Posts filed under “Think Tank”

Lotta data

The October NY manufacturing survey blew past expectations, coming in at 34.6, twice the forecast. It’s the highest level since May ’04. The number only measures the direction of improvement, not the degree so don’t extrapolate that we are partying like its May 2004 but there is no question today’s figure was impressive. New Orders rose to 30.8 from 19.8 while Backlogs rose 6 pts to positive territory for the 1st time since Mar ’08. Employment rose to 10.4 from -8.3 and positive for the 1st time since June ’08 which is nice to see. Inventories remained firmly negative but less so as they rose 7 points to the highest level since Feb. Prices Paid and Received both fell a touch. The 6 month Business Condition outlook rose 4 pts, the highest since Nov ’04. The NY survey is very volatile and we’ll need to see other regional data and the national ISM in order to confirm but manufacturing is expected to be a main contributor to the 2nd half recovery.

Sept CPI rose .2% both headline (in line) and core (.1% higher than expected). The y/o/y decline has slowed to 1.3%, a level last seen in May. The core gain rose 1.5% y/o/y and has remained stubbornly positive all through the economic turmoil proving that the deflation that we saw was mostly in food and energy and for everything else we saw was just disinflation. Owners Equivalent Rent, 24% of the overall CPI, fell .1%, only the 2nd drop since 1992 as rent pressures on landlords continue with rising unemployment and competition from unsold homes. Vehicle prices rose .5% led by used cars and trucks thanks to the taking off the market of many Cash for Clunkered cars, oh the unintended consequences. New vehicles prices rose .4% due to the limited supply of new cars. The implied inflation rate in the 10 yr TIPS is rising 2 bps to 1.96%, a 2 month high.

Initial Jobless Claims totaled 514k, 6k less than expected and are at the lowest level since early Jan but the prior week was revised up by 3k. Continuing Claims were 8k below estimates and down 75k from last week but those receiving Emergency Unemployment Compensation rose by 10k and those getting Extended Benefits rose by almost 6k. The EUC gain though is below the recent weeks but there is no way to know if a slowdown is due to people finding new jobs or are because they are running out of benefits. The monthly jobs data will answer that. The insured unemployment rate did tick down .1% to 4.5%. The amount of firing seen continues its downward trend with the timing and pace of hiring still being uncertain.

Category: MacroNotes

As seen for Q2, earnings season is great but revenue season is mixed

Earnings season continues to be excellent relative to expectations while revenue season is mixed, the same theme as seen in Q2. Based on my little earnings cheat sheet, 18 of 20 co’s have beat earnings estimates while only 10 have exceeded revenue estimates. All in one day today we get information on the labor market,…Read More

Category: MacroNotes

FOMC minutes, easy for longer but is the fire still raging?

The minutes from the FOMC Sept meeting didn’t reveal much in terms of gaining any clues of when they might raise interest rates in light of their more optimistic view of the economy in terms of expecting 2nd half improvement that they expect to continue into ’10. Based on their still sanguine view of inflation…Read More

Category: MacroNotes

DJIA 10,000, let’s reminisce

With the DJIA approaching 10,000 again, let’s reminisce about 1999, the year it first passed that magic level on March 29th. Millennium by the Backstreet Boys was the best selling album, American Beauty won the Academy Award, the Euro was established, SpongeBob SquarePants aired for the first time, Hugo Chavez was elected President of Venezuela,…Read More

Category: MacroNotes

FOMC Meeting Comments

FOMC Minutes (September) > Minutes from September’s meeting will reveal a wide range of views on the FOMC regarding the timing of the central bank’s withdrawal of the monetary stimulus. Some policymakers have lobbied for the central bank to begin tightening aggressively soon. Others, including Fed Chairman Ben Bernanke, appear to want to proceed with…Read More

Category: Federal Reserve, Think Tank

Business Inventories/data shows drag still but improvement to come

August Business Inventories still reflect the drag from inventories as they fell 1.5% vs expectations of a drop of 1%. Because sales rose by 1%, the inventory to sales ratio fell to 1.33 from 1.36, the lowest since August ’08 but it sets the backdrop for an improvement in manufacturing into year end as the…Read More

Category: MacroNotes

A Discourse on the Method . . .

. . . of Rightly Conducting the Reason and Seeking Truth in Contemporary Economies & Markets, with sincerest apologies to the memory of Rene Descartes.



