The Fed and Inflation

The Lehmann Letter SM In prepared remarks today before the House Committee on Financial Services, Chairman Ben Bernanke of the Federal Reserve (http://www.federalreserve.gov/newsevents/testimony/bernanke20100224a.htm) said: “Over the past year, the Federal Reserve has employed a wide array of tools to promote economic recovery and preserve price stability. The target for the federal funds rate has been maintained it a historically low range of 0 to 1/4 percent since December 2008. The FOMC continues to anticipate that economic conditions–including low rates of resource utilization, subdued inflation trends, and stable inflation expectations–are likely to warrant exceptionally low levels of the federal funds rate Continue reading

Loss of Confidence

The Lehmann Letter SM Today the Conference Board reported that its Index of Consumer Confidence fell to 46.0 in February from 56.5 in January. You can see from the chart that consumer confidence has been fluctuating around 50 for most months since crashing from its pre-recession level of about 100. Roughly speaking it’s half of what it was. Don’t expect robust consumer expenditures and a buoyant economy until confidence returns to pre-recession levels. Consumer Confidence Click on chart to enlarge) Recessions shaded Recovery will be slow and painful until consumer confidence breaks out of the trough and begins climbing back Continue reading

What the Fed Said

The Lehmann Letter SM Yesterday the Federal Reserve released the statement regarding its lending to banks: http://www.federalreserve.gov/newsevents/press/monetary/20100218a.htm There has been some speculation that this signals a reversal and tightening of Fed policy. Here in part is what the Fed said: “…The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal Continue reading

Good News

The Lehmann Letter SM Today the Census Bureau reported 591,000 housing starts in January, a gain of 2.8% over December’s figure: http://www.census.gov/const/newresconst.pdf Any increase is a welcome sign, but the chart below shows that we have been stuck in a rut of fewer than 600,000 starts for a year. There won’t be true recovery in residential construction until we reach and surpass a million starts. And that depends on a resolution of the foreclosure crisis. Too many homes continue to be dumped on the market at a steep discount. That discourages builders from starting new ones. Housing Starts Click on Continue reading

Big Week

The Lehmann Letter SM Next week will be a big week for economic data: Housing starts, industrial production, capacity utilization and consumer and producer prices. Let’s focus on housing starts and capacity utilization, to be released Wednesday. You can see that housing starts are in an unprecedented slump, hanging out at about half-million per month. Improvements in housing have been small and tenuous. Construction can’t become robust until the wave of foreclosures ends. Financial institutions continue to repossess homes and dump them on the market. Even when banks hold these properties off the market, that still creates an overhang that Continue reading

Imports and Exports

The Lehmann Letter SM Today the Department of Commerce, “…announced today that total December exports of $142.7 billion and imports of $182.9 billion resulted in a goods and services deficit of $40.2 billion, up from $36.4 billion in November, revised. “ You can find the report at http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm We can expect the deficit in our balance of trade to continue to grow as the economy recovers. Higher incomes mean higher purchases both from overseas and at home. As the rest of the world recovers it will purchase more from us too. But if experience is any guide our purchases from Continue reading

February Publication Schedule

The Lehmann Letter Here’s the publication schedule for some of February 2010’s most important economic indicators. 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. PUBLICATION SCHEDULE February 2010 Source (* below)……Series Description…Day & Date Quarterly Data BEA…………………………GDP………………………Fri, 26th Monthly Data ISM……………Purchasing managers’ index……….Mon, 1st BLS……………………Employment………………… Fri, 5thFed…………………Consumer credit……(Approximate).Fri, 5thCensus………………Balance of trade………………Wed, 10thCensus………………Retail trade…………………….Thu, 11thCensus………………….Inventories……………………..Thu, 11thFed………………………Industrial production………….Wed, 17thFed……………………Capacity utilization…………….Wed, 17thBLS……………………Consumer prices………………Fri, 19thBLS…………………Producer prices……………….Thu, 18thCensus………………….Housing starts………………….Wed, 17thConf Bd………………Leading indicators…………….Thu, 18th Conf Bd……………Consumer confidence………… Tue, 23rd NAR…………………Existing-home sales…….…….Thu, 25thCensus………..New-home Continue reading

Half Full

The Lehmann Letter Today’s employment report for January from the Bureau of Labor Statistics highlights this recession’s enigma: http://stats.bls.gov/news.release/empsit.nr0.htm Is the glass half full or half empty? “Half full,” say those who focus on the unemployment rate’s drop to 9.7% from 10.0%. “Half empty,” say those who focus on the 20,000 jobs lost and point out that the economy continues to lose jobs. But the “half full” folks have time on their side because all the trends are in the right direction. For instance, the chart below shows that job losses, which exceeded a half-million per month for a while, Continue reading