2009 coasts home

The flow of good news regained its upward momentum in December. Even though good only just edged out bad 3-2 in the last inning of the month, the good news index (GNI) finished the month at 73.8, up from 60.5 in October and November. The 3-month average also regained some lift and rose to 65.0 as the year ends.

Perhaps the best news at the end of December came on the regulation and policy side, rather than from the numbers, however. The Federal Reserve began to build the tools needed to gather back some of the monetary growth spawned by the emergency action drills of the past couple of years. Perhaps other agencies are similarly taking steps to prepare themselves for unwinding the various rescues, bailouts, and stimulus packages.

After-tax profits for retail corporations with assets greater than $50 million averaged 2.3 cents per dollar of sales for the third quarter 2009, down 0.3 cents from the second quarter. Declining profit margins are bad news.

Sales of new one-family houses in November 2009 were at a seasonally adjusted annual rate 11.3 percent below the October’s. Bad, but not really news; progress is still sketchy in the housing-related markets.

New orders for manufactured durable goods increased 0.2 percent in November. Good. Thin gruel perhaps, but good nonetheless.
Real gross domestic product increased at an annual rate of 2.2 percent in the third quarter. Good, even if less good that earlier estimates.

Personal income increased 0.4 percent and disposable personal income increased 0.5 percent in November. Personal consumption expenditures (PCE) increased 0.5 percent. All good.

December gains consolidate

With the majority of reports already out, December is shaping up as a month that firmly re-establishes the upward trend in the Good News Index (GNI). Seventy-eight percent of the news released so far this month has been good and the 3-month average of the GNI has regained its upward momentum. A very small uptick in real weekly earnings joins the slight dip in the unemployment rate to hold out the hope that recovery is even spreading, however slowly, to the labor markets.

U.S. retail sales for November increased 1.3 percent from the previous month. A second good month in a row.

Total business sales for October 2009 were $1,004.0 billion, up 1.1 percent from September. Returns business sales to the good news column.

The U.S. Import Price Index advanced 1.7 percent in November, led by a 7.3 percent rise in fuel prices. Nonfuel import prices rose 0.4 percent. Export prices advanced 0.8 percent. Mixed news, and relies on the nonfuel imports to get that good.

Industrial production increased 0.8 percent in November after having been unchanged in October. Manufacturing production advanced 1.1 percent, with broad-based gains among both durables and nondurables. Good, especially the part about “broad based”.

Manufacturing corporations' seasonally adjusted after-tax profits averaged 6.8 cents per dollar of sales for the third quarter of 2009, up 2.7 cents from 4.2 cents in the second quarter of 2009. Good news foreshadowing better, as profits data tend to do.

The Producer Price Index for Finished Goods rose 1.8 percent, seasonally adjusted, in November. The index for finished goods less foods and energy rose 0.5 percent in November. This is on the very cusp of being too much pricing power; my judgment on the overall report is that it is, taken somewhat optimistically based on core index movements, neutral.

CPI-U increased 0.4 percent in November after rising 0.3 percent in October. The index for all items less food and energy was unchanged in November. Good, stable.

Real average hourly earnings fell 0.5 percent from October to November 2009. Real weekly earnings, however, rose 0.1 percent over the month. The decline in real average hourly earnings was more than offset by a 0.6 percent increase in the average work week. Mixed; a “positive zero”.

Housing starts in November 2009 were at an annual rate is 8.9 percent above the rate in October. Good news that doesn’t quite retrace the decline last month.

December starts well

December’s economic reporting is off to a very strong start. More than 70 percent of the news released thus far has been good. The calendar of releases (http://www.whitehouse.gov/omb/assets/omb/inforeg/pei_calendar2009.pdf) is busy through next Friday, with many of the reports referencing the transitional third quarter. It should make for an interesting week, as statistics watching goes.

In October, consumer credit decreased at an annual rate of 1.7 percent. Consumer credit had decreased at an annual rate of 3.3 percent in the third quarter of 2009. Revolving credit (largely credit cards) had decreased at an annual rate of 7.3 percent and nonrevolving credit at an annual rate of 0.9 percent in the third quarter. Still a bad sign for overall consumer demand.

October 2009 sales of merchant wholesalers were up 1.2 percent from September. End-of-October inventories were up 0.3 percent over the month. Good, especially as the “positive zero” on inventories can be interpreted as the beginning of a build up to regular levels.

October exports of $136.8 billion and imports of $169.8 billion resulted in a goods and services deficit of $32.9 billion, down from $35.7 billion in September. Pretty good news, especially as both elements grew a bit.

The end of recovery's beginning?

The unemployment rate edged down to 10.0 percent in November, and nonfarm payroll employment was essentially unchanged. Mixed news on the surface and neutral when examined more closely.

Some analysts were advising cautious interpretation of the employment situation. With the proviso that it be cautious optimism, we agree; this is more an end to the beginning of recovery than a beginning of a transition into growth, but it is a beginning of recovery.

The mixed message of a drop in the unemployment rate and a very, very small negative number on the employment side was confirmed by our proprietary index of labor market conditions. The labor market index was unchanged in November as two indicators improved, two deteriorated, and the fifth was unchanged.

Now let’s do a bit of speculative technical analysis of some of our numbers. As mentioned in the May 8, 2009, post, the difference between this index and its 6-month moving average (6MA) often has been at its greatest negative value on or about the NBER-designated business cycle trough. In three of the six troughs it has spanned, the index-minus-6MA has troughed in the same month, in two others index-minus-6MA troughed a month before the business cycle, and in 1971 it lead by 6 months.

Index-minus-6MA it seems very likely troughed in March 2009. That would indicate a possible recession trough in March or April. Moreover, our good news diffusion index (GNDI) edged over 50 in June 2009. That the releases analyzed to compile that index generally had reference months of April or May gives additional impetus to the trough-in-April speculation. Finally, the summary of the business cycle chronology posted here on December 5, 2008, suggested that the recession may then have had “4-6 months left to run.” That would imply a trough in April, May, or June 2009.

April, it seems, is the common theme of all three of these strictly technical analyses. (Understand “strictly technical” to denote analyses of movements in a series without reference to the fundamental meaning, if any, of that series.) So, if next year at about Christmastime, the NBER business cycle dating committee announces that April 2009 was the recession trough, you heard it here first. If they pick some other date, you never heard of us.

In other news, new orders for manufactured goods, up six of the last seven months, increased 0.6 percent in October. Shipments, up four of the last five months, increased 0.8 percent. Good report, especially as the unfilled orders-to-shipments ratio edged up and the inventory ratio edged down.

Nonfarm business sector labor productivity increased at an 8.1 percent annual rate during the third quarter of 2009. This was a revision down from data released last month and reflected a downward revision to output and an upward revision to hours. Good, albeit less good than we thought before.

The labor market and the business cycle: relationship issues?

The labor market is in the uncomfortable position of being a leading indicator going into recession and a lagging indicator coming out. When our proprietary index of labor market conditions was developed in the late 1980s, the goal was to develop an antidote to the excessive attention analysts gave to single indicators—payroll employment, unemployment rate, unemployment rate including discouraged workers, long-term unemployment rate, or whatever—and develop a disciplined, consistent approach to multi-indicator analysis.

After finding that the average lead or lag of the comprehensive employment and comprehensive unemployment measures published in the Bureau of Economic Analysis Handbook of Cyclical Indicators (ca. 1982) was about a quarter’s lead at the peak and about the same lag at the trough, the trick was to select a few indicators that had the same averages and create a composite index from them.

As it turned out, the following five indicators met that condition:
• Goods-producing employment
• Aggregate hours index
• Unemployed 15 weeks or more as a percent of the labor force
• Unemployment rate
• Employment-to-population ratio

The composite index created from these five by using the methodology outlined in the Handbook led the business cycle by 3.5 months at the peaks designated by the National Bureau of Economic Research and lagged the trough by 3.75 months—at least in the four cycles the index spanned at its inception. Since then, there seems to have been a radical change in the relationship of the labor market to the general business cycle.

