The Lehmann Letter (SM)
The Census Bureau and the National Association of Realtors reported slightly stronger housing starts and existing-home sales for November. Is this the start of an upward trend? We’ll see. There have been many false dawns.
The problem is: We’ve been down so long we grasp at false straws of hope. That’s a consequence of settling into a new regime of reduced circumstances and expectations. Small improvements are overblown.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Wednesday, December 21, 2011
Thursday, December 8, 2011
Consumer Spending
The Lehmann Letter (SM)
Take a look at two leading indicators recently released by the Federal Reserve and the Department of Commerce.
The Fed reported that consumer credit (excluding mortgage borrowing) had risen by $92.4 billion, at a seasonally adjusted annual rate, in October. The chart shows that a strong economy depends upon around $100 billion monthly in new consumer credit. The chart also shows that households desperately reduced outstanding debt during and immediately following the recession. Now they are beginning to borrow once again. We will see whether or not consumer credit rises to the $100 billion level required to generate strong growth in aggregate demand.
Consumer Credit
(Click on chart to enlarge)
(Recessions shaded)
The Commerce Department reported new-vehicle sales of 13.6 million, seasonally adjusted annual rate, in November. The chart reveals that this continues the upward trend, climbing out of the bottom of the recession. Will it continue rising to the 17-million annual rate that signals a vibrant auto industry? We'll see.
Auto sales
(Click on chart to enlarge)
(Recessions shaded)
This letter will return to these indicators regularly. The economy can't fully recover unless they fully recover.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Take a look at two leading indicators recently released by the Federal Reserve and the Department of Commerce.
The Fed reported that consumer credit (excluding mortgage borrowing) had risen by $92.4 billion, at a seasonally adjusted annual rate, in October. The chart shows that a strong economy depends upon around $100 billion monthly in new consumer credit. The chart also shows that households desperately reduced outstanding debt during and immediately following the recession. Now they are beginning to borrow once again. We will see whether or not consumer credit rises to the $100 billion level required to generate strong growth in aggregate demand.
Consumer Credit
(Click on chart to enlarge)
(Recessions shaded)
The Commerce Department reported new-vehicle sales of 13.6 million, seasonally adjusted annual rate, in November. The chart reveals that this continues the upward trend, climbing out of the bottom of the recession. Will it continue rising to the 17-million annual rate that signals a vibrant auto industry? We'll see.
Auto sales
(Click on chart to enlarge)
(Recessions shaded)
This letter will return to these indicators regularly. The economy can't fully recover unless they fully recover.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Monday, December 5, 2011
It’s Housing
The Lehmann Letter (SM)
This letter has emphasized housing’s importance. Residential construction is flat. The economy won’t grow strongly until home building rebounds.
For validation of this view see Floyd Norris’s December 1 posting on The New York Times site:
http://www.nytimes.com/2011/12/02/business/time-to-accelerate-the-housing-recovery-floyd-norris.html?scp=3&sq=Floyd%20Norris&st=cse
Sad to say: It doesn’t look like any policy initiative will be successfully applied. That means the needed rebound will not occur.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
This letter has emphasized housing’s importance. Residential construction is flat. The economy won’t grow strongly until home building rebounds.
For validation of this view see Floyd Norris’s December 1 posting on The New York Times site:
http://www.nytimes.com/2011/12/02/business/time-to-accelerate-the-housing-recovery-floyd-norris.html?scp=3&sq=Floyd%20Norris&st=cse
Sad to say: It doesn’t look like any policy initiative will be successfully applied. That means the needed rebound will not occur.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Friday, December 2, 2011
Good News, Bad News
The Lehmann Letter (SM)
“The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today.”
That’s the first sentence from today’s Bureau of Labor Statistics employment report:
http://stats.bls.gov/news.release/empsit.nr0.htm
The unemployment rate fell as discouraged workers left the labor force, even though employment grew by 120,000. As this letter has said many times: Job growth must be twice as great, month after month for several years, before full-employment is restored. How will that happen?
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
The chart illustrates current events as well as past success. Notice today’s plateau forming around 100,000 and earlier periods growing at over 200,000. This is just another inadequate plateau, similar to others we have seen develop across the data: Residential construction, auto sales, industrial activity and so on. We need a boost. From where will it arise?
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
“The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today.”
That’s the first sentence from today’s Bureau of Labor Statistics employment report:
http://stats.bls.gov/news.release/empsit.nr0.htm
The unemployment rate fell as discouraged workers left the labor force, even though employment grew by 120,000. As this letter has said many times: Job growth must be twice as great, month after month for several years, before full-employment is restored. How will that happen?
Job Growth
(Click on chart to enlarge)
(Recessions shaded)
The chart illustrates current events as well as past success. Notice today’s plateau forming around 100,000 and earlier periods growing at over 200,000. This is just another inadequate plateau, similar to others we have seen develop across the data: Residential construction, auto sales, industrial activity and so on. We need a boost. From where will it arise?
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
Thursday, December 1, 2011
PMI Remains Anemic
The Lehmann Letter (SM)
This morning the Institute for Supply Management announced that the Purchasing Managers Index (PMI) had risen to 52.7 in November from 50.8 in October:
http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
The PMI measures purchasing managers' impressions of the economy's strength based on their experience buying inputs for their firms. A number below 50 indicates a contracting economy; a number above 50 indicates an expanding economy.
Purchasing Managers' Index
(Click on chart to enlarge)
(Recessions shaded)
Inventories
(Click on chart to enlarge)
(Recessions shaded)
The charts indicate the correlation between inventory expansion and the PMI. Manufacturing production slumped during the recession as businesses sold goods out of inventory and cut production. That is, businesses liquidated their stocks on hand as sales slowed. Consequently production fell faster than sales and the PMI slumped as purchasing managers reduced their orders for inputs.
Businesses rebuilt their inventories as the recession ended. Production recovered as a result and the PMI bounced back strongly. Now, however, inventory buildup is over and manufacturing production no longer has that additional boost. The PMI has been hovering at just above 50, and November's 52.7 is no cause for elation.
We can't reasonably expect a jump in production and the PMI until demand improves significantly.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
This morning the Institute for Supply Management announced that the Purchasing Managers Index (PMI) had risen to 52.7 in November from 50.8 in October:
http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
The PMI measures purchasing managers' impressions of the economy's strength based on their experience buying inputs for their firms. A number below 50 indicates a contracting economy; a number above 50 indicates an expanding economy.
Purchasing Managers' Index
(Click on chart to enlarge)
(Recessions shaded)
Inventories
(Click on chart to enlarge)
(Recessions shaded)
The charts indicate the correlation between inventory expansion and the PMI. Manufacturing production slumped during the recession as businesses sold goods out of inventory and cut production. That is, businesses liquidated their stocks on hand as sales slowed. Consequently production fell faster than sales and the PMI slumped as purchasing managers reduced their orders for inputs.
Businesses rebuilt their inventories as the recession ended. Production recovered as a result and the PMI bounced back strongly. Now, however, inventory buildup is over and manufacturing production no longer has that additional boost. The PMI has been hovering at just above 50, and November's 52.7 is no cause for elation.
We can't reasonably expect a jump in production and the PMI until demand improves significantly.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
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