At the Fed: Doves Prevail

The Lehmann Letter (SM) At the Fed: Doves Prevail You can easily read yesterday’s report from the Federal Reserves’ Open Market Committee. It’s only seven paragraphs: But if you don’t, the following quote sums it up: “…To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate…” The doves continue to prevail over the hawks. Interest rates will remain low until the Fed is certain that the expansion has gained strength. (To be fully informed visit © 2014 Michael B. Lehmann    

The Good News in the GDP Report

The Lehmann Letter (SM)   This morning’s Bureau of Economic Analysis press release reported a good 4.0% increase in second-quarter GDP following a disappointing 2.1% (revised) drop in the first quarter: Look at the numbers and you’ll see a $70 billion gain from 2013’s last quarter, i.e. the quarter before the drop. Roughly a $55 billion improvement in consumer durable goods (think autos) and a $35 billion rise in nonresidential fixed investment (think business capital expenditures) account for the lion’s share of this improvement. (A big jump in imports reduced the gain in overall GDP.) That’s welcome news Continue reading

Consumer Confidence Moves Higher

The Lehmann Letter (SM) The economy remains bifurcated: The stock market, employment trends and new-vehicle sales are strong while residential construction, business capital expenditures and consumer confidence have lagged. But now there is evidence that consumer confidence may be moving out of the doldrums. This morning The Conference Board reported July Consumer Confidence of 90.9: The chart and the table below the chart show that’s a solid gain. Consumer Confidence Recessions shaded Here’s the record since the beginning of 2013: 2013 January        58.4 February       68.0 March           61.9 April              69.0 May              74.3 June             82.1 July              81.0 August          81.8 September    80.2 Continue reading

New Home Sales Disappoint

The Lehmann Letter (SM) Last month this letter reported a jump in May new-home sales and asked: “Is the jump a fluke or is it an omen of a new upward surge?” Now we know……….. On July 24 the Census Bureau reported 406,000 new homes built in June: That’s a huge drop from the Bureau’s initial report of 504,000 new homes in May. The Bureau revised May’s figure down to 442,000, and also revised March and April data. The outcome: A big downward revision for this year’s first half and fear that new home sales are waning rather than Continue reading

The Fed’s Growing Confidence in the Economy

The Lehmann Letter (SM) In an announcement on July 9 and in a summary of its June 17-18 Open Market Committee meeting, the Federal Reserve expressed growing confidence in the economy. You can see it in this July 10 article by Binyamin Appelbaum in The New York Times: “Fed, Confident in Economy, Details End of Bond-Buying Program” The story begins: “The Federal Reserve said on Wednesday that it planned to stop adding to its bond holdings in October, in a sign of its confidence that the economy is gaining strength even as the central bank gradually withdraws its support…..” Continue reading

The Next Bubble?

The Lehmann Letter (SM) Home prices have rebounded and the stock market recently set a record. Does this mean we’re heading toward our next bubble? It doesn’t seem that the residential real-estate market or the stock market have the froth of 2007 (real-estate bubble) or 2000 (dot-come bubble). Grinding to a halt seems more likely than a pop. But what about China? Reports from there have long-described runaway real-estate speculation and a mounting glut of unoccupied apartment towers. Will that bubble pop and drag down the rest of the world? Neil Irwin frames matters well in the July 8 issue Continue reading

Consumer Credit Robust

The Lehmann Letter (SM) Yesterday the Federal Reserve released robust consumer-credit data: Consumer credit rose by $235.2 billion in May. Consumer Credit (Change) (Recessions shaded) Consumer credit is now growing more strongly than before The Great Recession. 2013 January                  $194.0 billion February                 $275.9 billion March                      $71.6 billion April                        $127.4 billion May                        $220.2 billion June                       $166.4 billion July                        $157.6 billion August                    $188.9 billion September              $190.9 billion October                  $203.6 billion November               $86.3 billion December               $215.6 billion 2014 January                  $165.5 billion February                 $197.9 billion March                     $234.7 billion April                        $313.4 billion May                        $235.2 billion A remarkable series of numbers! (To be fully Continue reading

The Surge in Home Prices

The Lehmann Letter (SM) Yesterday’s letter commented on the surge in new-vehicle sales. New-home sales and new-vehicle sales have traditionally moved in tandem. Now, however, new-vehicle sales are back to pre-recession levels while new-home sales are a fraction of that level. The economy won’t return to the robust state it enjoyed before the Great Recession until homebuilding and home sales approach earlier levels. The problem seems anomalous when we consider that home prices have improved considerably from their recession depths. Therefore we ask: “Why are home sales performing so poorly while home prices are enjoying substantial gains?” For help with Continue reading

New-Vehicle Sales Keep Moving Up

The Lehmann Letter (SM) New-vehicle sales seem to have burst the bonds that held them back for about a year. On July 3 the Bureau of Economic Analysis reported 16.9 million new vehicles sold in June at a seasonally-adjusted annual rate: (Find motor vehicles under supplemental estimates, then open spreadsheet and click on tab 6 at bottom – Column I [scroll down for latest data].) See the chart and table below for perspective. New-Vehicle Sales (Recessions shaded) New-vehicle sales in millions at a seasonally-adjusted annual rate. 2013 January        15.2 February       15.3 March           15.3 April              15.2 May              15.4 June             15.8 Continue reading