December Publication Schedule

The Lehmann Letter (SM) Stocks rallied today on word that key central banks launched a coordinated effort to shore up the euro. This is further evidence that European leaders will do what is necessary to prevent a crisis. But that doesn’t ensure a robust economy here at home. Here’s a list of indicators that we will follow. ECONOMIC INDICATOR PUBLICATION SCHEDULE December 2011 Source (* below)……Series Description……Day & Date Quarterly Data BEA…US International Transacs…Thu, 15th BEA……….GDP & Profits…..……Thu, 22nd Monthly Data ISM..Purchasing managers’ index…Thu, 1st BLS………….Employment………… Fri, 2ndBEA.New-vehicle sales.(Approximate).Mon, 5th Fed. Consumer credit..(Approximate).Wed, 7thCensus………….Inventories………. Tue, 13thBLS…………Producer prices……. Thu, 15th Fed……….Capacity Continue reading

Capital Expenditures

The Lehmann Letter (SM) This week the Census Bureau reported $71.6 in October new orders for nondefense capital goods: These include all kinds of business purchases of nonmilitary machinery and equipment, from trucks and trains to backhoes and bake ovens, Nondefense Capital Goods (Click on chart to enlarge) (Recessions shaded) By placing the latest number on the chart you can see that new orders have reached a plateau in the mid-to-low 70s. New orders have not returned to the 80+ level that prevailed before the recession. You may recall from earlier editions of this letter that this is typical Continue reading

Buying and Borrowing

The Lehmann Letter (SM) Earlier this month the Commerce Department and the Federal Reserve reported 13.2 million October new-vehicle sales and an $88.8 billion September increase in consumer credit. New Vehicle Sales (Click on chart to enlarge) (Recessions shaded) Consumer Credit (Click on chart to enlarge) (Recessions shaded) These numbers appear to be healthy when placed in the context of the charts: New vehicle sales have grown since their recession bottom and so has consumer credit. But there is a real danger that they will now stall, creating a plateau that is inadequate to sustain a healthy economy. New vehicle Continue reading

Housing Starts

The Lehmann Letter (SM) Last month this letter reported that September housing starts had increased by 15% to 658,000. That was good news. Unfortunately this morning’s Census Bureau release says that figure was revised downward to 630,000 and that October starts were 628,000: Housing Starts (Click on chart to enlarge) (Recessions shaded) In any event the chart makes clear that housing starts have been hanging out at around 600,000 for some time. You can see where we have to go in order to return to a sense of normal. And there is no sign that will happen anytime soon. Continue reading

Strong Production

The Lehmann Letter (SM) Today the Federal Reserve reported solid growth in its October index of industrial production: Capacity utilization measures current production as a percentage of maximum output. You can see from the chart that capacity utilization dipped below 70% in the depths of recession. That was the worst performance since World War II. More than 30% of America’s industrial capacity went unused. Capacity Utilization (Click on chart to enlarge) (Recessions shaded) Capacity utilization rose to 77.8% in October. That signals continued expansion after a sharp bounce-back followed by a spell of stagnation in the summer. It would Continue reading

No Sign of Double Dip

The Lehmann Letter (SM) This morning the Commerce Department released its September report on business sales and inventories: Sales grew slightly while inventories hardly changed. Consequently the inventory/sales ratio remained unchanged at 1.27. Inventory/Sales Ratio (Click on chart to enlarge) (Recessions shaded) You can see the spike in the inventories/sales ratio during the recent recession. When a sales decline surprises businesses, unsold goods pile up in inventories. As sales drop and inventories climb, the inventory/sales ratio rises. No business wants inventories to rise as sales fall. Businesses sell goods out of inventories in order to deplete stocks they no Continue reading


The Lehmann Letter (SM) The stock market is down 2% today because of the Italian crisis. How matters will be resolved remains to be seen. But readers of this letter know that its author remains upbeat. Europe has faced many crises over the past 65 years and emerged stronger with each. Step-by-step Europe has knit itself into a powerful and successful economic entity. Challenges remain, and Europe will meet them. Europe will emerge stronger from this challenge just as it has from past challenges. (To be fully informed visit © 2011 Michael B. Lehmann

Not Enough

The Lehmann Letter (SM) A certain amount of cheer greeted the Commerce Department’s recent announcement that October new-vehicle sales had risen to 13.2 million: If you inspect the data, however, you will notice the recent plateau at about 13 million. We are inching upward, not climbing upward. The chart reveals that auto sales must return to 16 or 17 million to reach full production. We are nowhere near that level. Job Growth (Click on chart to enlarge) (Recessions shaded) This report further reinforces the impression that we are not falling into another recession, but we are in a period Continue reading

Luke Warm

The Lehmann Letter (SM) The problem with today’s economy is not that we are headed back toward recession. The problem is that the economy continues to grow at such a tepid pace that we are unable to deal with some of our severe problems. This morning’s October jobs report from the Bureau of Labor Statistics is an example: Employment did grow by 80,000. As the chart indicates this is much better than the horrific declines of the recession. But it’s far less than the 200,000 to 300,000 pace of job growth required to restore full employment. The unemployment rate Continue reading