There have been three business cycle peaks since 1990; the labor market has led them by an average of 13 months. There have been two troughs; the labor market has lagged them by 15 and 20 months. These figures and the tables below can’t tell us why this is so. In fact, they might not be conclusive evidence in themselves that the labor market and the business cycle are having relationship issues. But they are suggestive, and make tomorrow’s Employment Situation and those to follow it even more interesting.

NBER Peak/ Labor Market Peak/ Lead (-)/Lag (+)

December 1969/ June 1969/ -6
November 1973/ December 1973/ +1
January 1980/ July 1979/ -6
July 1981/ April 1981/ -3
July 1990/ March 1989/ -16
March 2001/ April 2000/ -11
December 2007/ December 2006/ -12

NBER Trough/ Labor Market Trough/ Lead (-)/Lag (+)

November 1970/ August 1971/ +9
March 1975/ June 1975/ +3
July 1980/ July 1980/ 0
November 1982/ February/ 1983 +3
March 1991/ June 1992/ +15
November 2001/ July 2003/ +20

December opened with a report of unchanged construction activity. The pace of activity isn’t inspiring, but the lack of movement in either directions gets coded as neutral and comes into the Good News Diffusion Index (GNDI) as a 0.5. Profits rose in the most recent quarter. I have not yet incorporated this part of the GDP report into the GNDI, but profitability is a leading indicator of the business cycle, and the increase in “profits from current production” is thus good news.

Total construction activity for October 2009 was nearly the same as the revised September 2009. Neutral. (Neutral and closely mixed reports are scored as 0.5 in the GNDI.)

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $130.0 billion in the third quarter, compared with an increase of $43.8 billion in the second quarter.

Better than half full, but no new wine

The good news diffusion index was unchanged at 60.5 in November. Reports on factory orders, retail sales, new home sales, and personal income were positive in November where they had been negative the month before. Conversely, the reports on foreign trade, business sales, housing starts, and durable goods orders were negative where they had been good news in October. The 3-month moving average of the GNDI slipped a bit to 60.4.

November closed out with the following reports:

New orders for manufactured durable goods decreased 0.6 percent in October. Bad news, especially considered with drops in shipments and unfilled orders.

Sales of new one-family houses in October 2009 were at an annual rate 6.2% above September 2009. Good news for a struggling sector.

Personal income increased 0.2 percent and disposable personal income increased 0.4 percent in October. Personal consumption expenditures increased $68.3 billion, or 0.7 percent. Quite good news all around.

Off the pace?

Both the monthly good news diffusion index and its 3-month moving average are going into the last week of November lower than they were at the end of October. It will take a very strong finish—3 points out of a possible 4—to keep momentum up.

The Nation's international trade deficit in goods and services increased in September, as imports increased more than exports. Bad, but, as a switch, for better reasons—faster increases, rather than slower declines.

U.S. total business sales for September 2009 were down 0.3 percent from August. Bad.

U.S. retail sales increased 1.4 percent in October. Good.

Privately-owned housing starts in October 2009 were at a seasonally adjusted annual rate of 529,000, more than 10 percent below September. Bad, shockingly bad.

The U.S. Import Price Index rose 0.7 percent in October, led by a 1.8 percent increase in fuel prices. U.S. export prices advanced 0.3 percent in October. Only the disproportionate impact of fuel prices kept this from being too bad. Rated neutral.

The Producer Price Index for Finished Goods advanced 0.3 percent in October; the index for finished goods less foods and energy moved down 0.6 percent. The decline in core prices pushes the envelope a bit, but on balance, this was a good news report.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3 percent in October. The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. Good.

Real average weekly earnings fell 0.1 percent over the month, as a result of a decline in real average hourly earnings and an unchanged average work week. Since reaching a recent high point in December 2008, real average weekly earnings have fallen by 1.9 percent. Bad. Not horrible, but bad.

Industrial production increased 0.1 percent in October after having averaged monthly gains of about 0.9 percent over the previous three months. Capacity utilization for total industry moved up 0.2 percentage point to 70.7 percent. Good. Not spectacular, but good.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.8 percent in the third quarter of 2009. The second estimate of the third-quarter increase in real GDP is 0.7 percentage point lower than the advance estimate issued last month. Less good than we thought, but still in the right direction.

Striding into November

November leads from strength. In the early going, good news came out twice as often as bad news. One must be concerned, however, that all the bad news seemed to fall on the shoulders of the economy’s workers and consumers—the continued decline in revolving credit and the still grim state of the labor market.

Our proprietary index of labor market conditions dropped 1.7 percent to 67.4 (2007=100). This marks the second straight month the index has failed to gain ground relative to its 6-month moving average. Such pauses have been the mark of recoveries that have been termed “jobless” in the past.

Total construction activity for September 2009 was 0.8 percent above August. Good news in a battered sector.

New orders for manufactured goods increased 0.9 percent in September. Good.

Sales of merchant wholesalers were up 0.7 in September. End-of-month inventories were down 0.9 percent. Good.

Productivity increased 9.5 percent in the nonfarm business sector during the third quarter of 2009, and unit labor costs fell 5.2 percent. Good, especially as a significant portion of it was an increase in output.

In October, the unemployment rate rose to 10.2 percent, the highest since April 1983, and nonfarm payroll employment continued to decline. Bad, just plain bad.

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009 and at an annual rate of 7.2 percent in September. Bad, increasingly bad at the end.

Easing out of October

It’s not like the economy is Usain Bolt—slowing up at the end of a month isn’t going to work very often. Despite a lackluster finish, however, October manages to close out with the news just over 60 percent good.

Total compensation costs for civilian workers increased 0.4 percent from June to September. For the year ending in September, compensation costs and wages and salaries each rose 1.5 percent and benefits increased 1.6 percent. Good, not great, but plus is good.

Personal income decreased less than 0.1 percent, disposable personal income decreased less than 0.1 percent, and personal consumption expenditures decreased 0.5 percent in September. Not good, the income side was essentially unchanged, but growing consumption is important now.

Did the base just get firmer?

Has it been almost a month since this was last updated? The downside of a good month for me. In any case, it has been a pretty good month in terms of the news coming out of the Federal statistical system. The GNDI—our proprietary measure of the relative balance between good and bad news in the topside paragraphs of the Principal Federal Economic Indicators—has crept back over 60 percent, with just personal income and the employment cost reports yet to go. The 3-month average of the good news index is now over 60 as well.

Total construction activity for August 2009 was 0.8 percent above the revised estimate for July. Good news.

New orders for manufactured goods decreased 0.8 percent in August. Shipments decreased 0.3 percent. Bad news, even if the orders decline was mostly a swing in transportation equipment.

August 2009 sales of merchant wholesalers were up 1.0 percent from July. End-of-month inventories were down 1.3 percent. Good news all around.

The Nation's international deficit in goods and services decreased to $30.7 billion in August from $31.9 billion (revised) in July, as exports increased and imports decreased. Generally good things.

U.S. retail and food service sales for September decreased 1.5 percent from the previous month. Not good at all.

U.S. total business sales for August were $989.6 billion, up 1.0 percent from the previous month. Month-end inventories were down 1.5 percent. Good news.

Privately-owned housing starts in September 2009 were 0.5 percent above the revised August 2009 estimate. Good.

New orders for manufactured durable goods increased 1.0 percent in September. Good.
Sales of new one-family houses in September 2009 were at a seasonally adjusted annual rate 3.6% below the revised August 2009 rate. Bad and especially disappointing after the good starts data.

Consumer credit decreased at an annual rate of 5-3/4 percent in August 2009. Bad; there has to be an end to retrenching at some point.

Nonfarm payroll employment continued to decline in September and the unemployment rate continued to trend up. Bad; there has to be a beginning of re-employment at some point.

