Consumer Confidence Stumbles

The Lehmann Letter (SM)  This morning the Conference Board provided evidence that the Fiscal Cliff has depressed consumer confidence:  Consumer confidence fell from the 70s to 65.1 in December.  In the Board’s press release, Lynn Franco, Director of Economic Indicators, said: “Consumers’ expectations retreated sharply in December resulting in a decline in the overall Index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more Continue reading

Business Paradox: Profits Strong, Investment Weak

The Lehmann Letter (SM)  Business is currently enjoying record profits and profit margins, but its investment in new plant and equipment is going nowhere fast.   Last week the Census Bureau reported $70.8 billion in new orders for nondefense capital goods for November:   The chart shows a sharp rebound coming out of recession, but expenditures have stalled between $70 and $80 billion in 2012.   New Orders for Nondefense Capital Goods (Recessions shaded)   What are the possible causes of this malaise?   First, demand is weak. Business sales have not emerged from the latest recession as Continue reading

Existing-Home Sales: Not There Yet

 The Lehmann Letter (SM)  Yesterday’s letter discussed new-home sales and drew attention to the fact that those sales are just beginning to improve and need to improve much more before robust conditions prevail.   The same cautious optimism holds true for existing-home sales. This morning the National Association of Realtors reported 5.04 million sales in November:   The press release said:   Existing-home sales “….rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November from a downwardly revised 4.76 million in October, and are 14.5 percent higher than the 4.40 million-unit pace in November Continue reading

Housing and Residential Construction: Still a Long Way to Go

The Lehmann Letter (SM) There is no doubt that housing and residential construction are emerging from the doldrums. That’s important for the continued health of the economic expansion.  But “emerging from the doldrums” is not the same as robust good health. Home prices and building are just beginning to recover.  For example, consider this morning’s Census Bureau report on housing starts:  Housing starts were 861,000 in November, sustaining revised reports of 843,000 in September and 888,000 in October. These figures are considerably better than this year’s earlier numbers: All in the 700,000 range.  The chart reveals that housing starts Continue reading

US Current Account

The Lehmann Letter (SM)  This morning the Commerce Department released its third-quarter estimate for the US current account:  The current account improved slightly to -$107.5 billion.  Take a look at the chart to put this in historical perspective. You can see that the US balance on current account deteriorated until the recent recession. Then it began to improve in the last several years.  Private Borrowing   Recessions Shaded  That means the US trade deficit stopped growing and has shrunk lately. Seems good. But, if you look more closely at earlier recessions, you can see that the trade deficit improved Continue reading

The Fiscal Cliff and Domestic Tranquility

The Lehmann Letter (SM) Perhaps we can avoid the Fiscal Cliff. But chances look slimmer with every passing day.  There are two overarching reasons to hope for success. The first reason involves the issues: Avoiding the consequences of falling off the cliff and the nature of the settlement achieved. The second reason involves the relationship between the parties: Can Democrats and Republicans go forward, build on a settlement, and forge cooperation. The nation needs both.  Success in resolving the issues – the first reason – is an obvious goal. But building a relationship is of equal importance. The parties may Continue reading

If They Can Do It, Why Can’t We?

The Lehmann Letter (SM) It’s amazing that the nations of Europe, a continent on which armies marched back and forth less than a century ago, can now agree to bind themselves into a closer and closer union. Europe is no longer a mere geographic concept. It is now a political concept. Measure by measure Europe is building unity.  Catch the latest in the New York Times:  “European Leaders Hail Accord on Banking Supervision”  The first paragraph sums it up:  “European leaders gathering here on Thursday for their year-end summit meeting hailed an agreement to place euro zone banks under Continue reading

Another Cause for Concern

The Lehmann Letter (SM) Manufacturing has struggled lately. This morning the Census Bureau released another cause for concern:  Business sales fell slightly in October and inventories rose. That indicates that businesses involuntarily accumulated the goods they thought they would sell but did not. Consequently the inventory/sales ratio moved up a little.  You can see from the chart that a sharp increase in the inventory/sales ratio typically accompanies recession as involuntary inventory accumulation grips the economy.  Inventory/Sales Ratio Recessions Shaded  October’s reading was only one month, not a trend, and the adverse movements were small. But in today’s fragile economy, Continue reading