Economic Slowdown

[unlawflcombatnt]

Evidence continues to mount that the U.S. economy is slowing down much more than predicted. Thursday's economic data was nearly all negative. Leading Indicators declined as predicted, leaving
the 1-month change at -0.2%. Not surprisingly, the government has again downwardly revised previously published statistics. July's Leading Indicator total was downwardly revised to -0.2% from the previously published -0.1%. The biggest downward revisions came in manufacturers' Consumer Goods Orders, revised downward -0.13%, from +0.1% change down to -0.12%. July's Manufacturing Workweek was also downwardly revised to a +0.06% increase from the original +0.12%.

5 of the last 7 months have shown declines in Leading Indicators. Though the 6-month total is only a -0.6% change (less than the -1.0% suggestive of a recession), the 7-month total is -1.1%. Also worth noting, according to the Conference Board, the most important single indicator of the 10 leading indicators is the interest rate spread between the 10-year Treasury note and the Federal funds rate. This has also declined. August marks the 2nd straight decline in this number, going from -0.02 in July to -0.04 in August. Below is a modified copy of September 21st's Leading Indicator report from Briefing.com, with the previously posted (pre-revision) numbers for Leading Indicators on the bottom chart. The key alterations are underlined in red, with the previous numbers posted in italics next to the current numbers.

LEADING INDICATORS




The top part of this chart can also be found at: http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/EconomicReleases/leader.htm>Briefing.com: Leading Indicators

An even more unsuspected decline came from the Philadelphia Fed Manufacturer Index. The actual index came in at -0.4, much worse than the predicted +13.0. This was the 1st negative reading since April 2003. The 6-month business outlook was also negative at -0.2. This was the 1st negative reading on the 6-month outlook since before the last recession. Most of the individual components of the index are at their lowest level in 6 years, according to the Philadelphia Fed. Below is a modified copy of the Philadelphia Fed report from Briefing.com. Again the "predicted" results from 9/20/06 are shown on the bottom chart. The current total and previously predicted total are underlined in red.

PHILADELPHIA FED MANUFACTURING INDEX



The top part of this chart can be found at http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/EconomicReleases/phil.htm>Briefing.com: Philadelphia Fed

A graphic representation of the state of our economy can be seen from the red line in the Leading Indicators graph below from Briefing.com. Notice the current steep drop in Leading Indicators parallels a similar drop leading up to the 2001 recession.



unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[hurricaneric]

1. Unfortunately People just don't seen to care.

I wonder what a war with Iran would do to the overall economy. Even sanctions. I assume they could effect the price of oil greatly.

[Frazzled Educator]

2. As long as the NFL and American Idol are on and their gas is cheap

Alot of Americans will sell their first born into slavery.

And I love the NFL.

[unlawflcombatnt]

3. Yes

They certainly seem to have a different set of priorities. The economy may not seem exciting right now, but it will certainly become exciting if there's a major slowdown. Hopefully some will get more interested before it's too late.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[area51]

4. kick

I wish the nazis at Faux news & other places would be forced to explain that if we have a "booming" economy like they claim,

• why are jobs hard to find
• 
  
• salaries are dropping


• very few employers offer healthcare bennies


• very few employers offer other bennies

[AtomicKitten]

5. which is precisely why

gas prices are dropping and Wal*Mart is talking about selling generic drugs for $4.

Keep the masses happy and count on their short attention span in November.

[fuzzyball]

7. Yap...the $4 Rx by Wal*Mart will make the masses happy and

take the air out of Universal Health Care. Wal*Mart
is also talking about $10 doctors visit fee in store.

[unlawflcombatnt]

8. $10 doctors visits

I'd like to see how Wal-Mart is going to pay for that.

As far as the prescription list that I've seen, none of the drugs listed are ones that cost over $4 in the past. The generics have been available for years, and previously were very cheap. So Wal-Mart has probably cut some kind of deal with the manufacturers for the drugs.

8 years ago, when I worked for an HMO, they paid $2-$4 for most birth control pills for a months supply. The same drugs cost a private paying patient $25-$30 per month.

So Wal-Mart can easily get drugs for extremely low prices, unlike the average person.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[fuzzyball]

11. $4 Rx & $10 Doctor are simply the loss leaders for Wal-Mart

which will bring the customer in and be exposed
to 1000,000 other items to purchase. The casino's
do the same thing...we used to take a bus from
Phoenix to Laughlin (a 3+ hour ride) and back sponsered
by the casino for $5 return trip. The only stipulation was
that we walk through the casino. And they had a very cheap
lunch to boot.

[fuzzyball]

6. Great post...thanks..kick for best post of day

[PsycheCC]

9. Pretty interesting leading indicators graph. Recession here we come?

More good work from the people's economist. Thanks Unlawful.

[unlawflcombatnt]

10. Thanks

I think the Leading Indicators graph tells the whole story. The red line, indicating the 10 Leading indicators, has gone down sharply. And the same downward slope occurred leading into the 2001 recession.

The Leading Indicators is probably the best single measure of the direction our economy is going in.