Industrial production rose 0.7 percent in September after an upwardly revised gain of 1.2 percent in August. In September, the capacity utilization rate for total industry increased to 70.5 percent. Good news.

The U.S. Import Price Index edged up 0.1 percent in September. The increase was led by higher nonfuel prices, which more than offset lower fuel prices. The price index for U.S. exports declined 0.3. This is one of those judgment calls—the topsides were relatively tame, but the import side saw too-large swings, both down for fuel and up for other goods. Neutral, on balance.

The Producer Price Index for Finished Goods declined 0.6 percent in September. The index for finished energy goods fell 2.4 percent, while prices for finished goods less foods and energy edged down 0.1 percent. Good, on a judgment based on the recently announced policy of placing higher weight on “core” measures.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in September. The “core” all items less food and energy index also increased 0.2 percent. Good all around.

Real average hourly earnings fell 0.1 percent from August to September. This decline stemmed from CPI-W, up by 0.2 percent, outpacing 0.1 percent growth in average hourly earnings. Bad, especially as average weekly earnings fell 0.4 percent as weekly hours declined.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.5 percent in the third quarter of 2009. Good news and especially important as the first good news from this report since the estimates for the second quarter of 2008

Slowing down and catching up

While the diffusion of good news did not stay above 60 percent in September, the 3-month moving average of our little index continued to advance and is now at 56.4. This all indicates that the tenor of news coming out of the Principal Federal Economic Indicators system has swung decisively from far more bad news than good in the first quarter of the year to more good than bad in the third quarter.

As far as the catching up goes, heres the scoreboard since I last had an opportunity to update:

Nonfarm payroll employment continued to decline in August, and the unemployment rate rose to 9.7 percent. (Bad news)

The U.S. Import Price Index increased 2.0 percent in August. Prices for imports excluding fuel increased 0.4 percent and followed a 0.2 percent decline the previous month. Prices for U.S. exports rose 0.7 percent. (A mixed report; the moderation in non-fuel imports was counterbalanced by a uncomfortable rise in non-food exports.)

The Producer Price Index for Finished Goods advanced 1.7 percent in August; prices for finished goods less foods and energy rose 0.2 percent in August after edging down 0.1 percent a month earlier. (At core, some good news)

The Consumer Price Index for all Urban Consumers (CPI-U) rose 0.4 percent in August; the index for all items less food and energy rose 0.1 percent. (Very good)

Real average hourly earnings fell 0.2 percent from July to August. (Bad news)

Total compensation costs for civilian workers increased 0.4 percent, seasonally adjusted, from March to June 2009. For the year ended June 2009, compensation costs rose 1.8 percent with both components of compensation--wages and salaries and benefits--each rising 1.8 percent. (Good as cost restraint, not good as a real pay increase. Mixed.)

The Nation's international deficit in goods and services increased to $32.0 billion in July, as imports increased more than exports. (Bad, but for encouraging reasons)
July 2009 sales of merchant wholesalers rose 0.5 percent (+/-0.5%) from last month. End-of-month inventories were down 1.4 percent. (Good news.)

Manufacturing corporations' after-tax profits averaged 4.3 cents per dollar of sales for the second quarter of 2009, up 1.6 cents from the first quarter of 2009. (Good news.)
U.S. retail and food service sales for August reached $351.4 billion, an increase of 2.7 percent from the previous month. (Good news.)

U.S. total business sales for July were $978.4 billion, up 0.1 percent from the previous month. Month-end inventories were $1,332.5 billion, down 1.0 percent. (Good news, albeit muted.)
After-tax profits for retailers were 2.7 cents per dollar of sales for the second quarter, up 1.2 cents from the first quarter. (Good news.)

Privately-owned housing starts in August 2009 were at a seasonally adjusted annual rate of 598,000 and 1.5 percent above July 2009. (Good news.)
New orders for manufactured durable goods in August decreased $4.0 billion or 2.4 percent to $164.4 billion. (Bad news.)

Sales of new one-family houses in August 2009 were at a seasonally adjusted annual rate of 429,000. This is 0.7% above the revised July 2009 estimate of 426,000. (Good news.)
Industrial output rose 0.8 percent in August, following an upwardly revised increase of 1.0 percent in July. (Good news.)

Real gross domestic product—the output of goods and services produced by labor and property located in the United States –decreased at an annual rate of 0.7 percent in the second quarter of 2009. (Bad news, even if much less bad than the previous quarter.)

Good news prevails in August

The good news diffusion index (GDI)—a proprietary measure of the qualitative nature of the month’s big reports from the Principal Federal Economic Indicators—rose to 62.5 in August. This indicates that good reports outnumbered bad by about three to two.

At the end of August, releases from BEA, BLS, and Census indicated that GDP fell 1.0 percent in the second quarter (bad), personal income was virtually unchanged (neutral), producer prices were down 0.9 percent overall and 0.1 percent for goods other than food and energy (neutral), durable goods orders were up 4.9 percent (good), and new home sales were up 9.6 percent (good).

Thus far in September, construction spending edged down (bad), while the full report on manufacturing was mixed or neutral. Orders were up and inventories down (good), but shipments and unfilled orders were both down (bad).

NOTE: My policy on evaluating price reports has changed to put more weight on “core” indexes, such as the PPI excluding food and energy. This is to allow for the often non-economic volatility of food, energy, and agricultural prices.

Housing starts trimmed back

Housing construction stalled in July. The overall diffusion of good news from the Principal Federal Economic Indicators has been three parts good to two parts bad so far this month.

Privately-owned housing starts in July 2009 were at a seasonally adjusted annual rate of 581,000; this is 1.0 percent below June. Bad news, albeit not statistically significant--rated zero.

Halfway up the ladder, or halfway down the hole?

About two-thirds of the economic news released recently by the principal Federal economic indicators has been good and the good news diffusion index (GNDI) stands at 65.4 halfway through August. Of course, the dismal view is that this is may be marking a recession-ending scenario that “only an economic statistician could love.” My good friend Larry Mishel was quoted as saying that the non-statistician would call the recession over only when we have completely escaped the hole we have fallen (or been pushed) into.

My own feeling is the good news starts when we find out that there is, indeed, a ladder on the other side of the hole. In fact, the next set of policy challenges is likely to be sorting out which of the many ladders we have been offered are worth keeping.

The Nation's international deficit in goods and services increased to $27.0 billion in June from $26.0 billion (revised) in May, as imports increased more than exports. Bad news on the topside and just a flicker of life in general details; rated a zero.

U.S. retail and food service sales for July reached $342.3 billion, a decrease of 0.1 percent from the previous month. No decline is good; rated zero.

U.S. total business sales for June were $975.8 billion, up 0.9 percent from last month. Month-end inventories were $1,350.0 billion, down 1.1 percent from last month. Both measures in desirable directions and statistically significant quantities; rated one.

On a seasonally adjusted basis, the CPI-U was unchanged in July. The index for all items less food and energy increased 0.1 percent in July after increasing 0.2 percent in June. Stability is the good news in a price measure; rated one.

Real average weekly earnings rose by 0.4 percent from June to July 2009. This increase stemmed from a 0.3 percent increase in average weekly hours and a 0.2 increase in average hourly earnings. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was unchanged. Unspectacular growth, but growth gets rated one.

Industrial production increased 0.5 percent in July. Aside from a hurricane-related rebound in October 2008, the gain in July marked the first monthly increase since the recession began in December 2007. Rated one.

Post (computer) crash developments

Sorry about the long absence. My computer crashed, was resuscitated, then crashed again. I have made enough transfers from the old drive to get the blog back on it’s feet and I’m waiting for the call from the repair shop to see how much else I’ll be able to restore.

While I wasn’t watching closely, the good news diffusion index (GNDI), a measure of what proportion of the news coming out of the Principal Federal Economic Indicators system is “good news,” as determined by the baldest possible reading of the various reports’ leading paragraphs and figures, edged back a little to 47.1 percent in July.

