Consumer Confidence Regains 100

The Lehmann Letter (SM) Consumer Confidence began the year with an important milestone: Recovering 100. Today the Conference Board reported 101.3 for March following a slight setback in February: https://www.conference-board.org/press/pressdetail.cfm?pressid=5423 That remains good and strong: Far from the doldrums of just a few years ago. Key Question: Can confidence sustain an upward momentum? 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 Continue reading

The Federal Deficit

The Lehmann Letter (SM) In September 2013 this letter asked: “Could the federal budget deficit disappear by 2016?” The answer was: “Yes.” The analysis was: See for yourself. The chart shows that expenditures have stopped growing while revenues continue to climb. At this rate the lines my cross in just a few years and the federal government’s fiscal condition flip from deficit to surplus. That’s if the trends continue. A recession or a tax cut would halt revenue growth and the political climate may change and permit expenditure’s expansion. But if the immediate trends continue, those lines will cross and Continue reading

Corporate Profits Struggle Upward

The Lehmann Letter (SM) This morning, along with its announcement that fourth-quarter 2014 GDP grew by 2.2%, the Bureau of Economic Analysis said that after-tax corporate earnings fell slightly to $1,837.5 billion: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=53 (Row 45) Take a look at the chart and you’ll see why the stock market is at an historic high. Corporate earnings have grown at a furious pace over the past 15 years. Will that furious pace continue? Earnings must continue growing if it’s to happen. Corporate Profits (Recessions shaded) Here are the recent numbers. Compare them to the chart. $Billions: 2011 First Quarter           1,399.2 Second Quarter      Continue reading

Has Business Equipment Peaked?

The Lehmann Letter (SM) New orders for nondefense capital goods (excluding aircraft) have hovered around $70 billion for two years. This is a little higher than its 2000 and 2007 peaks. Yesterday the Census Bureau reported $69.3 billion in new nondefense capital goods orders for January: http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf Can this indicator continue upward? New Orders for Nondefense Capital Goods Excluding Aircraft (Recessions shaded) New Orders for Nondefense Capital Goods Excluding Aircraft in $Billions: 2013 January        70.1 February       66.3 March           65.8 April              67.5 May              68.0 June             69.1 July              67.1 August          68.1 September    66.8 October        65.8 November     69.7 December     69.1 2014 January        67.8 Continue reading

Manufacturers’ Earnings Resume Plateau

The Lehmann Letter (SM) The December 8 letter reported that after-tax manufacturing profits had broken out of a plateau of about $150 billion and that profit margins had exceeded 9.0 cents per dollar of sales. That was a good sign for a newly robust manufacturing sector. On March 23, however, the Census Bureau reported seasonally-adjusted fourth-quarter manufacturing earnings of $154.1 billion and margins of 8.93 cents per dollar of sales: http://www.census.gov/econ/qfr/mmws/current/qfr_mg.pdf The table below reveals the upward path may be hesitant. Manufacturers’ Profits (Recessions shaded) Manufacturers’ Profit Margins (Recessions shaded) Here are the figures. Earnings in billions of dollars and Continue reading

New Home Sales Show Strength

The Lehmann Letter (SM) Yesterday we reported lackluster existing-home sales. This morning the Census Bureau reported 539,000 new homes sold in February: http://www.census.gov/economic-indicators/#home_sales That’s an improvement, as you can see from the chart and table. Let’s hope it supports new-construction gains. New Home Sales (Recessions Shaded) Here are the seasonally adjusted data at an annual rate: 2013 January        453,000 February       448,000 March           440,000 April              452,000 May              431,000 June             459,000 July              367,000 August          379,000 September    399,000 October        450,000 November     445,000 December     442,000 2014 January        457,000 February       432,000 March           403,000 April              413,000 May              458,000 June             409,000 July              399,000 August          448,000 September    456,000 Continue reading

Existing-Home Sales

The Lehmann Letter (SM) If home sales and building have stalled, what will replace them? In January this letter observed (and the chart reveals): Existing-home sales have been wavering around 5 million for two years. They peaked at over 7 million before the Great Recession. Is 5 million the new ceiling? This morning the National Association of Realtors reported 4.88 million sales in February: http://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steam The table provides monthly data. 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     Continue reading

Balance on Current Account

The Lehmann Letter (SM) Yesterday the Bureau of Economic Analysis (BEA) released fourth-quarter 2014 data for the nation’s balance on current account: http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm The BEA announcement seems dull as dirt: “The U.S. current-account deficit—a net measure of transactions between the United States and the rest of the world in goods, services, primary income (investment income and compensation), and secondary income (current transfers)—increased to $113.5 billion (preliminary) in the fourth quarter of 2014 from $98.9 billion (revised) in the third quarter. The deficit increased to 2.6 percent of current-dollar gross domestic product (GDP) from 2.2 percent in the third quarter. The Continue reading

Fed’s Encouraging Words

The Lehmann Letter (SM) Yesterday the stock market reacted positively to the Federal Reserve’s brief statement on interest rates. Go here for the Fed’s words: http://www.federalreserve.gov/newsevents/press/monetary/20150318a.htm The key paragraphs are: “…Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over Continue reading