Why Raise Rates Now?

The Lehmann Letter (SM) Will the Fed reduce rates in the face of receding inflation? This morning the Bureau of Labor Statistics (BLS) reported falling inflation: http://stats.bls.gov/news.release/cpi.nr0.htm The Consumer Price Index fell 1.2% at a seasonally-adjusted annual rate in August. The BLS announcement also said that prices rose 0.2% over the past year. Why raise rates now? Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To be fully informed visit http://www.beyourowneconomist.com/) © 2015 Michael B. Lehmann      

Industry Stuck in Neutral: Another Reason Not To Raise Rates

The Lehmann Letter (SM) This morning the Federal Reserve reported that industrial production has not grown since the spring and that industry’s capacity utilization has also not grown: http://www.federalreserve.gov/releases/g17/Current/default.htm Indeed, the table below reveals that capacity utilization (industry’s operating rate) has been stuck in neutral for two years. That’s another reason for the Federal Reserve to leave rates alone. Capacity Utilization (Recessions shaded) Here’s capacity utilization’s 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 Continue reading

Will the Fed Raise Rates?

The Lehmann Letter (SM) Will the Federal Reserve raise interest rates this week? It’s difficult to see the need for it. Inflation is weak and China is weakening. Auto sales are robust, but home building isn’t. Employment gains have been strong, but wage gains have been moderate An increase in rates would be a preemptive strike, not a response to current conditions. What if the Fed fails to raise rates before the economy does weaken? That will remove interest-rate cuts as a possible source of demand stimulus. Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To be fully informed visit Continue reading

Producer Prices Unchanged

The Lehmann Letter (SM) This morning the Bureau of Labor Statistics reported no change in the producer- price (wholesale-price) index: http://stats.bls.gov/news.release/ppi.nr0.htm We’ll see whether or not this influences the Federal Reserve’s decision next week regarding the direction of interest rates. Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To be fully informed visit http://www.beyourowneconomist.com/) © 2015 Michael B. Lehmann    

The Stock Market and the Cycle’s Peak

The Lehmann Letter (SM) The stock market appears to have peaked for this cycle. That doesn’t mean it will crash, although it probably will fade. There won’t be another Great Recession……… More of a fading away. There is no economic boom…… Little cyclical exuberance. But we may be nearing a peak. The Federal Reserve will decide whether or not it should force interest rates upward. If the Fed waits too much longer, the expansion may be over. And – once again – low interest rates will severely limit the Fed’s course of action when the economy does inevitably weaken. Questions Continue reading

Consumer Credit Provides Continuing Evidence of a Robust Economy

The Lehmann Letter (SM) Yesterday the Federal Reserve reported that consumer credit grew by $229.2 billion in July at a seasonally-adjusted annual rate: http://www.federalreserve.gov/releases/g19/current/ In addition the Fed revised June’s gain upward to $324.2 billion. These numbers, like new-vehicle sales, are emblematic of a robust economy. But there are some areas, such as homebuilding and business capital expenditures, that continue to lag. Consumer Credit (Change) (Recessions shaded) Monthly changes in consumer credit, seasonally adjusted at an annual rate: 2013 January                  $188.8 billion February                 $231.4 billion March                     $116.9 billion April                        $151.4 billion May                        $195.4 billion June                       $141.8 billion July                        $193.0 billion Continue reading

Manufacturers’ Earnings Continue Slide

The Lehmann Letter (SM) Manufacturers’ earnings and margins continued their slide in this morning’s report from the Census Bureau: http://www.census.gov/econ/qfr/mmws/current/qfr_mg.pdf Seasonally-adjusted second-quarter earnings were $128.6 billion and margins were 8.05 cents per dollar of sales: The charts and table make clear: This is not good news. Manufacturers’ Profits (Recessions shaded) Manufacturers’ Profit Margins (Recessions shaded) Here are the figures we have reported in the past, together with today’s update. Earnings in billions of dollars and margins in cents per dollar of sales, both seasonally adjusted: 2013 First Quarter           153.0            9.04 Second Quarter      144.4            8.54 Third Quarter          Continue reading


The Lehmann Letter (SM) Monthly labor-market reporting focuses on employment gains. This month let’s celebrate the unemployment rate’s fall to 5.1%. That‘s almost down to 5.0%’s full-employment threshold. If we can attain that, it will be a great day. Meanwhile, according to today’s report from the Bureau of Labor Statistics, the economy did add 173,000 jobs in August: http://stats.bls.gov/news.release/empsit.nr0.htm That’s a good gain after many months of 200,000+ improvements.. Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To be fully informed visit http://www.beyourowneconomist.com/) © 2015 Michael B. Lehmann        

Commerce Data Confirm Auto Sales Strength

The Lehmann Letter (SM) Yesterday’s Letter relayed a private estimate of 17.8 million new-vehicle sold in August. On the same day the Commerce Department made its report of 17.7 million sales at a seasonally-adjusted annual rate: http://www.bea.gov/national/index.htm#gdp (Find motor vehicles under supplemental estimates, then open spreadsheet and click on Table 6 at bottom – Column I [scroll down for latest data].) Sales for each of the past four months have 17.0 million or higher. That’s remarkably strong. New-Vehicle Sales (Recessions shaded) New-vehicle sales in millions at a seasonally-adjusted annual rate. 2013 January        15.4 February       15.5 March           15.4 April              15.4 May              Continue reading

New-Vehicle Sales Continue Strong

The Lehmann Letter (SM) This morning’s Wall Street Journal, in an article posted yesterday by Jeff Bennett and Chelsey Dulaney, reported 17.8 million new-vehicle sales for August: “U.S. Auto Sales Pace Accelerates” http://www.wsj.com/articles/auto-sales-cool-in-august-on-later-labor-day-1441108884 The opening paragraphs speak to a robust market: “U.S. car and truck buyers veered around a jittery stock market in August and snapped up vehicles at the fastest sales pace in 10 years, lured by financing incentives, low fuel prices and optimism toward the economy. “The seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and Continue reading