In early August, the index has gotten off to its best start yet. I’ll give specific figures after a few more of the numbers have come out.

Our proprietary composite index of labor market conditions dropped a bit further in July, but the decline was the smallest since February 2008 when the recession was just getting under official way.

The index had actually reached its peak at 102.8 (2007=100) in December 2006, fully a year before the recession began. This long lead at peaks and equally long lag at troughs has been a feature of the index’s performance in recent recessions. When it was constructed its average lead or lag was about a quarter, rather than a year or more. There’s a paper in that somewhere.

July looks stronger now

With seven of the nineteen indicators I expect to see reported this month out, the diffusion index of good news is at 42.9 for July. While this is below the final for June, it is ahead of the pace set in the early third of that month.

The Nation's international deficit in goods and services decreased to $26.0 billion in May from $28.8 billion in April, as exports increased and imports decreased. (A classic good, from the producers’ side.)

The U.S. Import Price Index rose 3.2 percent in June led by higher petroleum prices. The June increase followed a 1.4 percent advance in May. Export Prices also increased in June, rising 1.1 percent after advancing 0.5 percent in the previous month. (While firm pricing is nice for some at this economic juncture, these price rises are just too big. Bad news.)

Keeping up the (slowly improving) pace

Mixed bag over the past couple of days. By the end of the week, it will be a useful exercise to calculate the good news index (GNI). As of today, only five of the more than 20 reports have been released. At this point, we’re keeping pace with last month.

Consumer credit decreased at an annual rate of 1-1/2 percent in May 2009. Revolving credit decreased at an annual rate of 3-3/4 percent, and nonrevolving credit decreased at an annual rate of 1/4 percent. (Still bad. Consumers still retrenching.)

May 2009 sales of merchant wholesalers were $311.3 billion, up 0.2 percent from last month. End-of-month inventories were $402.2 billion, down 0.8 percent. (Good. Both sides contribute to continued decline in the inventory-to-sales ratio.)

More red glare than early light

July sputters off to a weaker start than did June, but hey, there’s a holiday and a chance to rest, relax, and regroup before next Wednesday’s report on consumer credit. Have a great Fourth, but don’t propose any victory toasts quite yet.

Total construction activity for May 2009 was 0.9 percent below April 2009. This broke a very modest winning streak for this indicator. (Bad news. I’m still intrigued though by the strength in the construction of manufacturing facilities.)

New orders for manufactured goods in May increased $4.1 billion or 1.2 percent to $347.9 billion. (Good news—and the reason I’m intrigued by the factory-building boomlet.)

Nonfarm payroll employment continued to decline in June, falling by 467,000, and the unemployment rate was little changed at 9.5 percent. (Obviously bad, especially as the unemployment rate was “little changed” from 9.4 percent.)

Our proprietary index of labor market conditions dropped 2.2 percent in June. The gap between the index and its trailing six-month moving average edged down a bit, even so. As we noted recently, a trough in the index-moving-average gap has been associated quite closely with the trough in the business cycle.

Break out the near-beer!

As June came to a close, our index of good news diffusion flirted with and finally surpassed, however briefly, the 50 percent mark. For June’s releases, good news edged out the bad and the good news index (GNI) closed at 52.4. Celebrations were muted as analysts waited for at least another month’s worth of data.

After-tax profits for retailers averaged 1.7 cents per dollar of sales for the first quarter of 2009, up 2.0 cents from the after-tax losses average of 0.3 cents for the fourth quarter of 2008. (Profits are good, moving from losses to profits is good.)

New orders for manufactured durable goods increased 1.8 percent to $163.9 billion in May. (Good. Even better when three of the past four readings have been good; but still accompanied by declines in shipments, particularly in transportation equipment.)

Sales of new one-family houses in May 2009 were at a seasonally adjusted annual rate of 342,000, down 0.6 percent from April. (Bad. Housing-related sectors still struggle to build a foundation for growth.)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 5.5 percent in the first quarter of 2009. (Bad, obviously, but less bad than both the last quarter of 2008 and earlier estimates of the first quarter of 2009.)

Personal income increased 1.4 percent and disposable personal income increased 1.6 percent in May. Personal consumption expenditures increased $25.1 billion, or 0.3 percent. (Good. We consumers are becoming less of an anchor.)

Approaching breakeven?

A veritable blizzard of statistical reports leaves the good news index at 47.1 percent thus far in June. Are we closing in on the 50 mark which would indicate that the good-news—bad-news ratio had broken even? If taht turns out to be so, I’ll start quoting some of my remarks of early December 2008.

Manufacturing corporations' after-tax profits averaged 3.2 cents per dollar of sales for the first quarter of 2009, up 8.2 cents from the average after-tax losses of 4.9 cents for the fourth quarter of 2008. Good news.

Privately-owned housing starts in May 2009 were at a seasonally adjusted annual rate of 532,000. This is 17.2 percent above April 2009. Obviously good news, even if this series has been very volatile lately.

The PPI increased 0.2 percent in May. This rise followed a 0.3-percent advance in April and a 1.2-percent decrease in March. Prices for finished goods other than foods and energy decreased 0.1 percent after rising 0.1 percent in April. Hard to imagine a better over-the-month report than this right now.

The Import Price Index increased for the third consecutive month in May, rising 1.3 percent. An 8.3 percent increase in petroleum prices was the primary contributor. The Export Price Index rose 0.6 percent. These top-side numbers are way too big to be comfortable, so even the relative calm in the non-petroleum import and non-agricultural export numbers and the firm pricing in their industrial supplies and materials lines don’t serve to promote the report to “mixed.”

CPI-U rose 0.1 percent in May after being unchanged in April. The index for all items less food and energy increased 0.1 percent in May after increasing 0.3 percent in April. Price stability is good.

Real average weekly earnings fell by 0.3 percent from April to May 2009. Wage erosion is bad.

Industrial production decreased 1.1 percent in May after having fallen a downward-revised 0.7 percent in April. The rate of capacity utilization for total industry declined further in May to 68.3 percent. Production declines are bad, without question. (But might the turn in the profits picture indicate that production is becoming more gainfully aligned with demand?)

Mixed revenue reports

The good news index (GNI) now stands at 40 percent as good news on last month’s retail revenue was offset by a weak report on April’s business (manufacturing and trade) sales.

Retail and food service sales for May reached $340.0 billion, an increase of 0.5 percent from April. Despite the facts that the gain was not widely diffused and included a price-driven increase in gas stations’ sales, this is undeniably good news.

U.S. total business sales for March were $966.8 billion, down 0.3 percent from April. Month-end inventories were $1,384.7 billion, down 1.1 percent. Despite the facts that the decline was considerably less steep than the previous month’s and that the inventory-to-sales ratio edged further down, a decline in sales is always bad news.

Bad news on trade and services

Bad news from the international trade and U.S. services releases has driven the good news index below 40. The GNI now stands at 37.5.

Foreign trade deteriorated on both the export and import accounts and the net was an increase in the deficit—a bad news trifecta from this release.

The quarterly services report was pretty poor as the Census Bureau emphasized for the information sector. Information sector revenue for the first quarter of 2009 was $275.3 billion, a decrease of 0.9 percent from the fourth quarter of 2008. Although this report is on the list of principal federal economic indicators, not included in our news index because its format is too disaggregated and difficult to summarize.

Middlemen not out of woods yet

Despite a sluggish month for wholesalers, the news index is at 42.9 percent, indicating that a growing proportion of the news released by the government in the Principal Federal Economic Indicator reports has been good so far in June.

April 2009 sales of merchant wholesalers were $309.4 billion, down 0.4 percent from last month. End-of-month inventories were $405.4 billion, down 1.4 percent from last month. The wholesalers’ inventory-to-sales ratio ticked down to 1.31 from 1.32. (Bad. Not enough good news to nudge this to a mixed from the prima facie bad of a further decline in sales in the wholesalers’ channel.)

