Second GDP Estimate: Fourth Quarter 2014

The Lehmann Letter (SM) This morning the Bureau of Economic Analysis (BEA) released its second estimate – 2.2% – of fourth-quarter 2014 GDP growth: The BEA said: “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 2.2 percent in the fourth quarter of 2014, according to the “second” estimate released by the Bureau of Economic Analysis.  In the third quarter, real GDP increased 5.0 percent. “The GDP estimate released today is based on more complete source data than were Continue reading

CPI Drops 8.4% at Annual Rate

The Lehmann Letter (SM) Yesterday’s letter pointed out the difficulty of discerning the Federal Reserve’s intentions regarding interest rates. One reason, of course, is the Fed has not yet decided. Inflation will be a key ingredient in that decision. This morning the Bureau of Labor Statistics announced an 8.4% decline in the consumer price index (CPI) in January at a seasonally-adjusted annual rate: That will support those who counsel against raising rates. (To be fully informed visit © 2015 Michael B. Lehmann      

What Did the Fed REALLY Mean?

The Lehmann Letter (SM) Is there a detective in the house? Yesterday Janet Yellen, the Federal Reserve’s chair, testified before Congress. There is evident difficulty in reaching consensus on what she meant. (Although the stock market rose yesterday.) Binyamin Appelbaum and Jon Hlsenrath covered the event for The New York Times and The Wall Street Journal. From the headlines and first paragraphs it’s hard to tell they covered the same occasion. First the Times: “Fed’s Janet Yellen, in Testimony, Counsels Patience on Interest Rate Increase” “Janet L. Yellen, the Federal Reserve chairwoman, told Congress on Tuesday that the central Continue reading

Consumer Confidence Remains High

The Lehmann Letter (SM) Consumer Confidence began the year with an important milestone: Recovering 100. Today the Conference Board reported 96.4 for February: That remains good and strong: Far from the doldrums of just a few years ago. 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              81.7 May              82.2 June             86.4 July              90.3 August          93.4 September    89.0 October        94.1 Continue reading

The Greek Bailout

The Lehmann Letter (SM) There are two schools of thought on Greece. One school says Europe went down the wrong path in dealing with its impecunious southerner. Austerity has made a bad situation worse, leading to a shrinking economy and mass unemployment and thereby making it more difficult for Greece to meet its debts. The other school says that’s Greece’s problem. Let it be a lesson to all others who contemplate irresponsibility. Meet your obligations or suffer the consequences. Don’t expect to be rewarded for misbehavior. Andrew Higgins’s article in yesterday’s New York Times, posted the day before, makes it Continue reading

Will the Fed Raise Rates?

The Lehmann Letter (SM) Will the Federal Reserve force interest rates upward? No one – maybe not even the Fed – knows for sure. But recent news stories offer insight. See the following articles in yesterday’s New York Times. They explain why the Fed may leave interest rates alone. The first, posted February 18 by Binyamin Appelbaum: “Fed Appears to Hesitate on Raising Interest Rate” The second, posted the same day: “Biggest Decline Since 2009 for Producer Price Index” If there are lingering doubts about the economy’s strength and inflation is muted, the Fed may decide to postpone Continue reading

Housing Starts at Past Recession Levels

The Lehmann Letter (SM) Housing starts have settled on a solid one million. Both the chart and table confirm this. Trouble is: That’s recession levels using past experience as a guide. The Great Recession depressed housing starts to 0.5 million, just half of typical recession levels. Yesterday the Census Bureau confirmed these developments by reporting 1.1 million housing starts in January: 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             Continue reading

Capacity Utilization: No Breakout Yet

The Lehmann Letter (SM) U.S. manufacturing, mining and public utilities are not yet producing above 80% of their rated capacity. This morning the Federal Reserve reported that industry operated at 79.4% of capacity in January: 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 December     78.4 2014 January        78.1 February       78.8 March           79.1 April              79.0 May              79.1 June             79.2 July              79.3 August          79.1 September    79.4 October        79.1 November     79.8 December     79.4 2015 January        79.4 Past expansions typically Continue reading

Venture Capital: U.S. vs. Europe

The Lehmann Letter (SM) Here’s an example of the US on the leading – not the trailing – edge. Twenty five years ago critics of the American economy looked to Japan and Europe for better ways of doing business: Industrial policy, long-run bank financing with an emphasis on patient capital. To these critics, America was an example of how not to do things: Wall Street’s obsession with the latest quarter, start-ups that led to profit-harvesting, the short-run view. That criticism subsided with the dot-com boom when America led the way into desk-tops, software applications and the web. It faded further Continue reading