New orders for durable goods were flat last month, the Census Bureau reports. That follows a strong 9.2% gain in September. Stripping out the volatile transport sector, however, reveals that new orders jumped a respectable 1.5% in October. Meantime, business investment gained some ground last month, with new orders for non-defense capital goods ex-aircraft rising 1.7%–the best month since May. Corporate America’s willingness to invest isn’t dead yet. Even so, new orders for big-ticket items overall remains sluggish. Today’s report suggests that the bottom isn’t falling out on this leading indicator, at least not yet, but the numbers are still well short of offering robust confidence for arguing that demand is strong.
Chicago Fed: Slower Economic Activity In October
The economy’s momentum weakened last month, according to today’s update of the Chicago Fed National Activity Index (CFNAI). The slowdown isn’t surprising, given the monthly declines cited in several reports for October data—retail sales and industrial production, for instance. The question remains if Hurricane Sandy distorted the data? That’s a possibility, although it’s not clear how much we can blame on weather for last month’s deceleration. Meantime, with the fiscal cliff approaching, today’s CFNAI report will surely promote worries that the economy is headed for rough seas.
Tactical ETF Review: 11.26.2012
If investors are worried about the threat from the fiscal cliff, it’s not obvious in the recent price trends for the major asset classes. Our ETF proxies for the primary slices of the world’s capital and commodity markets remain in the black for the year through November 23. For the month so far, only foreign developed-market bonds and REITs are suffering from the red ink disease, albeit in moderate doses, while the U.S. stock market overall is near the tipping point.
Book Bits | 11.24.12
● Antifragile: Things That Gain from Disorder
By Nassim Nicholas Taleb
Summary via publisher, Random House
Nassim Nicholas Taleb, the bestselling author of The Black Swan and one of the foremost thinkers of our time, reveals how to thrive in an uncertain world. Just as human bones get stronger when subjected to stress and tension, and rumors or riots intensify when someone tries to repress them, many things in life benefit from stress, disorder, volatility, and turmoil. What Taleb has identified and calls “antifragile” is that category of things that not only gain from chaos but need it in order to survive and flourish. In The Black Swan, Taleb showed us that highly improbable and unpredictable events underlie almost everything about our world. In Antifragile, Taleb stands uncertainty on its head, making it desirable, even necessary, and proposes that things be built in an antifragile manner.
Q4:2012 U.S. GDP Nowcast Update | 11.23.2012
The post-Hurricane Sandy economic updates have taken a slight toll on the GDP outlook for the fourth quarter. Since our previous Q4:2012 nowcast on November 5, the average estimate for real GDP growth has slipped to 1.2% from 1.7% previously, based on five econometric methodologies (see list below). That compares with the actual 2.0% increase for Q3, according to the government’s announcement last month. (All percentage changes cited based on quarter-over-quarter data in annualized terms). Keep in mind that there’s still a long way to go until the release of the initial estimate of Q4 GDP on January 30, 2013 from the Bureau of Economic Analysis. Meantime, if the data favors us with a degree of post-hurricane bounce back, the nowcasts will rise in the weeks ahead. Turning back to the present, let’s take a closer look at how The Capital Spectator’s current nowcasts stack up.
Happy Thanksgiving!
A day to relax, reflect–and give thanks. An autumn feast that’s inspired by the first banquet shared by the Plymouth colonists and Wampanoag Indians in 1621 is right as rain for your editor at this moment. After playing catch-up in the wake of Hurricane Sandy, it’s been a long month and so the opportunity to reconsider all that’s been won, and lost, in America is a welcome break from the routine. As one of the “classic” Thanksgiving essays republished in The Wall Street Journal over the years observes: “We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.”
Jobless Claims Fell Sharply Last Week
The ranks of the newly unemployed tumbled last week, as expected. The previous update on weekly filings for jobless benefits reported a dramatic surge, but many analysts–including yours truly–argued that the spike was weather related and so it probably wasn’t a sign that the business cycle was slipping over the edge. Today’s news provides some statistical support for that relatively optimistic perspective.
A Perverse Relationship: Equity Prices & Inflation Expectations
The stock market and the market’s implied inflation forecast are still a perverse couple. That’s no surprise, given the anxiety over the fiscal cliff, the economic outlook, the Middle East, and all the rest. The new abnormal, in short, is still with us and probably will be for the foreseeable future. That’s no surprise, even if this reality shocks some observers who continue to consider inflation from a pre-2008 perspective.
The Housing Recovery Rolls On
The housing sector continues to revive, according to this morning’s update on housing starts and newly issued residential building permits. Residential construction increased 3.6% in October over the previous month, the Census Bureau advises. Last month’s permits total total slipped 2.7%, but that’s not a worry at this point because this metric, which offers a clue about future construction activity, is still advancing at a robust pace generally.
Strategic Briefing | 11.20.12 | Housing & The Economy
Steady US housing recovery is boosting economy
Associated Press | Nov 19
The housing market’s recovery still has a long way to go. But for now, it’s helping prop up an economy that’s being squeezed by a global slowdown and looming spending cuts and tax increases. Joseph LaVorgna, an economist at Deutsche Bank, estimates that the housing recovery could boost U.S. economic growth by a full percentage point next year. That’s because a stronger housing market would mean more jobs, especially in industries like construction, and more consumer spending.