Promising start to June

More than a quarter of the news that will be released this month is out and it has been evenly split between good and bad news. The month’s good news index is at 50.0 as we close out the first week of June.

New orders for manufactured goods have gone up two of the last three months after increasing $2.5 billion or 0.7 percent in April. Shipments, down nine consecutive months, decreased 0.2 percent. April’s unfilled orders-to-shipments ratio was 6.01, up from 5.98 in March. The inventories-to-shipments ratio was 1.45, down from 1.46 in March. (Mixed, an improving mix, but still a mixed bag.)

During the first quarter of 2009, productivity—as measured by output per hour—rose 1.6 percent in the nonfarm business sector; output fell 7.6 percent and hours of all persons fell 9.0 percent. Productivity growth for the first quarter was originally estimated at 0.8 percent. (A slightly better mix than the original report, but productivity gains driven by slower drops in output than hours aren’t as good as they seem.)

Nonfarm payroll employment fell by 345,000 in May, about half the average monthly decline for the prior 6 months. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent. (Bad news, and on close examination, not really less bad news than last month.)

In March, consumer credit decreased at an annual rate of 5-1/4 percent. A big, and troubling, portion of the decline came in the non-revolving credit line—stuff like auto loans and other credits such as loans for mobile homes, education, boats, trailers, or vacations. (Bad, getting credit back on a sustainable up-trend is critical.)

Although our proprietary index of labor market conditions fell by 2-1/2 percent, it still closed the gap on its 6-month trailing moving average for the second month in a row. In the past, a local trough in this gap has been closely associated with the end of a recession.

A June jump?

June starts with two upbeat reports. Construction spending edged up again and personal income rose a bit. The disposable bit of income, that part left after taxes, rose even more than the total as a result of reduced current taxes and increased social benefit payments.

Total construction activity for April 2009 ($968.7 billion) was 0.8 percent above the revised March 2009. Personal income increased 0.5 percent and disposable personal income increased 1.1 percent in April. Both are good news.

Rather than recite the good news diffusion index here, I’ll ask a question: “Is it good news that spending on construction of manufacturing facilities took a big upward swing starting last April and had the strongest over-the-year and year-to-date percent increases of the sectors the Census Bureau reports on?”

First quarter GDP still bad news

Revising a number from very, very bad to very bad isn’t really good news, or even mixed. Real gross domestic product is now thought to have decreased at an annual rate of 5.7 percent in the first quarter of 2009. The advance estimate for first quarter GDP change was a decline of 6.1 percent.

I have not been logging the corporate profits indicator that is released along with GDP. That number moved away from its fourth quarter red ink, a decline of a quarter-trillion dollars, to a modest increase of $43 billion. (Please comment on whether or not I should be including this indicator in my calculations and analysis.)

The GNI closes out May at 36.1 percent. While that’s certainly better than the 14.7 percent in January, there is still a lot of bad news out there. Next week will be very interesting as we run up to the May employment situation on Friday through April construction spending, personal income, and factory shipments, and a revised first quarter productivity estimate.

A crocus sighting? Or just a croak?

I had thought my computer had lost the power to shock me; then I opened the Census Bureau’s Economic Indicators page. Any uptick, even one as small as April’s, in housing sales, especially coupled with firmness in mid-range pricing and another tick down in the months of inventory on hand, has to be regarded as promising.

While the small increase in durable goods orders also was good to hear, the details of that report, declining shipments and unfilled orders in particular, were not as good. Thus, the durable goods block in my good news diffusion index (GNI) was filled with a more conservative 0.5 rather than the 1.0.

After these two releases were logged, the May GNI read 38.2 percent, up 6.9 percentage points from April. The only release left on my calendar for May, unfortunately, is the preliminary report on first quarter GDP. So, let’s not start unrestrained celebrations yet.

Sales of new one-family houses in April 2009 were at a seasonally adjusted annual rate of 352,000; a modest 0.3% above March. The median sales price of new houses sold in April 2009 was $209,700, up a bit over the month; the average sales price was $254,000, down an even smaller bit. A good report, and something of a surprise.

New orders for manufactured durable goods in April increased $3.0 billion or 1.9 percent to $161.5 billion. This was the second increase in the last three months. Inventories, unfilled orders, and shipments fell. After some vacillation, I have decided to bend over backwards and call this a mixed report. (A painful example of the innate conservatism of the social sciences.)

It ain't over til it's over

The recession ain’t over yet, apparently. The housing-related sectors of the economy led us down, and will have to stabilize before we can stop the slide. The May good news diffusion index slipped to 33.3 on a very poor housing starts report.

Privately-owned housing starts in April 2009 were at an annual rate of 458,000. This is 12.8 percent below the revised March 2009 estimate of 525,000. This is bad, very bad. It’s only saved from being completely disastrous by the relatively stable-to-positive signs in the single-family components of starts and permits.

The rest of the month’s reports include the preliminary first quarter GDP release and the advance report on durable goods orders, neither which we should expect to much good news in, and the now very critical May 25th report on new home sales.

A brave mid-month scrabble

Good news on prices and a bit of an edge-up in real earnings outweighed a troublesome industrial production report. The good news diffusion index now reads 35.7 percent, compared with less than 15 percent at the beginning of the year.

Businesses are scrabbling hard to find the brake-the-slide traction we mentioned yesterday; holding the line on prices is a good thing. With most of this month’s remaining indicators on the production rather than pricing side, however, I’d expect the news index to slip a bit before we close out the month.

On a seasonally-adjusted basis, the CPI-U was unchanged in April after falling 0.1 percent in March. The index for all items less food and energy increased 0.3 percent in April after increasing 0.2 percent in March. Moderate price increases are very good news at this juncture.

Real average weekly earnings rose by 0.1 percent in April 2009 due to a 0.1 percent increase in average hourly earnings. Average weekly hours and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) were unchanged. Over the year real earnings increased 2.6 percent. Rising real earnings are good news at any juncture.

Industrial production decreased 0.5 percent in April after having fallen 1.7 percent in March. The capacity utilization rate for total industry fell further in April, to 69.1 percent, a low over the history of this series, which begins in 1967. Bad news.

May showers turn colder

So far this month, barely a quarter of the news has been good as the economy seeks enough traction to brake its decline. The effort hasn’t gone well so far in May and hadn’t gone well in April. The good news diffusion index is at 27.3 so far this month, down from 31.3 in April and 36.9 in March.

March 2009 sales of merchant wholesalers were $310.9 billion, down 2.4 percent from last month. End-of-month inventories were $411.7 billion, down 1.6 percent from last month. Bad news in the middle of the distribution chain.

The Nation's international deficit in goods and services increased to $27.6 billion in March from $26.1 billion in February, as exports decreased more than imports. Both terms of this equation and the sum are bad.

Retail and food service sales for April reached $337.7 billion, a decrease of 0.4 percent from the previous month. Bad, albeit less bad than March.

Total business sales for March were $971.7 billion, down 1.6 percent from February. Month-end inventories were $1,404.1 billion, down 1.0 percent from last month. No good news here.

The Import Price Index rose 1.6 percent in April. A 15.4 percent increase in import petroleum prices more than offset a 0.4 percent decline in the price index for nonpetroleum imports. Export prices also rose in April, increasing 0.5 percent. This is mixed news; no over-the-month increase of 1.6 percent in import prices is good, even if oil is to blame. However, the almost-too-big increase in export prices gives a sign that there is some demand out there.

The Producer Price Index for Finished Goods increased 0.3 percent, seasonally adjusted, in April. This rise followed a 1.2-percent decline in March and a 0.1-percent increase in February. Prices for finished goods other than foods and energy inched up 0.1 percent compared with no change in March. Moderate firmness in pricing is good news; the specter of deflation pushes further away.

