The Lehmann Letter (SM) Here are September’s economic indicators. We’ll track these for signs of a Double Dip. Things are not that grim now, but growth is slow. ECONOMIC INDICATOR PUBLICATION SCHEDULE September 2011 Source (* below)……Series Description……Day & Date Quarterly Data BLS……………Productivity …..……Thu, 1st BEA..International Transactions…Thu, 15th BEA……….GDP & Profits…..……Thu, 29th Monthly Data ISM..Purchasing managers’ index…Thu, 1st BLS………….Employment………… Fri, 2nd BEA.New-vehicle sales.(Approximate).Tue, 6th Fed. Consumer credit..(Approximate).Wed, 7th Census………….Inventories………. Wed, 14th BLS…………Producer prices……. Wed, 14th BLS………….Consumer prices.….. Thu, 15th Fed……….Capacity utilization……Thu, 15th Census………Housing starts…….Tue, 20th NAR………Existing-home sales….Wed, 21st Conf Bd…….Leading indicators….Thu, 22nd Census……..New-home sales……Mon, 26th Census……….Capital goods…….. Wed, 28th Conf Continue reading →

The Lehmann Letter (SM) This morning The Conference Board reported that its index of consumer confidence fell to 44.5 in August from 59.2 in July: http://www.conference-board.org/press/pressdetail.cfm?pressid=4276 It could be that August’s debt-ceiling imbroglio was a major factor and that confidence will bounce back up in September with the settlement of that issue. We’ll see. Consumer Confidence (Click on chart to enlarge.) Recessions shaded But you can see for yourself that the latest reading presents a sharp setback. Consumer confidence is not growing. It’s true that there is noise in the data. Consumer confidence can vary sharply from month to month. Continue reading →

The Lehmann Letter (SM) The stock market rallied today on word from the Commerce Department that personal consumption expenditures had risen strongly (0.8%) in August by considerably more than income (0.3%): http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm This encouraged those who fear a double-dip recession. If households increase their spending by more than their income, that means they are borrowing once again. Perhaps household balance sheets are repaired sufficiently to permit strong consumer spending. We’ll see. Just keep in mind the Commerce Department’s Friday GDP report: Second-quarter GDP rose by 1% after a first-quarter increase of 0.4%. That’s no sign of double-dip either, but it Continue reading →

The Lehmann Letter (SM) Some folks are waiting for a pronouncement from Fed Chairman Ben Bernanke that will rescue the stock market: Something about expansionary monetary policy and low interest rates. They shouldn’t set their hopes too high. It’s true that low interest rates are good for the stock market, other things being equal. Interest-earning assets are an alternative to stocks. During the late 1970s, when inflation and interest rates were double-digit, investors abandoned stocks in favor of money-market funds. Today’s low interest rates promote stock-market investment. Low interest rates also promote borrowing and spending by households and businesses, stimulating Continue reading →

The Lehmann Letter (SM) Yesterday the National Association of Realtors reported 4.67 million existing homes sold in July: http://www.realtor.org/press_room/news_releases/2011/08/july_ehs Past issues of this letter have focused on new home sales and new construction. But the Realtors’ report gets to the heart of the current economic problem. The latest data coupled with the chart don’t indicate a slump and don’t indicate growth. We see fluctuation in a range that is too high to bring on recession but not high enough to spark full employment. Existing Home Sales (Click on chart to enlarge) (Recessions shaded) We remain somewhere in between: Neither bust Continue reading →

The Lehmann Letter (SM) Stocks are down again this morning. Lately the stock market has fallen to a level below its 2000 peak: The market has fluctuated in a range for the past decade. There’s been no progress. S&P’s downgrade of U.S. debt is the proximate cause of this morning’s rout. But keep the big picture in mind: Stocks rode margins upward since the trough of the 2008 recession, and are now suffering because there’s little hope of rising sales volume. © 2011 Michael B. Lehman

The Lehmann Letter (SM) Stocks stabilized this morning as the Bureau of Labor Statistics reported that July’s unemployment rate remained virtually unchanged at 9.1% and that nonfarm employment grew by 117,000: http://stats.bls.gov/news.release/empsit.nr0.htm We’ll see if stocks hold steady through the close. Job growth (Click on chart to enlarge.) Recessions shaded A glance at the chart reveals that 117,000 new jobs, while better than some recent reports, is not up to the 200,000 – 300,000 usually associated with periods of expansion. The economy remains weak. (The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional Continue reading →

The Lehmann Letter (SM) The chickens are coming home to roost. As this blog has stated, rising profit margins have buoyed earnings. Now we need growing sales volume to carry earnings forward. But sales volume can’t grow in a weak economy. Residential construction must expand to transform weakness into strength. And that won’t happen until household balance sheets recover. Which won’t be soon………… © 2011 Michael B. Lehman

The Lehmann Letter (SM) The blogger is on vacation, returning to the office on August 15. But he’s not too far away to escape the news. Now that the debt increase has been resolved for the moment, some are making dire forecasts that reflect their view of the settlement. As this letter has observed throughout the year, the economy is in a fragile state. It is hard to imagine that – under the current political circumstances – we could have reasonably expected an outcome sufficiently expansionary to overcome the economy’s inherent weakness. Growth will be weak until household balance sheets Continue reading →