Once again, the one considered most important by the Conference Board is the interest rate spread. And it has been trending downward for over a year, and is now negative. According to the Conference Board, the 4th most important is (Manufacturer's) Consumer Goods Orders. It has been revised downward sharply from the previous month's estimate (guesstimate?).

The economy is definitely slowing down. Whether it will slow down to the point of being a recession is likely. Whether it will technically meet the criteria of being a recession is something that can be statistically altered by the government by simply underestimating inflation, since it requires 2 consecutive quarters of negative real (or inflation-adjusted) GDP growth. Look for some unbelievably low government calculated inflation rates, especially those calculated by the Bureau of Economic Analysis.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[AX10]

12. kick and recomended!

[lgn19087]

13. The fancy charts are nice

but unfortunatley, the MOST visible signs of economic activity (oil prices and the stock market) are trending for the GOP. The DJIA has had quite a run up lately, and hopefully we catch the timing right for a pullback just before the election. Oil prices will likely stay down until the beginning of winter. IIRC consumer confidence is fairly high (correct me if wrong). These are the numbers that really matter.

[unlawflcombatnt]

15. DJI & Consumer Confidence/Sentiment

I think you're right about the recent run up in the DJI, though slowed declined at the end of the week. I think investors, especially in the stock market, are more concerned about that than the average voter.

Consumer Confidence and Consumer Sentiment are not overly positive. August's Conference Board guestimate of the overall reading was 105. It came in much lower at 99.6. Michigan Consumer Sentiment has not been good. The following is a quote from Briefing.com in their writeup on Consumer Sentiment:

"Declines in 6 of the last 9 months leave the index -19% below the Jan 2004 cyclical peak and with the last 6 months below the average during the 2001 recession."

I'd say this measure of Consumer Confidence/Sentiment is very negative. Below are graphs of both.





The "expectations" line (blue) is markedly negative in both cases. If nothing else, I'd definitely say the trend is not upward. Combine this with the sharp downward slope of the Leading Indicators graph and it appears the trend is definitely downward, despite any rises in the DJI.

[lgn19087]

16. I stand corrected

about consumer confidence. I thought I remember seeing that it had risen as gas prices cooled, but I must have dreampt that. As far as the Dow goes, I think you're partially right about it not having that much impact with the average voter, but there's been a lot of talk about it hitting all-time highs lately and though it did cool the last few trading days, lately when you turn on a news channel we see lots of green arrows. That might contribute to people's perception about the economy...but this is all speculation. If you don't mind me asking...are you a economist? You have a very good grasp of the issues.

[unlawflcombatnt]

17. Consumer Confidence

Thanks for the compliment. No, I'm not an economist. I've just studied it a lot.

I'll have to admit that I often get thrown for a loop with consumer confidence and sentiment. It's never clear what is considered a "good" reading and what is not.

The graphs make it a little easier. Based on the graphs, it appears we're nowhere close to as well off as we were in the late 90's, and it doesn't appear we've ever caught up. Now we're starting to slide downward again.

Consumer Confidence is due out tomorrow (9/26/06). We'll see how that comes out.

The markets certainly mounted a peculiar response to the decline in Existing Home Sales, and the first price decline since 1995. The markets seem inordinately focused on interest rates. Any apparent bad news that reduces the chance of an interest rate hike is greeted positively by the DJI. It doesn't make any sense to me, but that's how it responds.

The fact that consumer spending power is declining, through declining home equity extraction and declining real wages, doesn't seem to bother investors. When the current borrowing bubble really bursts, they're going to change their focus. It's hard to "grow" the economy when consumer spending power declines. It's hard to increase profits if the sale of goods necessary for profits declines.

Economist Nouriel Roubini calls this a sucker rally. To me it's kind of like the calm before the storm.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[lgn19087]

20. how do today's figures fit into this? eom

[unlawflcombatnt]

14. Leading Indicators Graph-Revised

Since it was necessary for me to upload the Leading Indicators graph to my own uploading service, I decided to modify it by removing the blue line representing the Coincident Index. That should make it much easier to follow. Below is the revised version.

[GreenTea]

18. All BushCo cares about is getting the Dow above Clinton's all time high

before the November elections...Not that the Dow means shit...But if it tops the all time high (and it is less than 500 points away from an all time high) - The republican corporate media (with Rove's WH talking points) will make the story into the biggest thing to ever happen. Saying, it shows (the stagnate) economy is doing better than ever under Bush.

Only the Corporations, with their outsourcing of jobs, wage & benefit cuts, subsidies, (welfare) tax cuts and incentives & charging higher prices while destroying Unions are kicking ass...The rest of the 88% of the country is working harder for less money, less benefits, paying higher prices and losing pensions...

Yes, If they are able to get the meaningless Dow to an all-time high before the election we'll never hear the end of it...If they's a way to fix it and get the Dow to an all time high, they will!

[unlawflcombatnt]

19. DJI

If that's the case, they know how to artificially prop it up. They can cut the Fed rate (a lot) and suppress oil prices. The Dow seems to rise in response to both, despite any negative economic information that accompanies it.

They can also falsely claim that inflation is controlled, and that rising prices we see really aren't rising. The government can just change what items they measure the price of, if too many consumer goods are increasing in price.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."