A modest May flower

Through the end of the first week, the good news diffusion index May is off a better start than it got in April. Thirty percent of the news has been good so far in May.

New orders for manufactured goods in March decreased 0.9 percent to $345.3 billion. Bad news continues for factories.

Total construction spending for March was 0.3 percent above February. A ray of sunshine, albeit not significantly bright, and entirely in public sector work.

In March, consumer credit decreased at an annual rate of 5.2 percent. Revolving credit decreased at an annual rate of 6.8 percent, and nonrevolving credit decreased at an annual rate of 4.2 percent. Still falling—a bad thing even if the Fed pointed out a more mixed set of signals in the first quarter totals.

Productivity rose 0.8 percent in the nonfarm business sector in first-quarter, as hours fell faster than output. Unit labor costs increased 3.3 percent. A mixed report. The unit costs were driven by wage gains.

Nonfarm payroll employment continued to decline in April (-539,000), and the unemployment rate rose from 8.5 to 8.9 percent. Obviously bad news; we can anticipate this report being bleak for quite a while.

The composite index of five labor market indicators dropped 2.1 percent in April. Four of the five indicators fell. Those were, in order of their contribution to the decline, goods-producing employment, the unemployment rate, the long-term (15+weeks) unemployment rate, and the aggregate hours index. The employment-to-population ratio was unchanged.

There may be a bud of hope in the fact that the index edged back a little closer to its 6-month moving average. In the past, the trough in the difference between the MA and the series has been closely associated with the timing of the recession trough.

Cold showers in late April

Zero for two on good news this morning. This drags the good news diffusion index down to 31.3 thus far in April. And, with only the advance report on Q1 GDP and last month’s personal income and outlays left to go, I’d have to bet that the index dips below 30 by the time we wrap up the month.

Sales of new one-family houses in March 2009 were at a seasonally adjusted annual rate of 356,000. This is 0.6% below the revised February 2009 estimate of 358,000.
New orders for manufactured durable goods in March decreased $1.3 billion or 0.8 percent to $161.2 billion.

Deep in the bowels of the home sales report, there were only 2,000 fewer sales in March than in the unexpected February spike in sales. In addition, both the number of homes on sale at the end of March and the months worth of sales they represented continued to edge down.

There was no such acorn as a reward for rooting around in the durable goods report. Orders, shipments, and unfilled orders all fell. Inventories fell by a smaller percent than shipments, implying no progress on working down inventories in durable goods manufacturing.

The economic slope is still slippery

Bad news outweighed the good this week as the economy struggles to find traction. While the quantitative measure of good versus bad news continues to be well below the break-even point (35.7 percent), the anecdotal and qualitative information in the Fed’s Beige Book was interpreted as portending a more stable situation: “However, five of the twelve Districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level.”

U.S. retail and food service sales for March totaled $344.4 billion, a decrease of 1.1 percent from the previous month. (Bad news, although pretty much concentrated in the automotive and gasoline segments.)

U.S. total business sales for February were $994.9 billion, up 0.2 percent from January. Month-end inventories were $1,421.3 billion, down 1.3 percent over the month. (Good news, although entirely in the trade divisions.)

The Producer Price Index for Finished Goods decreased 1.2 percent in March. At the earlier stages of processing, prices received by producers of intermediate goods fell 1.5 percent and the crude goods index declined 0.3 percent. (Tough call, but this much price weakness is not good news, it is deflationarily bad.)

Industrial production fell 1.5 percent in March after a similar decrease in February. For the first quarter as a whole, output dropped at an annual rate of 20.0 percent, the largest quarterly decrease of the current contraction. (Bad news and promises more bad news for other production measures, such as GDP, in the first quarter.)

On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in March after rising 0.4 percent in February. The index for all items less food and energy increased 0.2 percent in March, the same increase as in February. (Good news—stable prices.)

Real average weekly earnings were about unchanged in March 2009. A 0.3 percent decrease in average weekly hours was offset by a 0.2 percent increase in average hourly earnings and a 0.1 percent decrease in the Consumer Price Index. (Neutral)

Privately-owned housing starts in March 2009 were at a seasonally adjusted annual rate of 510,000. This is 10.8 percent below the revised February 2009 estimate of 572,000. (Obviously bad news, although we should have been ready for it after last month’s upside spike.)

Playing catch-up

Apologies for the quick-and-dirty catch up—a couple of day jobs (or maybe pay jobs is better)—came up last week. In any case, the statistical system split evenly between good and bad news in our absence. As we go into the mid-month tide of data, the count stands at about 36 percent of the news released so far in April being good.

February 2009 sales of merchant wholesalers were $319.7 billion, up 0.6 percent from last month. End-of-month inventories were $419.3 billion, down 1.5 percent from last month. (Good news on both.)

The Nation's international deficit in goods and services decreased to $26.0 billion in February 2009 from $36.2 billion in January, as exports increased and imports decreased. (Good news through the front door this time.)

Consumer credit decreased at an annual rate of 3-1/2 percent in February 2009. Revolving credit decreased at an annual rate of 9-3/4 percent. (Bad news, credit crunch continues.)

Import prices increased for the first time since July, advancing 0.5 percent in March after edging down 0.1 percent in February. The March advance was led by a 10.5 percent rise in petroleum price. Export prices decreased 0.6 percent in March because of lower prices for both agricultural and nonagricultural exports. (Mixed to bad news. Scored as bad on balance, based uncomfortable decline in export prices.)

Production shaky, employment a shambles

The value of total construction activity for February 2009 was $967.5 billion, 0.9 percent below January 2009. Bad news, albeit less bad than recently.

New orders for manufactured goods in February increased $6.1 billion or 1.8 percent to $352.2 billion. Despite this upswing in the headline number, shipments were stagnant and the unfilled orders book slipped below a 6-month backlog. On the other hand, inventories were down and the inventory-to-shipment ratio edged down a trifle. Mixed news, on balance.

Nonfarm payroll employment fell by 663,000 in March, continuing a decline that has totaled 5.1 million over the course of the current recession. The unemployment rate rose from 8.1 to 8.5 percent. Our proprietary composite index of current labor market indicators re-accelerated its decline. Unrelieved bad news.

Obviously our diffusion index of economic news is off to a slow start in April—only 16.7 percent of the news has been good. At the comparable point last month there had been no good news at all.

March goes out with a sour roar

If there was any doubt about the fourth quarter of 2008 being a disaster, the two final (this time I mean it) PFEI releases for March removes it entirely.

In the fourth quarter of 2008, after-tax profits of large retail corporations over totaled $6.1 billion, down $2.2 billion, or 26.8 percent, from the $8.4 billion recorded in third quarter 2008, and down 65.3 percent from the fourth quarter of 2007.

The over the year decline—which is a rough-and-ready style of seasonal adjustment—was driven by both lower sales (down 4.2 percent, fourth quarter to fourth quarter) and by slimmer margins (down 2 cents to 1.2 cents per dollar of sales).

At least the retail sector had profits. A separate report highlighted sharp swings prom profits to significant losses in manufacturing and mining firms, and a nearly complete evaporation of profits in wholesale trade.

These two bad-news reports drop the diffusion of good news in March to 36.9 percent of the news released through the Principal Federal Economic Indicators series of reports. The February index was 21.1 percent.

Income, expenditures not much changed

Personal income decreased 0.2 percent, and disposable personal income decreased 0.1 percent in February. Personal consumption expenditures increased 0.2 percent.

Oops. I was caught by the two releases in March trap set for the personal income and expenditures report. The report was pretty much a non-event, as it turns out, but did reduce our diffusion index of economic news to 40.8 for March. That's still a big jump from February, which in turn had edged up from January. We're still running below 50 percent, however. (Whether or not 50 percent is a significant deal on our measure remains to be seen.)

Yes, GDP was way down in 4Q 2008.

