December Publication Schedule

The Lehmann Letter (SM)  The fiscal cliff is the big issue and it will loom larger as year-end approaches. But we will maintain our attention on the economic indicators below. There will be no sudden collapse next month. Even if we go over the cliff.  ECONOMIC INDICATOR PUBLICATION SCHEDULE  December 2012  Source (* below)……Series Description……Day & Date  Quarterly Data  BLS…. Productivity & Costs….Wed, 5th  BEA…US International Transacs…Tue, 18th  BEA……….GDP  & Profits…..……Thu, 20th  Monthly Data  ISM..Purchasing managers’ index…Mon, 3rd  BLS………….Employment…………   Fri, 7th BEA.New-vehicle sales.(Approximate).Wed, 5th  Fed. Consumer credit..(Approximate).Fri, 7th Census………….Inventories………. Thu, 13th BLS…………Producer prices……. Thu, 13th Fed……….Capacity utilization……Fri, 14th BLS……….Consumer prices.….. Continue reading

Corporate Profits Remain Strong

The Lehmann Letter (SM)  This morning the Commerce Department announced a revised third-quarter 2.7% GDP increase:  That’s an improvement over the first quarter’s performance.  But strong corporate earnings are the big news at a seasonally adjusted annual rate of $1,752.2 billion in the third quarter.  (Click on Section 1 in the above website, then click on Table 1.12 and then scroll down to line 45 making sure that you scroll all the way to the right.)  Profits (Recessions shaded)  The chart confirms the strength of this report. You can see that earnings recovered strongly from the depths of the Continue reading

Real Estate Rebound? See for Yourself……

  The Lehmann Letter (SM  Yesterday’s letter emphasized our bifurcated economy: Some indicators are strong, others are weak.   The same point can be made today by looking at the Census Bureau’s latest data on new-home sales:   New-home sales were 368,000 in October. It’s hard to see much of a real-estate rebound when you update the chart with that number.   New Home Sales   (Recessions shaded)   That doesn’t mean expansion has not begun. It has. But the data also show that the economy is not yet benefiting from the strong surge that marked other recoveries. Home Continue reading

Capital Expenditures Stall

The Lehmann Letter (SM) Business has the profits and it has the funds, but its capital expenditures are not optimistic. New spending should be expanding more rapidly.  It’s all part of the bifurcated economy that now confronts us. Some areas, such as new-vehicle sales, have done well. Some areas, such as housing, are beginning to show new life. But business investment, which popped up early, has now stalled.  This morning the Commerce Department reported $71.6 billion in new orders for nondefense capital equipment for the month of October:  If you look at the chart, you can see this is down from a recent high Continue reading

The Cliff: Europe vs. U.S.

The Lehmann Letter (SM)  Sometimes observers point to Greece and caution that we face a similar fate if we do not pull back from the fiscal cliff.  Actually our problems are more akin to Ireland’s and Spain’s. Those nations’ government debt was not unusually burdensome. Yet they required help from Europe because the banking crisis pulled their governments over the cliff. Here’s what happened. Ireland and Spain benefited from a housing boom that became a bubble. They enjoyed full employment until the backlash from the US swept over Europe. Their banks had to retrench, just as US banks did, once Continue reading

The Cliff and the Balance Sheet

The Lehmann Letter (SM) It’s not just the fiscal cliff. Even if negotiations remove the cliff, substantial balance-sheet challenges will continue to confront the economy. Household balance sheets remain bruised from the beating inflicted by the 2008 collapse. Debt is too high and liquidity too low. Households can’t exuberantly borrow and buy while trying to pay off debt and rebuild liquidity. Federal Reserve Chairman Ben Bernanke discussed a number of related issues in his November 20 speech At the New York Economic Club:  Consider:  “….severe financial crises–particularly those associated with housing booms and busts–have often been associated with many Continue reading

The Chairman Speaks

The Lehmann Letter (SM) Yesterday Federal Reserve Chairman Ben Bernanke shared his views with the New York Economic Club:  He began his talk by saying:  “My remarks today will focus on the reasons for the disappointingly slow pace of economic recovery in the United States and the policy actions that have been taken by the Federal Open Market Committee (FOMC) to support the economy. In addition, I will discuss some important economic challenges our country faces as we close out 2012 and move into 2013–in particular, the challenge of putting federal government finances on a sustainable path in the Continue reading

Housing Gains New Ground

The Lehmann Letter (SM) It appears that we are finally making real progress in residential building. This morning the Census Bureau announced 894,000 housing starts in October after a revised 863,000 starts in September:  If you place these new numbers on the chart, you can see that we are finally beginning the long climb out of the recent trough.  Housing Starts (Recessions shaded)  You should also notice how much further we have to go before we can claim that a true building expansion is underway.  There has been so much said about the housing recovery lately, we should keep Continue reading

The Pledge

The Lehmann Letter (SM)  Negotiations between the Obama administration and congressional Republicans regarding the fiscal cliff may be difficult and contentious because of issues that are in plain view: Tax rates on various income groups, military and domestic spending and the size of the deficit.  In addition, and just beneath the surface, lies the Grover Norquist pledge that Republicans made not to raise tax rates. Republicans, of course, wish to remain true that pledge. It would be a huge victory for the president if he could dislodge Republicans from that pledge.  Just a few days ago The Wall Street Journal Continue reading

Industrial Expansion Remains Stalled

The Lehmann Letter (SM) As the president and Congress attempt to pull back from the fiscal cliff, they must keep in mind the fragility of the current expansion. This morning’s Federal Reserve report on capacity utilization (a.k.a. the factory operating rate) underscored that fragility: It was 77.8% in October, barely above the rate of a year ago. That reinforces the observation that industrial expansion remains stalled. This is not the ideal time for a game of chicken. Compromise would be best. (To be fully informed visit © 2012 Michael B. Lehmann