Still Struggling

The Lehmann Letter (SM) Today the National Association of Realtors reported a small 2.2% drop in existing-home sales for May: The Association’s press release, in the lead sentence, said: “Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates….” But the 5.6 6 million May figure for home sales doesn’t look so impressive when imposed on the chart below. Existing Home Sales (Click on chart to enlarge.) Recessions shaded You can see that home sales are still struggling and well off the sharp Continue reading

Export Drive

The Lehmann Letter (SM) Washington hopes that exports will help lead us out of the slump. But the latest data on our international accounts from the Commerce Department is not encouraging: Our first quarter current-account deficit rose to $109.0 billion from $100.9 billion in the last quarter of 2009. The growth in our trade deficit from $140.1 billion to $151.3 billion accounted for all of the increase. In other words, our imports surged by approximately $11 billion more than our exports. That’s not a good omen. Take a look at the chart below. You can see that our trade Continue reading

Conflicting Signals

The Lehmann Letter (SM) Today’s major statistical releases confirm the conflicted state of today’s economy. The Fed announced that American industry operate at 74.7% of capacity in May: That means that the manufacturing, mining and public utilities sectors are producing 74.7% of their maximum output. That looks pretty good when you impose that number on the chart below. It appears that industry is making a snappy comeback from recent lows. We are not yet up to the 80% level that indicates good health, but halfway there from the 70% lows we reached at the depths of the recession. Capacity Continue reading


The Lehmann Letter (SM) Today the Commerce Department announced that May retail sales fell 1.2% from the April level: This serves as a reminder of the current recovery’s fragility. While it’s true that these data vary from month to month, household purchases can’t be counted on to pull the economy robustly forward. Consumers continue to put their balance sheets in order. This means reducing debt and building liquidity. That is bound to have a negative effect on spending. The economy is recovering, but it’s a struggle. © 2010 Michael B. Lehmann

Beige Book

The Lehmann Letter (SM) Here’s the Fed’s Beige Book summary for the past six weeks. It’s based on reports from business and community sources throughout the nation. You can find it at: “Economic activity continued to improve since the last report across all twelve Federal Reserve Districts, although many Districts described the pace of growth as “modest.” Consumer spending and tourism activity generally increased. Business spending also rose, on net, with employment and capital spending edging up but inventory investment slowing. By sector, nonfinancial services, manufacturing, and transportation continued to gradually improve. Residential real estate activity in many Districts Continue reading

Consumer Credit & Autos

The Lehmann Letter (SM) The stock market has stumbled lately, and we have looked to Europe as the cause. But our problems are primarily domestic, not imported. Consumer demand remains lukewarm. Take a look at some recent data. Yesterday the Federal Reserve released April figures for consumer credit: Household borrowing grew by only $12 billion at a seasonally adjusted annual rate. The chart below shows that $100 billion is a healthy number. Consumer credit may no longer be shrinking, but household borrowing is not yet robust. It has to grow more quickly if we want a strong signal that Continue reading