Real gross domestic product decreased at an annual rate of 6.3 percent in the fourth quarter of 2008, according to final estimates released by the Bureau of Economic Analysis. In the preliminary estimates, the decrease in real GDP was 6.2 percent. As we expected, the final numbers for fourth quarter GDP confirmed what we knew about the end of last, and even piled on an extra tenth of bad news.

The weakness was also confirmed by the corporate profits figure released along with GDP. Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $250.3 billion in the fourth quarter of 2008, compared with a decrease of $18.5 billion in the third quarter.

With no more PFEI releases on my calendar and this report easily classified as bad news, the good-news diffusion index finishes the month with a value of 42.1, compared with 21.1 in February.

Good news? You're kidding!

“Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000. This is 4.7 percent above the revised January 2009 estimate of 322,000.”

“New orders for manufactured durable goods in February increased $5.5 billion or 3.4 percent to $165.6 billion.”

I am very tempted to simply let these quotes from the Census Bureau stand alone, chalk up these releases in the “good news” column, and move right along. The pessimist in me is constrained to point out that the housing inventory is still more than a year’s worth of sales, that durables shipments, inventories, and unfilled orders books all shrank in February, and that the only other news due out this month will be a re-confirmation of the crappy GDP numbers for the fourth quarter of 2008.

With the caveats thus out of the way, good news has diffused through 44.4 percent of the top-side data released thus far this month. Even allowing for the projected bad “news” about GDP, our good news index (GNI) is poised to have nearly doubled between February and March.

A good surprise drives a rise

Housing starts rose 22.2 percent in February to a seasonally adjusted annual rate of 583,000. Permits edged up 3 percent. The increase in starts was entirely in multi-family units; permits went up among single-family dwellings but down for multi-unit projects. This was very surprising good news that we will take in both hands. It will be interesting to see how the divergences between single and multi-unit construction play out over the next few months.

CPI-U increased 0.4 percent in February after rising 0.3 percent in January. As has been the case recently, the movement was dominated by swings in energy prices. The core CPI (exclude food and energy) has been pretty well behaved, with recent moves on the order of 0 to 0.2 percent per month and a total increase of 1.8 percent over the past year. This report had more good news than anything else in it.

Real average weekly earnings fell by 0.3 percent from January to February. A 0.2 percent increase in average hourly earnings was offset by a 0.4 percent increase in CPI-W. Average weekly hours were unchanged. Any decline in real earnings is bad news.

Thus far in March, there has been less bad news than there was in February. The good news index stands at 37.5 so far this month, compared with 26.7 at the same point last month (and 21.1 for all of February).

Production loses energy; price news mixed

Industrial production fell 1.4 percent in February; the overall index has now declined for 4 consecutive months and for 10 of the past 12 months. At 99.7 percent of its 2002 average, output was at the lowest level since April 2002. The capacity utilization rate fell to 70.9 percent in February, matching the December 1982 historical low for this series.

While this is unambiguously bad news, it is interesting to note that the decline in was almost entirely attributable to a decline in the sub-index for consumer energy goods; declines in production of residential electricity and natural gas overshadowed increases in fuel production.

The Producer Price Index for Finished Goods advanced 0.1 percent in February. Taken by itself this would be good news—a very moderate rate of price increase. The intermediate goods index dropped by 0.9 percent over the month and the crude goods index fell by fully 4.5 percent. Taking the report as a whole, I am assigning it a neutral score.

As of the release of these two reports, 30.8 percent of the news released in the Principal Federal Economic Indicators has been positive. In February, the monthly index was 21.1 percent.

Less bad news?

January 2009 sales of merchant wholesalers, except manufacturers’ sales branches and offices were $326.1 billion, down 2.9 percent over the month. Wholesale inventories were down 0.7 percent. The inventory-sales ratio rose to 1.30. While the sales decline was less precipitous than last month’s, the news here is still bad.

February 2009 retail sales were down 0.1 percent. Declines were seen almost entirely in the automotive sector, with very small declines in a few other sectors. The important “general merchandise” category saw a small increase. Although the retailers almost scored a second consecutive increase, the report is in the bad news column.

In January, the combined value of distributive trade sales and manufacturers’ shipments were down 1 percent. Inventories declined by a roughly similar amount, thus the inventory-sales ratio remained at 1.43 This report summarizes and restates the bad news we heard last month as the individual underlying data were released.

The goods-and services international trade deficit was $36.0 billion in January, down from $39.9 billion in December. January exports were $7.6 billion less than December exports of $132.5 billion. January imports were $11.5 billion less than December imports of $172.4 billion. While you don’t like to have good news come in through the back door, this report is good news for domestic product; at worst, this should be considered a neutral report.

The U.S. Import Price Index edged down 0.2 percent in February. Declining nonpetroleum prices more than offset an upturn in petroleum prices. Export prices also recorded a modest decrease in February, falling 0.1 percent. While the good news of relative price stability at the top side of this report is tempered somewhat by the split between oil and non-oil imports, good news is good news.

Thus far in March, good news has accounted for about 31 percent of the statistical output from the system of Principal Federal Economic Indicators. I don’t expect this diffusion index to stay above 30 through the end of the month, but it has crept up a bit from January and February.

March less lousy than February, so far

Not so lousy is a pretty low bar. So far in March, about a third of the official statistical reports have headlined good news at the topside. Next week we’ll learn a bit about trade—foreign and domestic—and get or first look at prices.

New orders for manufactured goods decreased $6.9 billion or 1.9 percent to $351.9 billion in January. This was the sixth consecutive decline—a modern record. The drop in orders accompanied declines in shipments, inventories, and unfilled orders that also extended those losing streaks into record territory. The unfilled orders-to-shipments and inventory-to-shipment ratios both rose, although the orders backlog rose slightly faster. All the bad news was somewhat less bad than last month, but was bad nonetheless—and extending the run of bad news certainly isn’t good.

If one had read the recent GDP revision, one was expecting the worse-than-originally reported news on productivity. In the business and nonfarm business sectors, productivity declined 0.4 percent in the fourth quarter of 2008, rather than increasing as reported Feb. 5. In both sectors, this resulted from a 3.2 percentage points downward revision to output, with hours little changed.

Consumer credit increased at an annual rate of 3/4 percent in January 2009. Revolving credit increased at an annual rate of 1-1/4 percent, and nonrevolving credit increased at an annual rate of 1/2 percent. This is good news; shrinking credit, along with deflation, poses huge risks. Glad to see an uptick here.

Nonfarm payroll employment fell by 651,00 in February and the unemployment rate rose from 7.6 to 8.1 percent. Over the past 12 months, the number of unemployed persons has increased by about 5.0 million, and the unemployment rate has risen by 3.3 percentage points. If the current downturn were to see the same degree of increase in the unemployment rate as had occurred in long recessions in the past, there would be about half a point more to go.

Our proprietary index of labor market conditions fell sharply as all five indicators went bad. In declining order of their contribution to the fall, they were good-producing employment, unemployed 15 weeks or longer as a percentage of the civilian labor force, the unemployment rate, aggregate hours index, and employment-to-population ratio. The gap between the declining index and its 6-month trailing moving average widened slightly and is at a level exceeded only in the long recession of 1973-75 and the sharp decline of 1980.

Construction spending weakens again, but consumption spending takes a stand

Construction spending was at an annual rate of $986.2 billion during January 2009, a reduction of 3.3 percent from December. The January figure is 9.1 percent below the January 2008 estimate. (Bad news, no matter how well anticipated.)

Personal consumption expenditures increased $56.4 billion, or 0.6 percent, in January. Personal income increased $44.8 billion, or 0.4 percent, and disposable personal income increased $183.0 billion, or 1.7 percent. (Good news, even after allowing for special factors such as pay raises for federal civilian and military personnel and cost-of-living adjustments to several transfer payment programs.)

