June Economic Indicators

The Lehmann Letter (SM) This morning CNN/Money aired a report confirming the double-dip in home prices: http://money.cnn.com/2011/05/31/real_estate/march_home_prices/index.htm The story began: “Home prices hit another new low in the first quarter, down 5.1% from a year ago to levels not reached since 2002.” The article went on to state that there is no end in sight to the decline and that falling prices depress home building because developers can’t compete with low-price existing homes. No doubt buyers and builders have pulled back, waiting to see where and when the market stabilizes. As this letter has said more than once, economic expansion Continue reading

End of Month Wrapup

The Lehmann Letter (SM) The Commerce Department’s recent report that first-quarter GDP grew by a meager 1.8% focused our attention, once again, on the economy’s prospects: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm Aggregate demand’s growth has been weak. At this stage in the recovery household expenditures on residential construction and durable goods as well as business expenditures on plant and equipment should be surging forward. But they’re not. At the same time, government expenditures are shrinking. The federal government’s stimulus plan worked to boost the economy out of the depths of recession. But it’s over now and federal expenditures are no longer growing. Meanwhile state Continue reading

Home-Sales Disaster

The Lehmann Letter (SM) This morning’s Bureau of the Census release of April’s new-home sales data (http://www.census.gov/const/newressales.pdf) began with this paragraph: “Sales of new one-family houses in April 2011 were at a seasonally adjusted annual rate of 323,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.3 percent (±16.6%)* above the revised March rate of 301,000, but is 23.1 percent (±9.7%) below the April 2010 estimate of 420,000.” It appears that building activity improved in the latest month but is down from a year ago. But that Continue reading

Foreclosure Overhang: The Distressed Property Glut

The Lehmann Letter (SM) Take a look at this morning’s New York Times article by Eric Dash entitled, “As Lenders Hold Homes in Foreclosure, Sales Are Hurt:” http://www.nytimes.com/2011/05/23/business/economy/23glut.html?_r=1&ref=todayspaper It begins by saying: “The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.” And then goes on to observe: “Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory Continue reading

Housing Starts Unchanged: Gaining Historical Perspective

The Lehmann Letter (SM) This morning the Census Bureau included the following in its report on new residential construction (http://www.census.gov/const/newresconst.pdf): “Privately-owned housing starts in April were at a seasonally adjusted annual rate of 523,000. This is 10.6 percent (±13.0%)* below the revised March estimate of 585 000 and is 23 9 percent (±7 0%) below the revised April 2010 rate of 687 000.” Housing Starts (Click on chart to enlarge.) Recessions shaded At first glance that seems to contradict this letter’s heading, which announces that housing starts are unchanged. But if you look at the chart, you’ll see that housing Continue reading

Foreclosures Down: Is the Glass Half-Full or Half-Empty?

The Lehmann Letter (SM) Two articles on the real-estate crisis appeared on CNN’s website this morning: “Foreclosures Down for Seventh Straight Month” http://money.cnn.com/2011/05/12/real_estate/foreclosures_fell_again/index.htm?iid=HP_River and “Obama: Homeowners Need More Help” http://money.cnn.com/2011/05/12/news/economy/obama_housing/index.htm?iid=HP_LN The first article reported a drop in foreclosure filings and bank repossessions of foreclosed properties. That looks good, BUT…….. The article makes clear that banks have NOT slowed foreclosures because fewer homeowners are in trouble. Rather, banks have slowed foreclosures because they are double-checking their paperwork and because many markets already have a glut of foreclosed homes. The banks know that too many foreclosed homes mean a lower price for Continue reading

Double Dip: Home Prices Sink Again

The Lehmann Letter (SM) Take a look at this front-page article in today’s Wall Street Journal: http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html?mod=WSJ_hp_LEFTTopStories It’s entitled “Home Market Takes a Tumble.” The chart accompanying the article illustrates a five-year drop in home prices. The rate of decline fell recently, but lately began to accelerate again. The article indicates that experts expect home prices will continue falling until 2012. The reason? Expiration of the homebuyers tax credit has dampened demand while foreclosures have boosted supply. Demand down + Supply up = Prices down. These developments can’t be good for homebuilding, and that’s why this letter has doubts about Continue reading

Great Jobs Report

The Lehmann Letter (SM) The stock market rallied strongly this morning following a great jobs report from the Bureau of Labor Statistics: http://stats.bls.gov/news.release/empsit.nr0.htm Employment grew by over 200,000 in February, March and April. That’s good news. Job growth (Click on chart to enlarge.) Recessions shaded The chart makes clear that job growth has to be that strong, month after month and year after year, to achieve and maintain full employment. Let’s hope the good news continues. The stock market had trouble earlier this week because of weakness in the commodity markets. Prices for oil, gold and silver fell. Indexes for Continue reading

Autos Stalled?

The Lehmann Letter (SM) Yesterday the Bureau of Economic Analysis of the US Department of Commerce released its April estimate of new-vehicle sales: http://www.bea.gov/national/index.htm#gdp (Scroll down to “Motor vehicles,” open Excel spreadsheet and go to “Table 6” at the bottom.) New-vehicle sales have grown strongly over the past year, breaking out of the 11 million range and climbing to 13 million. The chart shows that these figures continue the strong upward trend from less than 10 million in the depths of the recession. New-Vehicle Sales (Click on chart to enlarge.) Recessions shaded But the latest numbers provide cause for concern. Continue reading

Profit-Margin Squeeze?

The Lehmann Letter (SM) Yesterday’s Wall Street Journal carried an article on the profit-margin squeeze generated by world-wide price increases: http://online.wsj.com/article/SB10001424052748704436004576298912487327374.html?KEYWORDS=materials+costs Manufacturing continues to grow while facing the following question: Can it raise prices in order to pass on cost — especially fuel cost — increases? The chart indicates that this is an important question because business has benefited mightily from a 10-year surge in margins. Profit margins did not fall during the recent recession and now stand at an all-time high. Profit Margins (Click on chart to enlarge.) Recessions shaded Rising productivity is largely responsible for this trend. Management Continue reading