July Publication Schedule

The Lehmann Letter (SM) The conventional wisdom says the economy is moving forward. The Fed says it will wait and see before tightening monetary policy: It will only pursue restraint if aggregate demand grows too quickly. We’ll examine the evidence as the month goes by. ECONOMIC INDICATOR PUBLICATION SCHEDULE July 2013 Source (* below)……Series Description……Day & Date Quarterly Data BEA……..….GDP ..……..…Wed, 31st Monthly Data ISM..Purchasing managers’ index…Mon, 1st BEA.New-vehicle sales.(Approximate).Wed, 3rd BLS………….Employment…….…   Fri, 5th Fed. Consumer credit..(Approximate).Mon, 8th BLS…………Producer prices……. Fri, 12th Census………….Inventories…….. Mon, 15th BLS……….Consumer prices.……. Tue, 16th Fed……….Capacity utilization……Tue, 16th Census………Housing starts…….Wed, 17th NAR………Existing-home sales….Mon, 22nd Census……..New-home sales…… Continue reading

China’s Debt Management

The Lehmann Letter (SM) We will see if China can manage its banking system to greater effect than we managed ours. Will China avoid the boom and bust that characterized our economy from 2003 to 2009? China’s efforts have drawn attention to its shadow banks. They function like investment banks here: Borrowing money from commercial banks and lending it to industrial enterprises. That’s expansionary, and lately China’s central bank has attempted to moderate shadow-bank lending in an attempt to restrain the boom and avoid a bubble. Two recent newspaper articles draw attention to China’s efforts. On June 25 David Barboza Continue reading

Disappearing Deficit

The Lehmann Letter (SM) Once upon a time economists thought a federal budget deficit would drive economic expansion, as debt-fueled spending boosted aggregate demand. Now the shrinking deficit is a passive passenger in a growing economy. This morning the Commerce Department revised downward its estimate for first-quarter GDP, which grew by only 1.8%: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm But along with that report came some encouraging news about the federal deficit: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=87 (Click on Section Three and then Table 3.2.) It is now about half of what it was approximately 5 years ago. Federal Receipts, Expenditures & Deficit Recessions Shaded The first-quarter federal deficit Continue reading

Economy: Half Full or Half Empty?

The Lehmann Letter (SM) Is our economy’s glass half full or half empty? Who is correct: The Bulls or the Bears? This letter has wrestled with that issue ever since the official declaration that the Great Recession had ended. Perhaps it’s time for you to be the economist. The following may help. An article by Brenda Cronin in yesterday’s Wall Street Journal nicely sums the situation: “Slow-Motion U.S. Recovery Searches for Second Gear” http://online.wsj.com/article/SB10001424127887323300004578559263197557362.html?KEYWORDS=brenda+cronin Pay special attention to the large number of charts that accompanied the article. Here’s how the story begins: “After four bumpy years, the U.S. recovery finally Continue reading

The People’s Bank of China Is No Federal Reserve

The Lehmann Letter (SM) China’s central bank has chosen a path very different from that taken by our central bank. The Federal Reserve refused to rein in the dot-com bubble of the late 1990s or the real-estate bubble of 2003 – 2007. The People’s Bank of China is not taking that kind of laissez-faire approach. And, along the way, it has also pulled back our stock market. China fears rocked the stock market this morning, just a day – Friday – after the stock market stabilized following two days of decline. The following CNN/Money article by Charles Riley blames China’s efforts Continue reading

Existing Home Sales: Are You a Bull or a Bear? And What Does That Mean?

The Lehmann Letter (SM) The stock market opened higher this morning, and the world exhaled. The bears – at least for the time being – had had their day. Will the bulls take charge once more? The economy will provide a clue, and housing will remain an omen. On June 17 this letter reviewed a Wall Street Journal article that summarized the bull and bear case for housing’s continued expansion. The bulls looked to demographics and the bears looked to household balance sheets. The bulls said that rising population and family formation would drive demand higher, while the bears said Continue reading

Overreaction? Does the Fed’s Statement Justify the Selloff?

The Lehmann Letter  (SM) The stock market is down sharply this morning – after yesterday’s big drop – in fear that the Federal Reserve will end its expansionary policy. Concern flows from remarks made yesterday by Ben Bernanke, the Fed’s chairman. Is that fear justified? You can judge for yourself by reading the Fed’s brief statement http://www.federalreserve.gov/newsevents/press/monetary/20130619a.htm Here are the key excerpts: “…The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside Continue reading

It’s the Economy

The Lehmann Letter  (SM) This afternoon the Federal Reserve’s Federal Open Market Committee concludes a two-day meeting with a summary of its economic projections and a press conference by Chairman Ben Bernanke. Observers are eager to learn the Fed’s    prognosis for the economy and the Fed’s policy plans. Since the economy is more difficult to forecast then the weather, there are a number of views going forward. On June 16 The Wall Street Journal published an article by Jon Hilsenrath and Phil Izzo pointing out the disparity between economists’ consensus forecast and the Fed’s forecast: “Economists Wary as Fed’s Next Continue reading

Housing Starts: Breaking the One-Million Barrier

The Lehmann Letter (SM) Housing starts reached the 1 million mark in March. This morning the Census Bureau reported 914,000 starts in May: http://www.census.gov/construction/nrc/pdf/newresconst.pdf Housing starts have lingered just under the 1 million level for about six months. Housing Starts (Recessions shaded) The chart reveals a number of important facts. First, housing starts have recently climbed substantially after several years near the bottom of the trough. Second, residential construction is volatile. There is no normal. Yet it appears fair to say that housing starts must reach 1.5 million before we claim recovery. Third, a recovery level of 1.5 million starts Continue reading

Housing: Bull or Bear?

The Lehmann Letter  (SM) Housing and building data are published in the second half of the month: Housing starts are scheduled for tomorrow and existing and new home sales for the 20th and 25th respectively. This letter examines them regularly because housing was ground-zero for the Great Recession and therefore housing must play a key role in any subsequent expansion. This letter also recommends reading a June 10 article published in The Wall Street Journal: “Housing’s Up, but Is Foundation Sound?” http://online.wsj.com/article/SB10001424127887324069104578531040339867974.html The article lays out housing’s bull and bear scenarios. First the bull, or optimistic case: “…The bull case Continue reading