Seventeenth century medicine, Moliere observed, was a field where most men died of their remedies and not of their diseases. So too, twenty-first century interventionist monetary policy seems to kill more wealth than if recessions were left alone to run their course. Instead of bloodletting, our “physicians” pump us full of liquidity until we explode, and then pump more into us as we lay gushing.

In the US our chief surgeon, the Fed, has been able to operate unilaterally, virtually unencumbered by Congressional restrictions or mandates, so that Wall Street banks (its literal owners and first constituency) don’t die. And the Fed needn’t worry about claims of malpractice because, as we now see, when push comes to shove its insurance carrier is the US Treasury, which is another way of saying the same taxpayers that lay bleeding.

Transitive properties still hold: if A equals B and B equals C, then A must equal C. Applied here: if US taxpayers (A) fund the US Treasury (B), and Treasury backs the Fed (C), and the Fed backs Wall Street banks (D), then US taxpayers (A) back the ongoing profitability of Wall Street banks (D). Perhaps this explains why all those crisp new electronic dollars created from thin air last fall went directly to creditor banks rather than to debtor homeowners?

Saving the system was generally perceived then to be saving the US economy or saving the commercial paper market or saving depositors from losses. In fact these systems were never at risk given the Fed’s willingness to print money and cover all bets. Whether carefully designed or the result of impulsive reactions, there was a decision made at the highest levels of government. The only conclusion to draw was that the “system” saved was the system of government intermediation into the private sector economy and it was accomplished by saving the government’s ports of entry — Wall Street’s largest and most influential banks.

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Category: Think Tank

Sept Retail Sales

Sept Retail Sales were better than expected as they fell just 1.5% m/o/m, .6% better than forecasts, as the CARS program ended (motor vehicles, parts fell 10.4%). Ex the influence of auto’s, sales rose .5%, .3% more than expected and ex auto’s and gasoline, sales were up .4%, .2% higher than estimated. Component supplier Intel…Read More

Category: MacroNotes

Impressive earnings, impressive execution but how’s end demand?

Solid execution with big upside in revenues from INTC and JPM provides an interesting backdrop to the Retail Sales data today. Intel has benefited from inventory rebuilding, especially ahead of the Windows 7 launch (replacement cycle hopes) and netbook sales. The question of sustainability will be sell through to the end consumer and the Retail…Read More

Category: MacroNotes

Vice Chairman Donald L. Kohn: The Economic Outlook

Vice Chairman Donald L. Kohn

At the National Association for Business Economics, St. Louis, Missouri
October 13, 2009

The Economic Outlook

I’m pleased to be here at the National Association for Business Economics. Most of you are in the business of making or using economic forecasts to inform the strategies of your organizations as they try to meet their objectives. So am I, and I thought this would be a good opportunity to discuss my view of the outlook and the implications that I draw for monetary policy. I’ll start with a brief overview of recent developments and the near-term outlook. Then I’ll turn to a few of the issues that bear on the medium to longer-run outlook. I emphasize that the views you are about to hear are my own and not necessarily those of my colleagues on the Federal Open Market Committee.1

In broad terms, the data that we have in hand indicate that economic activity turned up in the third quarter. To some extent, the pickup in activity in recent months reflects the dissipation of some of the forces that had been exerting downward pressure on the economy during the preceding several quarters. Perhaps the most important of these downward forces was the turmoil in financial markets that began in late 2007, which not only tightened credit availability and reduced wealth, but also undermined confidence, especially when conditions took a decided turn for the worse in the fall of 2008. The stabilization, and more recently the improvement, in risk appetites and financial conditions, in part responding to actions by the Federal Reserve and other authorities, has been a critical factor in allowing the economy to begin to move higher after a very deep recession.

A turn in the inventory cycle is another key element in the recent firming in aggregate activity. During the second half of 2008, many firms were apparently surprised at the sharp falloff in demand. In response to a buildup of unwanted inventories, they began aggressively liquidating stocks by slashing production well below the level of sales. The pace of liquidation intensified through the middle of this year. More recently, however, with inventories now less burdensome, firms have begun boosting production to slow the pace of inventory destocking and bring output into closer alignment with expected final sales. This process is particularly evident in the motor vehicle industry, where the stock of cars and trucks on dealers’ lots had become extremely lean, prompting increases in assemblies from the very low levels seen at midyear. More broadly, the slower pace of inventory liquidation likely provided an appreciable boost to manufacturing production in July and August, and should continue to push up factory output further in the near-term.

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Category: Federal Reserve, Think Tank