The economy continues to struggle and recession risk is elevated, but today’s official estimate of third-quarter GDP shows that the economy didn’t surrender to contraction in the last three months. That may change, but for now the recession talk is on the defensive.
The Forecast File: US Q3 GDP
GDP Growth Rate May Run Out of Steam
The Wall Street Journal | Oct 27
The Commerce Department will release its first estimate of third-quarter U.S. gross-domestic-product growth Thursday. Economists expect GDP in real terms to expand at about a 2.7% seasonally adjusted annualized pace, helped by a rebound in auto production after Japan-related shutdowns this year. This would be an improvement from the economy’s average 0.9% growth rate in the first half of the year.
Brooklyn Bound
I’m heading off to the NAPFA Practice Management & Investments Conference at the Brooklyn Marriott. I’m the luncheon speaker tomorrow (Wed). The topic: asset allocation. Strategy chatter on a full stomach. Is that wise? We’ll see. In any case, blogging will go dark for the next day or so, with a resumption of the usual fare on Thursday.
Meanwhile, I see that today’s S&P/Case-Shiller Home Price Indices were up in August. “We see a modest glimmer of hope with these data,” David Blitzer of S&P said via the press release.
Hayek’s Solution
There’s no shortage of worrisome trends on the macro stage, but perhaps the most troubling is the trend in real (inflation-adjusted) hourly earnings and personal consumption expenditures. Both have been falling persistently on a year-over-year basis. Some economists see this as a dark sign for the business cycle. It’s also a test of Hayek’s idea that falling wages will plant the seeds of economic recovery. By that standard, macro salvation is coming.
Another Look At The Stock Market & The Business Cycle?
The stock market’s annual performance is comfortably in the black again. After a brief slump into negative territory on a year-over-year price basis in late-September and early October, the S&P 500 is higher by 4.9% through Oct. 21. Is that a sign that the economy will keep growing? History offers some evidence for responding with a cautious “yes.”
A Precarious Optimism For Q3 GDP
Worries about a new recession have been on a roll over the past month, but some forecasters are having second thoughts. “The U.S. economy probably grew in the third quarter at the fastest pace this year, easing anxiety that the recovery was on the verge of stalling, economists said before a report this week.” Bloomberg reports. “Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate after advancing 1.3 percent in the previous three months, according to the median forecast of 68 economists surveyed by Bloomberg News before the Commerce Department’s Oct. 27 release. Orders for business equipment rose in September and new-home sales stabilized, other data may show.”
Book Bits For Saturday: 10.22.2011
● The Vigilant Investor: A Former SEC Enforcer Reveals How to Fraud-Proof Your Investments
By Pat Huddleston
Interview with author via Financial Impact Factor Radio
Today on the Financial Impact Factor Radio we had Pat Huddleston, author of “The Vigilant Investor: A Former SEC Enforcer Reveals How to Fraud-Proof Your Investments“, lawyer and CEO of Investors Watchdog LLC. As a former SEC Enforcer, he has seen more scams than you could imagine. With his new book, he takes those stories and the effect it has had on the victims and gives us the ultimate tell-all on how to spot what the people we may trust are actually doing – often right under our noses.
Strategic Briefing | 10.21.2011 | US Leading Indicators
September Leading Economic Index
Conference Board | Oct 20
The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.2 percent in September to 116.4 (2004 = 100), following a 0.3 percent increase in August, and a 0.6 percent increase in July. Says Ataman Ozyildirim, economist at The Conference Board: “September data shows moderating growth in both the LEI and the CEI. The weaknesses among the leading indicator components have become slightly more widespread in September. Moreover, the CEI suggests current economic conditions have been slow, with weak gains in all four components over the past six months. The slow pace in the LEI suggests a growing chance that this sluggish economy is going to be here for a while.”
A Small Dip In Jobless Claims Keeps Hope (And The Un-Recession) Alive
Today’s update on new jobless claims is encouraging because of what didn’t’ happen. New filings for unemployment benefits didn’t rise last week, which keeps hope alive that a new recession can be avoided for the foreseeable future. But while new claims dropped by 6,000 last week to a seasonally adjusted 403,000, this mild decline isn’t all that convincing. The ranks of the newly unemployed continue to swell each week by roughly 400,000, a stark reminder that the labor market is still struggling. As a result, the economy remains vulnerable, even if it’s not at the tipping point.
Awkward History Lessons
Ron Paul, a Republican congressman running for president, indicts the Federal Reserve in today’s Wall Street Journal. Surely there’s no shortage of mistakes that can and should be leveled at the central bank. Institutions run by mere mortals are nobody’s idea of perfection. Yet there’s also some progress to report. In contrast to the early 1930s, the Fed’s response to the financial crisis was better this time. That’s a low standard, but at least we don’t have 25% unemployment. Better, but not good enough. But as Paul sees it, the true solution is removing the central bank from the system. All will be well, he suggests, once we let the market take over the delicate task of managing the nation’s money supply. The historical precedent for this idea, however, is thin, to say the least.