September Publication Schedule

The Lehmann Letter (SM) Yesterday this letter reported a sharp drop in the second-quarter federal budget deficit. The same release from the Commerce Department also revealed flat corporate profits haven’t improved this year. That’s because aggregate demand’s growth has not been robust. And it is all the more reason to pay special attention to the economic indicators as they unfold. Here is our calendar for September. Let’s hope we see more strength as the fall begins.  ECONOMIC INDICATOR PUBLICATION SCHEDULE  September 2013  Source (* below)……Series Description……Day & Date  Quarterly Data BLS…Productivity & Costs ….Thu, 5th BEA…International transacs…Thur, 19th BEA……..….GDP ..……..…Thu, Continue reading

Balanced Budget by 2016?

The Lehmann Letter (SM) Could the federal budget deficit disappear by 2016? Yes it could according to statistics released this morning. Today’s big news from the Commerce Department is a 2.5% second-quarter increase in GDP: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm But the report included good news on the 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., lines 36, 39 & 45) The second-quarter deficit shrank to $656.4 billion without including capital items, and shrank to $723.9 billion with the inclusion of capital items. Those figures are half of what they were two years ago and far smaller than the deficit was at Continue reading

Race to the Bottom?

The Lehmann Letter (SM) Labor cost entails more than wages: Productivity (efficiency) is key. If output per worker is high, wages can also be high while cost per unit of output remains low. But if foreign shores raise their productivity to US levels, then US producers are driven to put relentless downward pressure on wages. Let’s hope this is not the beginning of a race to the bottom. These issues also affect consumer confidence and consumer spending. Yesterday’s letter observed that consumer confidence continues to rise. But two recent articles raise troubling issues. On August 26 Neil Shah writing in Continue reading

Consumer Confidence Struggles Northward

The Lehmann Letter (SM) The economy is recovering, even expanding, but its forward progress is slow and fitful. Residential construction and business capital expenditures – two important categories – provide examples of this sluggish improvement. Meanwhile households have grown more confident in the economy. This morning The Conference Board reported August consumer confidence at 81.5: http://www.conference-board.org/press/pressdetail.cfm?pressid=4918 Consumer confidence is now higher than it’s been for half a decade. Consumer Confidence (Recessions shaded) The chart reveals consumer confidence’s good progress since the depths of recession. The index has more than doubled. Now place August’s 81.5 reading in historical context. You can Continue reading

Business Capital Expenditures: A Good Leading Indicator?

The Lehmann Letter (SM) This morning’s news reports advised listeners not to be too disappointed at the July drop in new orders for capital goods. These data are notoriously volatile. This letter likes to focus on a piece of that report: New orders for nondefense capital goods, because they provide insight into business capital expenditures on plant and equipment. And today’s announcement from the Commerce Department was not bad: http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf Business ordered $78.0 billion of new equipment to July. New Orders for Nondefense Capital Goods (Recessions shaded) Place that number on the chart and you can appreciate its relative strength. Continue reading

If Homes Were Autos

The Lehmann Letter (SM) If homes were autos, this recovery would be complete. The unemployment rate would be in the 5% range and corporate earnings would soar, boosting the stock market to ever greater heights. That’s because new-vehicle sales are almost back to where they were before the Great Recession. This is not the case with housing. The recovery in existing-home sales and home prices has made the news, although it is far from complete. But your examination of the chart will immediately reveal that new-home sales remain severely depressed. If new-home sales had recovered as strongly as auto sales, Continue reading

Skyscrapers and the Business Cycle

The Lehmann Letter (SM) Have you noticed how skyscraper construction reflects the business cycle? Exuberant upswings foster monumental building. Recession and depression do the opposite. It isn’t just the amount of construction; it’s also the height. Think of the Chrysler building and the Empire State building in New York: Both symbols of the roaring 20s. The Empire State building was a white elephant during the Great Depression, but filled with tenants after World War II. Then a new wave of building began, capped by the World Trade Center in New York and the Sears Tower in Chicago. High inflation and Continue reading

Nice Bump for Real Estate

The Lehmann Letter (SM) Sales of existing homes have hovered around 5 million for almost three quarters. This morning the National Association of Realtors reported July sales of 5.39 million: http://www.realtor.org/news-releases/2013/08/existing-home-sales-spike-in-july That’s a nice bump upward. Existing Home Sales (Recessions shaded) The report raises this question: What is a good level? The 7 million peak reached during the 2003-2007 real-estate boom was clearly abnormal. What about the 5 million plateau at the end of the 1990s dot-com boom? That was considered very strong at the time. Can we aspire to 6 million now? That may be necessary in order to Continue reading

Household Borrowing in US and Europe

The Lehmann Letter  (SM) No one is saying that it is the best of times and the worst of times, but two recent Wall Street Journal articles portray very different scenes in the US and Europe. Begin with the following by Eric Morath that appeared in the August 15 edition: “Confident Consumers Step up Their Borrowing” http://online.wsj.com/article/SB10001424127887323639704579012661218273926.html “After years of struggling to shed debt, Americans are finally gaining enough confidence in their finances to step up borrowing for autos, homes and other goods—a shift that could boost the economic recovery…..” Compare and contrast that with Matthew Dalton’s piece from August Continue reading

Leadership at the Fed

The Lehmann Letter  (SM) Ben Bernanke’s term at the Federal Reserve’s helm is nearing an end. Who’ll be the Fed’s next chair and how will that person govern? See today’s Wall Street Journal for an excellent article on this topic by Jon Hillsenrath: “Test for Federal Reserve’s Next Chief: Quelling Dissent” http://online.wsj.com/article/SB10001424127887323455104579017213638168086.html?mod=ITP_pageone_1 Mr. Hillsenrath discusses the leadership style of recent Fed chairs and also provides a profile of the top contenders to replace Mr. Bernanke. In this letter’s view it would be surprising if there were little dissent at the Fed. Intense ideological struggle characterizes the economic scene throughout our Continue reading