If you’re looking for evidence that recession risk is rising, you won’t find it in today’s update on industrial production, which surged 1.1% in April—the biggest monthly rise since December 2010. The cycle may be drag us down in the months ahead, but industrial production is putting up a pretty good imitation of swimming against the tide.
Author Archives: James Picerno
Retail Sales Growth Turns Sluggish In April
Retail sales rose a meager 0.1% last month on a seasonally adjusted basis, the smallest monthly gain since December, the Census Bureau reports. The retreat in the growth rate isn’t terribly surprising, given the relatively strong pace in each month during the first quarter. Nonetheless, today’s sales news won’t inspire confidence amid all the renewed worries about the potential blowback for the global ecoomy if Greece leaves the euro and the possibility of rising recession risk in the U.S.
Strategic Briefing | 5.15.12 | Will Greece Leave The Euro?
European leaders and financial markets braced for Greece exit from euro
The Guardian | May 15
With attempts in Athens to form a government after last week’s election looking increasingly doomed, European leaders abandoned their taboo on talking about the possibility that Greece might have to leave the euro.Shares, oil, and the euro were all sold heavily on Monday in anticipation that anti-austerity parties would garner support in a second Greek election likely to be held next month, bringing the row between Greece and its European creditors to a climax.
Is That A Recession Or Just More Slow-Growth Turbulence?
The Economic Cycle Research Institute last week repeated its forecast that the U.S. is headed for a new recession, a prediction that the consultancy has been emphasizing since last September. There is some damning evidence to consider, starting with the slumping rate of growth in personal income, a danger sign that’s been with us for months.
Book Bits | 5.12.2012
● Better, Stronger, Faster: The Myth of American Decline… and the Rise of a New Economy
By Daniel Gross
Q&A with author via Kai Ryssdal (Marketplace)
Ryssdal: All right, so here comes the put-up-or-shut-up: You say early in this book that the ingredients are already here. You say ‘it’s tough to see what exactly is going to propel the United States forward, but the ingredients are already here.’ Like what?
Gross: Well exports is obviously one of them. The fact that the world has been growing more rapidly than the U.S. is a big source of this declinist thinking. An author like Tom Friedman goes to China and says, ‘Oh boy, they’re building high-speed rails and look at us, we can’t build infrastructure; we’re finished.’ Exports started turning up in April 2009, before the economy at large did. In the last two years, they’re up 35 percent. When the rest of the world gets rich, or gets middle-class, they buy what we make. That includes Boeing jets, gas turbines. I found a family-controlled, little company in suburban Pennsylvania that makes wallpaper. 2007, 2008 — 80 percent of this business was at home; now 70 percent is overseas.
Strategic Briefing | 5.11.12 | The Outlook For Oil Prices
Oil: A Temporary Selloff?
BCA Research | May 10
Oil prices may stay under downward pressure in the near term and are particularly vulnerable to euro volatility. Nonetheless, our cyclical bias is still positive…. Moreover, many of the headwinds for oil prices should prove temporary even if a washout in the euro does develop. Generous Fed liquidity reduces the odds of sustained U.S. equity weakness at a time when the U.S. economy is on a stable, albeit slow growth path. In this environment, lower oil and product prices have a self-stabilizing aspect by supporting consumer and business confidence, suggesting that without a major exogenous shock, the downside in oil prices from current levels is lmiited. Bottom line: Our Commodity & Energy Strategy service maintains that oil prices should be higher by year-end.
Jobless Claims Fall (Just Barely) Last Week
There’s good news and bad news in today’s weekly update of initial jobless claims. The good news is that new filings for jobless benefits fell last week, albeit by a slim 1,000 to a seasonally adjusted 368,000. That’s also the bad news. A more convincing drop–ideally to new post-recession lows–is what’s needed to boost confidence. Instead, we seem to be stuck in neutral, and so there’s no resolution yet for the main question weighing on the economic outlook: Are the last two months of weak growth in private payrolls signs of deeper troubles for the U.S. economy?
Does History Support NGDP Targeting Now?
The debate about targeting a higher rate of growth for nominal gross domestic product (NGDP) keeps the blogosphere humming, but the discussion doesn’t mean much if Fed Chairman Ben Bernanke doesn’t embrace the idea. Don’t hold your breath. Last month he said the idea is “reckless.” That’s monetary-speak for: Don’t even think about it. But if NGDP targeting is considered a radical notion by some, including those at the pinnacle of monetary power, the empirical record suggests otherwise.
Is The Recent Fall In Inflation Expectations A New Warning Sign?
The new abnormal is still with is, and that means that the recent fall in inflation expectations could be signaling trouble ahead… again. Implied inflation, based on the yield spread between the nominal and inflation-indexed 10-year Treasuries, remains tightly linked with the ebb and flow of the stock market and, by implication, the broader economy. That’s an unusual relationship in the grand scheme of financial and economic history, but it’s a relationship that rolls on in the wake of the Great Recession. It’s also a relationship that in recent weeks seems to be anticipating a new round of problems for the economy. (For the theory behind this empirical fact, see David Glasner’s research paper on the so-called Fisher effect.)
Investing In A G-Zero World
The planet is ripe with investment opportunity, according to most of the speakers at an ETF conference I attended yesterday in Boston. From emerging markets to sector rotation to alternative betas, optimism abounds, attendees were told.