Root Cause

THE BE YOUR OWN ECONOMIST ® BLOG On June 25 The San Francisco Chronicle carried an op-ed article on the root causes of the housing crisis: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/25/EDPC11EELA.DTL&hw=Michael+Lehmann&sn=004&sc=184. Here’s a slightly longer version that includes a chart that did not appear in the online piece. On June 25 the Census Bureau reported 512,000 new-home sales in May. Update the chart below with that data, and two observations strike you. First, there’s the enormity of the unfolding 2007 – 2008 real-estate debacle. Second, there’s the unprecedented nature of the 2000 – 2005 real-estate build-up. Home sales rose 50 percent beyond their earlier Continue reading

The Fed’s Open Market Committee

THE BE YOUR OWN ECONOMIST ® BLOG Today the Fed’s Open Market Committee decided to leave unchanged the interest rate at which banks lend reserves to one another (http://www.federalreserve.gov/newsevents/press/monetary/20080625a.htm). The Fed’s press release said: “The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent. “Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh Continue reading

June Consumer Confidence

THE BE YOUR OWN ECONOMIST ® BLOG Today’s press release by The Conference Board (http://www.conference-board.org/economics/ConsumerConfidence.cfm) began as follows: “The Conference Board Consumer Confidence Index, which had declined in May, declined even further in June. The Index now stands at 50.4 (1985=100), down from 58.1 in May……… “Says Lynn Franco, Director of The Conference Board Consumer Research Center: “This month’s Consumer Confidence Index is the fifth lowest reading ever. Consumers’ assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear. Looking ahead, consumers’ economic outlook is so bleak that the Expectations Index has Continue reading

Consumer Confidence

THE BE YOUR OWN ECONOMIST ® BLOG Tomorrow The Conference Board releases its June estimate for Consumer Confidence. May’s figure was 57.2 (1985 = 100.0). In the May release, Lynn Franco, Director of The Conference Board’s Consumer Research Center said: “The Consumer Confidence Index now stands at a 16-year low (Oct. 1992, 54.6). Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy. Consumers’ inflation expectations, fueled by increasing prices at the pump, are now at an all-time high and are likely to rise further Continue reading

Leading Indicators

THE BE YOUR OWN ECONOMIST ® BLOG Today The Conference Board announced that the index of leading economic indicators increased 0.1 percent in May following a similar increase in April (http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1). These minor gains were insufficient to offset decreases in previous months, so that the index has declined over the past half year. The index is an amalgam of ten statistical series, such as stock prices and building permits, designed to give an early indication of the economy’s direction. You can see from the chart below that the index has stalled. Today’s report maintains that impression. Leading Indicators (Click on Continue reading

$1.555

THE BE YOUR OWN ECONOMIST ® BLOG Yesterday the Bureau of Economic Analysis released its estimate of the U.S. current-account deficit for the first quarter of 2008(http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm). The lead sentence said: “The U.S. current-account deficit–the combined balances on trade in goodsand services, income, and net unilateral current transfers–increased to$176.4 billion (preliminary) in the first quarter of 2008 from $167.2 billion (revised) in the fourth quarter of 2007.” Today’s currency trading closed at $1.555 per Euro. That’s not a record low, but the dollar has fallen dramatically over the last five years. What’s the connection between yesterday’s report on the current-account Continue reading

Bad Tuesday

THE BE YOUR OWN ECONOMIST ® BLOG The Federal Reserve(http://www.federalreserve.gov/releases/g17/Current/default.htm),Census Bureau(http://www.census.gov/const/newresconst.pdf)and Bureau of Labor Statistics(http://stats.bls.gov/news.release/ppi.nr0.htm) issued three unhappy releases today. The Fed’s capacity-utilization data reports industry’s current operating level, measured as a percentage of maximum output. The table below shows that industry’s operating rate has weakened this spring. It had been roughly 82% before the current downturn began. There were over a million single-family housing starts (Census Bureau) during the housing boom that peaked a couple of years ago. Soon, as the table below reveals, they’ll be less than half that record level. Inflation at the wholesale level, as measured Continue reading

Big Tuesday

THE BE YOUR OWN ECONOMIST ® BLOG Tuesday, June 17 will be a big day for economic data. Here’s a list with relevant sources. Fed……………………………………………..Industrial productionFed…………………………………………….Capacity utilization Census………………………………………..Housing startsBLS…………………………………………….Producer pricesBEA…………………………………….………International Transactions BEA = Bureau of Economic Analysis of the U.S. Department of CommerceBLS = Bureau of Labor Statistics of the U.S. Department of LaborCensus = U.S. Bureau of the CensusFed = Federal Reserve System There’ll be grist for the mill. Stay tuned. © 2008 Michael B. Lehmann

Retail Trade

THE BE YOUR OWN ECONOMIST ® BLOG Today the Census Bureau issued a surprisingly strong retail-trade report (http://www.census.gov/marts/www/marts_current.html). May’s total was 1.0% ahead of April’s, and April’s figure was revised upward from an 0.2% drop to an 0.4% gain over March. Sales at gasoline stations improved most dramatically because of the sharp rise in gasoline prices. But all categories of establishments showed gains except for miscellaneous retailers. Households continue to spend despite a steep drop in consumer confidence, a steep loss in residential-real-estate wealth and declines in employment. Perhaps the economic stimulus package’s rebate checks are keeping everything afloat and Continue reading