May Publication Schedule

The Lehmann Letter (SM) This morning’s GDP report from the Bureau of Economic Analysis said GDP growth was flat in the first quarter (up by only 0.1%): ttp://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=1 (Percentages) http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=6 (Dollar figures) But a look at the dollar figures generates some concern: Household expenditures on services were up but business investment in equipment and inventory was down, while our trade deficit grew. That’s too bad, but this letter has reported new orders for business equipment have been flat for some time. We’ll keep tabs on the following in May: ECONOMIC INDICATOR PUBLICATION SCHEDULE  May 2014  Source (* below)……Series Description……Day & Continue reading

Has Consumer Confidence Stalled?

The Lehmann Letter (SM) The chart displays consumer confidence’s sharp recovery from its Great Recession trough. But this important indicator appears to have leveled lately. Consumer Confidence Recessions shaded This morning the Conference Board reported April consumer confidence of 82.3: https://www.conference-board.org/press/pressdetail.cfm?pressid=5172 Here’s a recap of the preliminary – unrevised – data for consumer confidence that this letter has reported over the past year: 2013 March           59.7 April              68.1 May              76.2 June             81.4 July              80.3 August          81.5 September    79.7 October        71.2 November     70.4 December     78.1 2014 January        80.7 February       78.1 March           82.3 April              82.3 Notice the upsurge in 2013’s second quarter Continue reading

The Root Cause of Housing’s Weakness

The Lehmann Letter (SM) This letter believes that a weak housing sector is ground zero for the economy’s anemic expansion and that weak household balance sheets are responsible. Neil Irwin delved into this issue in an article in yesterday’s New York Times: “Why the Housing Market Is Still Stalling the Economy’ http://www.nytimes.com/2014/04/27/upshot/the-housing-market-is-still-holding-back-the-economy-heres-why.html?_r=0 Mr. Irwin began by simply stating the problem: “..The bigger thing holding back housing is simply demand. Fewer people can or want to fulfill the American dream of starting a household of their own….” Then Mr. Irwin identified demographics as the cause of that problem: “…The number of Continue reading

Mortgage Lending Trouble

The Lehmann Letter (SM) This letter has expressed the view that homebuilding must grow swiftly before the economy can grow rapidly. But weak household balance sheets stand in the way of robust mortgage borrowing and a strong recovery in residential construction. An article by Nick Timiraos in today’s Wall Street Journal is instructive: “Demand for Home Loans Plunges” http://online.wsj.com/news/articles/SB10001424052702304788404579522051733228402?mg=reno64-wsj The article begins: “Mortgage lending declined to the lowest level in 14 years in the first quarter as homeowners pulled back sharply from refinancing and house hunters showed little appetite for new loans, the latest sign of how rising interest rates Continue reading

Existing Home Sales: You Decide

The Lehmann Letter (SM) Yesterday’s letter discussed new-home sales and asked you to decide – based on monthly data – whether or not new-home sales had improved over the past year. Let’s conduct the same exercise with existing home sales. This week the National Association of Realtors released data for March: http://www.realtor.org/news-releases/2014/04/existing-home-sales-remain-soft-in-march   Existing home sales were 4.59 million on a seasonally adjusted annual basis. Compare that to the chart below and the monthly data below the chart. Existing Home Sales (Recessions shaded) Existing home sales in millions: 2013 March           4.96 April              4.99 May              5.15 June             5.16 July              5.38 August          Continue reading

New Home Sales: You Decide

The Lehmann Letter (SM) Previous dispatches of this letter have said that (1) residential construction was Ground Zero for the Great Recession and therefore must be Ground Zero for any true expansion, and (2) the deterioration of household balance sheets fueled decades of housing boom and future housing booms are foreclosed because that deterioration cannot continue. That said, take a look at this morning’s report from the Census Bureau: http://www.census.gov/construction/nrs/pdf/newressales.pdf New Home Sales Recessions Shaded The Census reported 384,000 new homes sold in March. The Bureau also reported monthly sales for the past year: 2013 March           443,000 April              446,000 May              Continue reading

The Balance Sheet and the Business Cycle

The Lehmann Letter (SM) Yesterday’s letter discussed the current economic expansion’s weakness due to residential construction’s incomplete recovery. Today’s letter draws attention to household balance sheets’ role. Ever since World War II, but increasingly over the past 30 years and especially since 2000, households have shifted out of liquid assets and into tangible assets and relied heavily upon borrowing to finance residential construction and home purchases. The ultimate excess occurred from 2003 through 2007 during the residential real estate bubble. Then, as the bubble burst, everything went into reverse. Residential construction and residential real estate collapsed as households reduced debt Continue reading

The Anemic Recovery and Expansion

The Lehmann Letter (SM) This letter has expressed the following view: Since the bursting housing bubble generated the Great Recession of 2008, housing’s recovery and expansion must be Ground Zero for any general economic expansion. The overall expansion has been tepid because housing has failed to fully revive. This letter also believes that each recovery has its own dynamic: Some do cluster about a general scenario, while others have a life of their own. Inflation’s rhythm and the Fed’s response determined the Old Economy cycles of the 1950s, 1960s, 1970s and 1980s. Then technology and the New Economy drove the Continue reading

The Fed Speaks

The Lehmann Letter (SM) On April 16 Federal Reserve Chair Janet Yellen spoke before the Economic Club of New York on “Monetary Policy and the Economic Recovery:” http://www.federalreserve.gov/newsevents/speech/yellen20140416a.htm It’s instructive to observe the Fed’s view in the Chair’s words. Ms. Yellen began with a summary of current conditions: “Nearly five years into the expansion that began after the financial crisis and the Great Recession, the recovery has come a long way. More than 8 million jobs have been added to nonfarm payrolls since 2009, almost the same number lost as a result of the recession. Led by a resurgent auto Continue reading

Beige Book

The Lehmann Letter (SM) Every six weeks the Federal Reserve publishes “Current Economic Conditions,” a non-statistical seat-of-the-pants survey of economic conditions conducted by the Federal Reserve Banks in each of the Fed’s twelve districts. Better known as the Beige Book, it provides a business point of view. The latest appeared yesterday: http://www.federalreserve.gov/monetarypolicy/beigebook/files/BeigeBook_20140416.pdf Here are some key sentences and phrases from its Summary: “Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report…..” “…Consumer spending increased in most Districts…………..” “…Manufacturing improved in most Districts…” “…Reports on residential housing markets varied….” Continue reading