GDP Growth Slows At End of 2014

The Lehmann Letter (SM) This morning the Bureau of Economic Analysis released its initial estimate of a 2.6% increase in fourth-quarter 2014 GDP: The report began: “Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 2.6 percent in the fourth quarter of 2014, according to the “advance” estimate released by the Bureau of Economic Analysis.  In the third quarter, real GDP increased 5.0 percent….. Then it explained the slowdown from the previous quarter’s robust pace: “….The deceleration in real Continue reading

The Fed Says Wait and See

The Lehmann Letter (SM) Yesterday the Federal Reserve said the following about its policy going forward: “…..Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.  However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.  Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated. “…..When the Continue reading

Consumer Confidence Hits 100!

The Lehmann Letter (SM) 100+ signals healthy consumer confidence and this indicator is finally back. It fell below 30 during the depths of the Great Recession. The chart and table reveal its long climb back. It was in the 60s two years ago. Yesterday the Conference Board reported 102.9 for January: Consumer Confidence (Recessions shaded) Here’s the record since the beginning of 2013 (1985 = 100.0): 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 October        72.4 November     72.0 December     77.5 2014 January        79.4 February       78.3 March           83.9 April              Continue reading

Existing-Home Sales Fall in 2014

The Lehmann Letter (SM) The Census Bureau will release December data for new-home sales at 10AM Eastern time today. Meanwhile existing-home sales were down 3% in 2014 compared to 2013 according to the January 23 bulletin from the National Association of Realtors: The table provides monthly data for both years. 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          5.33 September    5.26 October        5.13 November     4.83 December     4.87 2014 January        4.62 February       4.60 March           4.59 April              4.66 May              4.89 June             5.03 July              5.14 August          5.05 September    Continue reading

Teaching Greece a Lesson

The Lehmann Letter (SM) Has Greece learned its lesson? Yesterday Greece said “Enough.” It chose a different direction in parliamentary elections. A fresh coalition, led by leftists, will negotiate with Europe over the austerity plan imposed upon Greece and accepted by the old government. The new government has vowed to unring that bell. The Greek people want to end the grinding depression that has gripped the Greek economy. Europe’s insistence upon a drive to balance the budget has slashed government expenditures and generated a drop in employment and wages. Europe says this will make Greece more competitive in world markets Continue reading

Europe’s Recovery Plan

The Lehmann Letter (SM) Yesterday Europe’s central bank launched a new expansion program. The bank will purchase European government securities in the hope that this will further reduce interest rates and thereby stimulate European borrowing and spending. The plan is known as Quantitative Easing and is similar to a plan undertaken and concluded by our own Federal Reserve. It’s not clear whether or not this plan will succeed. Supporters point to our own Federal Reserve’s Quantitative Easing and the robust growth of the American economy. But that assumes that our Quantitative Easing was primarily responsible for our success. The Federal Continue reading

Housing Starts Gradual Ascent

The Lehmann Letter (SM) Residential construction drove earlier expansions. Not so this time. Yesterday the Census Bureau reported 1.1 million housing starts in December: The chart reveals rapid ascent from recession’s trough and the table reveals a gradual ascent in the last two years. Housing Starts Recessions shaded These figures are presented in thousands of homes started, so that 0.9 is shown in its raw form of 896 for 896,000: 2013 January        896 February       951 March           994 April              848 May              915 June             831 July              898 August          885 September    863 October        936 November     1,105 December     1,034 2014 January        897 February       Continue reading

Capacity Utilization Remains Around 80%

The Lehmann Letter (SM) Last month we observed an important milestone when capacity utilization reached 80%. The chart and table reveal a long road back. This means that U.S. manufacturing, mining and public utilities are – once again – producing 80% of their rated capacity. Recently the Federal Reserve reported that industry operated at 79.7% of capacity in December: That’s close enough to 80% to say: Holding steady. Capacity Utilization Recessions shaded Here’s the recent record. 2013 January        77.4 February       77.8 March           78.0 April              77.8 May              77.8 June             77.8 July              77.5 August          77.8 September    78.3 October        78.2 November     78.5 Continue reading

Inequality: Income vs. Wealth

The Lehmann Letter (SM) Most reports on inequality feature income (what we earn) inequality. Some focus on wealth (what we own, or net worth) inequality. There is a difference. Income does not equal wealth. There are far more millionaires – who, because of homeownership, have wealth of one million dollars – than there are folks whose income is a million dollars. Very few people have net annual earnings of one million dollars while there are many whose homeownership makes them millionaires. Wealth inequality is more extreme than income inequality. Yesterday Faith Karimi posted the following on CNN’s website: “Wealthiest 1% Continue reading