vehicles.
At least there is no sign of a double dip.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Tuesday, November 15, 2011
No Sign of Double Dip
The Lehmann Letter (SM)
This morning the Commerce Department released its September report on business sales and inventories:
http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf
Sales grew slightly while inventories hardly changed. Consequently the inventory/sales ratio remained unchanged at 1.27.
Inventory/Sales Ratio
(Click on chart to enlarge)
(Recessions shaded)
You can see the spike in the inventories/sales ratio during the recent recession. When a sales decline surprises businesses, unsold goods pile up in inventories. As sales drop and inventories climb, the inventory/sales ratio rises.
No business wants inventories to rise as sales fall. Businesses sell goods out of inventories in order to deplete stocks they no longer need. Production drops and the economy is gripped by recession.
You can see from the chart that the crisis is well behind us. The inventories/sales ratio has fallen back to normal as businesses liquidated their inventories and sales began to recover. Once sales growth resumed, businesses could begin to replenish their inventories.
Now both inventories and sales are back to where they were before recession hit, and both continue to grow. That's a good sign and can be taken as an omen that a new recession is not around the corner.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
This morning the Commerce Department released its September report on business sales and inventories:
http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf
Sales grew slightly while inventories hardly changed. Consequently the inventory/sales ratio remained unchanged at 1.27.
Inventory/Sales Ratio
(Click on chart to enlarge)
(Recessions shaded)
You can see the spike in the inventories/sales ratio during the recent recession. When a sales decline surprises businesses, unsold goods pile up in inventories. As sales drop and inventories climb, the inventory/sales ratio rises.
No business wants inventories to rise as sales fall. Businesses sell goods out of inventories in order to deplete stocks they no longer need. Production drops and the economy is gripped by recession.
You can see from the chart that the crisis is well behind us. The inventories/sales ratio has fallen back to normal as businesses liquidated their inventories and sales began to recover. Once sales growth resumed, businesses could begin to replenish their inventories.
Now both inventories and sales are back to where they were before recession hit, and both continue to grow. That's a good sign and can be taken as an omen that a new recession is not around the corner.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Friday, November 11, 2011
Good News From Europe
The Lehmann Letter (SM)
Markets are rallying on the good news from Europe. It appears that Greece and Italy will install new governments to deal with their fiscal crises. There’s no sign yet that nations are abandoning Europe or the euro.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Markets are rallying on the good news from Europe. It appears that Greece and Italy will install new governments to deal with their fiscal crises. There’s no sign yet that nations are abandoning Europe or the euro.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Wednesday, November 9, 2011
Europe
The Lehmann Letter (SM)
The stock market is down 2% today because of the Italian crisis. How matters will be resolved remains to be seen.
But readers of this letter know that its author remains upbeat. Europe has faced many crises over the past 65 years and emerged stronger with each. Step-by-step Europe has knit itself into a powerful and successful economic entity. Challenges remain, and Europe will meet them. Europe will emerge stronger from this challenge just as it has from past challenges.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
The stock market is down 2% today because of the Italian crisis. How matters will be resolved remains to be seen.
But readers of this letter know that its author remains upbeat. Europe has faced many crises over the past 65 years and emerged stronger with each. Step-by-step Europe has knit itself into a powerful and successful economic entity. Challenges remain, and Europe will meet them. Europe will emerge stronger from this challenge just as it has from past challenges.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Monday, November 7, 2011
Not Enough
The Lehmann Letter (SM)
A certain amount of cheer greeted the Commerce Department's recent announcement that October new-vehicle sales had risen to 13.2 million:
http://www.bea.gov/national/index.htm#gdp
If you inspect the data, however, you will notice the recent plateau at about 13 million. We are inching upward, not climbing upward. The chart reveals that auto sales must return to 16 or 17 million to reach full production. We are nowhere near that level.
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
This report further reinforces the impression that we are not falling into another recession, but we are in a period of slack performance and inadequate progress.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
A certain amount of cheer greeted the Commerce Department's recent announcement that October new-vehicle sales had risen to 13.2 million:
http://www.bea.gov/national/index.htm#gdp
If you inspect the data, however, you will notice the recent plateau at about 13 million. We are inching upward, not climbing upward. The chart reveals that auto sales must return to 16 or 17 million to reach full production. We are nowhere near that level.
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
This report further reinforces the impression that we are not falling into another recession, but we are in a period of slack performance and inadequate progress.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Friday, November 4, 2011
Luke Warm
The Lehmann Letter (SM)
The problem with today's economy is not that we are headed back toward recession. The problem is that the economy continues to grow at such a tepid pace that we are unable to deal with some of our severe problems.
This morning's October jobs report from the Bureau of Labor Statistics is an example:
http://stats.bls.gov/news.release/empsit.b.htm
Employment did grow by 80,000. As the chart indicates this is much better than the horrific declines of the recession. But it's far less than the 200,000 to 300,000 pace of job growth required to restore full employment. The unemployment rate is now 9% and will remain at that troublesome level until job growth accelerates.
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
If you examine the detail in the link above you will notice that government jobs declined by 24,000. This is tragic because severe unemployment should generate a federal effort to stimulate hiring. Government employment should be growing not shrinking. But government efforts to stimulate employment are now bogged down in controversy over the federal deficit. It would be helpful to boost employment now and deal with the deficit later.
Some may take solace that our government problems don't seem as pressing as those in Europe. But Europe has a long post-World War II history of going to the brink, muddling through and then finding a solution that creates a stronger Europe. There is every reason to believe that Europe will pull the rabbit out of the hat once again, strengthening the euro and knitting a stronger continent.
There is less reason for optimism on this side of the Atlantic Ocean.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
The problem with today's economy is not that we are headed back toward recession. The problem is that the economy continues to grow at such a tepid pace that we are unable to deal with some of our severe problems.
This morning's October jobs report from the Bureau of Labor Statistics is an example:
http://stats.bls.gov/news.release/empsit.b.htm
Employment did grow by 80,000. As the chart indicates this is much better than the horrific declines of the recession. But it's far less than the 200,000 to 300,000 pace of job growth required to restore full employment. The unemployment rate is now 9% and will remain at that troublesome level until job growth accelerates.
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
If you examine the detail in the link above you will notice that government jobs declined by 24,000. This is tragic because severe unemployment should generate a federal effort to stimulate hiring. Government employment should be growing not shrinking. But government efforts to stimulate employment are now bogged down in controversy over the federal deficit. It would be helpful to boost employment now and deal with the deficit later.
Some may take solace that our government problems don't seem as pressing as those in Europe. But Europe has a long post-World War II history of going to the brink, muddling through and then finding a solution that creates a stronger Europe. There is every reason to believe that Europe will pull the rabbit out of the hat once again, strengthening the euro and knitting a stronger continent.
There is less reason for optimism on this side of the Atlantic Ocean.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
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