Consumer Confidence Index: Moving Into the New Year

The Lehmann Letter (SM) This morning the Conference Board announced its Consumer Confidence Index rose to 78.1 in December from a revised 72.0 in November: Is that significant? As always, the chart places matters in perspective. Consumer Confidence Recessions shaded There’s no doubt of significant improvement since the depths of the Great Recession. But you can also see fluctuation around the trend line. The key question: Will the index attain the 100+ levels typically associated with prosperity? Households/Consumers know when times are good or bad. Their verdict is important moving into the New Year. (To be fully informed visit Continue reading

January Publication Schedule

The Lehmann Letter (SM) Let’s follow these indicators as we begin the New Year. ECONOMIC INDICATOR PUBLICATION SCHEDULE January 2014 Source (* below)……Series Description……Day & Date Quarterly Data BEA……….GDP  …..……Thu, 30th Monthly Data ISM..Purchasing managers’ index…Thu, 2nd BEA.New-vehicle sales.(Approximate).Fri, 3rd Fed. Consumer credit .(Approximate).Wed,8th BLS………….Employment…………   Fri, 10th Census………….Inventories………. Tue, 14th BLS…………Producer prices……. Wed, 15th BLS……….Consumer prices.….. Thu, 16th Fed……….Capacity utilization……Fri, 17th Census………Housing starts…….Fri, 17th NAR………Existing-home sales….Thu, 23rd Census……..New-home sales…… Mon, 27th Census……….Capital goods…….. Tue, 28th Conf Bd….Consumer confidence.. Tue, 28th *BEA = Bureau of Economic Analysis of the U.S. Department of Commerce *BLS = Bureau of Labor Statistics of the Continue reading

Inequality and Bifurcation

The Lehmann Letter (SM) On December 4 President Obama spoke on inequality and economic mobility: In the president’s words: “…But starting in the late ‘70s, this social compact began to unravel.  Technology made it easier for companies to do more with less, eliminating certain job occupations.  A more competitive world lets companies ship jobs anywhere.  And as good manufacturing jobs automated or headed offshore, workers lost their leverage, jobs paid less and offered fewer benefits. “As values of community broke down, and competitive pressure increased, businesses lobbied Washington to weaken unions and the value of the minimum wage.  As Continue reading

The Fed, Interest Rates and the Stock Market

The Lehmann Letter (SM) On December 23 this letter commented on the correlation in price movements between financial assets such as stocks and bonds on the one hand and tangible assets such as commodities and gold on the other. In the1970s and 1980s, for instance, when swings in the inflation rate were most dramatic, commodities and gold surged in the high-inflation 1970s while bonds and stocks slumped and then commodities and gold plunged in the low-inflation 1980s as stocks and bonds climbed. Recently some observers attributed gold’s plunge to the Fed’s slowing of its bond-buying program. In their view investors Continue reading

New Home Sales Moving Up

The Lehmann Letter (SM) This morning the Census Bureau announced 464,000 new-home sales in November: As you can see from the chart that’s an improvement over recent reports. Home sales have turned upward. New Home Sales Recessions Shaded Is that an omen of improved residential construction activity? Conor Dougherty discussed that in yesterday’s Wall Street Journal: “Housing Outlook for 2014: Steadier, Sturdier” The forecasts are in bold: “The strength of the housing recovery was a welcome surprise this year. If forecasters are correct, the sector is finally ready to start picking up the rest of the economy in Continue reading

The Fed, Inflation and Gold

The Lehmann Letter (SM) Perhaps folks will now realize that an expansionary monetary policy does not guarantee inflation. Years ago, during the high-inflation ‘70s, it seemed obvious to group assets into financial and tangible categories. Financials, such as stocks and bonds, did well in times of low inflation. Tangibles, such as commodities, rose during high inflation. It was easy to choose. Recently gold presented a paradox. Gold rose despite low inflation. It seems that those who bet that the Federal Reserve’s expansionary policy would generate inflation purchased gold in anticipation of that inflation. But that inflation never materialized. Now that Continue reading

GDP: Nice End-of-Year Surprise

The Lehmann Letter (SM) This morning the Bureau of Economic Analysis released welcome news: GDP rose by 4.1% in the third quarter. Here’s the announcement: “Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.1 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 2.5 percent. “The GDP estimate released today is based Continue reading

Easy Money as Far as the Eye Can See

The Lehmann Letter (SM) The stock market exploded yesterday when the Federal Reserve issued the press release summarizing its outlook: Consider these sentiments drawn from the press release: “…The (Fed) anticipates …that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal….” Wow! “…well past…” That means the Fed plans for quite some time to suppress interest rates even as the economy expands and inflation rises modestly. Continue reading

One Million Housing Starts

The Lehmann Letter (SM) Yesterday’s letter discussed the Great Recession’s extraordinary impact on construction employment. Although non-building employment has recovered, construction hiring has not. This shortfall has held back employment’s overall recovery. Housing has definitely been ground zero for recession and the anemic recovery and expansion following recession. That’s why we should welcome this morning’s housing-starts report from the Census Bureau: Builders began work on 1,091,000 new dwellings in November. That’s the first report of over a million starts since March. Housing Starts Recessions shaded You can see from the chart that a million starts would be an improved Continue reading

Ground Zero

The Lehmann Letter (SM) This letter has often characterized residential construction as Ground Zero for the Great Recession. That is, residential construction’s collapse and downward spiral dragged the remainder of the economy down with it. Consequently residential construction’s lingering weakness has hobbled the economy’s recovery and expansion. On December 14 Floyd Norris provided corroborating evidence in The New York Times: “Feeble Hiring in Construction is a Stubborn Drag on Growth” Here is most of what Mr.Norris said. Pay close attention to the data and take his advice to examine the charts accompanying the article: “Six years after the Great Recession Continue reading