With only these two reports in hand, our diffusion index of the news delivered at the top sides of government reports on the economy starts the month of March off well at 50 percent good. The next few days, however, bring several reports (factory shipments and orders and the employment situation in particular) that may very well drive it back to roughly the February GNI (21.1).

GDP worse than we knew

Gross Domestic Product (GDP) decreased at an annual rate of 6.2 percent in the fourth quarter of 2008, according to revised estimates. In the advance estimates, the decrease in real GDP was 3.8 percent. The downward revision to the percent change in real GDP was widespread; the largest contributors were downward revisions to private inventory investment, to exports, and to personal consumption expenditures for nondurable goods. So, the bad news of the advance report released last month has been turned into the worse news of this release.

There was, as the month closes out, good news in 21 percent of February’s Federal statistical output. In February the GNI was 14.7 percent.

Bad news in homes and factories

Sales of new one-family houses were at a seasonally adjusted annual rate of 309,000 in January, a rate down 10.2 percent from December 2009 and at only about half that recorded in January 2008. There were 342,000 homes for sale at the end of January; this represents 13.3 months’ supply at the current sales rate. None of this should come as any particular surprise, but it is still bad news, the worst being the more-than-a-year's overhang of unsold houses. Long ago, economist John Maurice Clark identified residential construction as one of the strategic sectors in understanding the business cycle and a sluggish, over-supplied housing market is certainly bad news for that sector.

New orders for manufactured durable goods decreased 5.2 percent to $163.8 billion in January. This was the sixth consecutive monthly decrease and represented an accelerated dive from December's figures. Again, this is the bad news we expected from the hardgoods industries.

With two more "zeros" added in, our diffusion index of good versus bad economic news now stands at 22.2 percent good for February. The only indicator left is a revision of the fourth quarter GDP numbers and that will only tweak the bad news we got at the end of January. Still, the good news index (GNI) will have edged up from last month.

Consumer prices stable, real earnings stagnant

On a seasonally adjusted basis, CPI-U increased 0.3 percent in January after declining in each of the three previous months. Prices for all items less food and energy (core-CPI) rose 0.2 percent in January. This non-deflationary report is good news. (Good)

Real average weekly earnings fell by a mere 0.1 percent from December to January. A 0.3 percent increase in average hourly earnings was offset by a 0.3 percent increase in the CPI-W. Average weekly hours were unchanged. In the context of recent reports in which deflationary price movements offset shrinking workweeks, this is, at worst, a neutral report. (Neutral)

After recording these two signals, the GNI stands at 25 percent for February, with only a couple more reports to go.

A quick game of catch-up

I have been away on travel for one client and also engaged in a consulting gig with one of the more social statistics-oriented agencies. So, this is a quicker and dirtier than usual run through developments in economic statistics so far in February. Note that, after all that follows, my Good News Index (GNI) for February is at 17.9 percent as of today.

PPI: A 0.8 percent increase followed declines of 1.9 percent in December and 2.5 percent in November. At the earlier stages of processing, the decrease in prices for intermediate materials slowed to 0.7 percent from 4.2 percent, and the index for crude materials declined 2.9 percent after dropping 5.3 percent in December. Although this report contains some good news (declining rates of price deterioration), the topside number is outside the upper bound of my range of comfort, and the volatility itself is not useful at this point. (Bad news)

Housing starts and permits: Starts in January were at a seasonally adjusted annual rate of 466,000. This was 16.8 percent below December. (Bad news, and no surprise)

Industrial production and capacity utilization: Industrial production fell 1.8 percent in January. The capacity utilization rate for total industry fell to 72.0 percent. (Bad news)

International prices: The Import Price Index declined 1.1 percent in January, following decreases in each of the previous five months. In contrast, export prices rose for the first time in six months, advancing 0.5 percent in January. (Mixed, leaning to bad.)

Business sales: down 3.2 percent (±0.2%) from November 2008 and down 11.8 percent from December 2007. Inventories were down, but their ratio to sales edged up. (On balance, bad news)

Retail sales: Retail and food services sales for January, were $344.6 billion, an
increase of 1.0 percent from the previous month. (Good)

Balance of trade: December exports were $8.5 billion less than November exports of $142.3 billion. December imports were $10.2 billion less than November imports of $183.9 billion. (This is a bad news way to narrow the trade deficit—mixed on balance.)

Wholesale trade: December 2008 sales of merchant wholesalers were $336.1 billion, down 3.6 percent from November. Inventories fell, but their ratio to sales crept up. (Bad)

Employment: Nonfarm payroll employment fell 5908,00 in January and the unemployment rate rose from 7.2 to 7.6 percent. Our proprietary index of the labor market also declined sharply as all five indicators went the wrong way. (Bad)

Factory sales: New orders for manufactured goods in December, down five consecutive months, decreased $14.8 billion or 3.9 percent. This was the longest streak of consecutive monthly decreases in a decade and a half. The unfilled orders-to-shipments ratio was 5.82, down from 5.87 in November. The inventories-to-shipments ratio was 1.44, up from 1.42 in November. (Bad throughout)

Consumer credit: Consumer credit decreased at an annual rate of 3 percent in the fourth quarter. (Bad)

Productivity: Output per hour for the nonfarm business sector rose 3.2 percent as output declined 5.5 percent and hours fell 8.4 percent. (This is a bad way to increase productivity—mixed on balance.)

Personal Income and spending: Personal income decreased $25.3 billion, or 0.2 percent, and disposable personal income decreased $25.1 billion, or 0.2 percent, in December. Personal consumption expenditures decreased $102.4 billion, or 1.0 percent. (Bad both ways)

Construction spending: Construction spending during December 2008 was at a seasonally adjusted annual rate of $1,053.7 billion, 1.4 percent below the revised November estimate. Just missed being neutral (the margin of error is + or – 1.3 percent), but still bad news. (Bad)

Housing vacancies: The rental vacancy rate was 10.1 percent in the fourth quarter of 2008—higher than the fourth quarter rate for 2007 (9.6 percent), but not statistically different from the rate last quarter (9.9 percent in III:08). For homeowner vacancies, the current rate of 2.9 percent was not statistically different from the fourth quarter 2007 rate or the rate last quarter (2.8 percent each). (Not used in the GNI)

Manufacturing slide, housing collapse

New orders, shipments, and unfilled orders for manufactured durable goods all declined in December. Inventories rose over the month. The decline in shipments was 0.7 percent while the unfilled orders book shrank 1.3 percent. Taken together, these data imply that the cushion of unfilled orders is being eroded.

Sales of new one-family houses in December 2008 were at a seasonally adjusted annual rate of 331,000. This is 14.7 percent below November and 44.8 percent below December 2007.

Both of these reports are pretty unambiguously bad news. The decline in new orders was fractionally less severe than last month, but even Pollyanna couldn’t make lemonade out of that.

The diffusion of good news in January’s statistical releases now stands at 14.7 percent. There are two releases to go—GDP (Q4) and ECI (Dec)—so I can’t see this rising much. Even if both max out, less than a quarter of the news we have seen this month would have been negative.

Straw houses

Privately-owned housing units authorized by building permits in December 2008 were at a seasonally adjusted annual rate of 549,000, down 10.7 percent from November and 50.6 percent from December 2007.

Private housing starts were at an annual rate of 550,000 last December. This is 15.5 percent below November and 45 percent below December 2007.

Housing completions in December 2008 were at an annual rate of 1,015,000. This is 5.2 percent below November and 23.6 percent below December 2007.

It is hard to imagine a more negative report, although we may have to, given the million-unit housing overhang I heard about last October (See the November 4 post’s October 30 entry.) It may well be that the collapse of the housing bubble is the shock that is driving this recession—and driving it into the “longer recession” category.

Our next look at the new residential construction data will come February 18. Will you dare to keep your hands in the air and off the grab bar?

With only a very few reports left to go this month, the good news index (GNI) stands at 16.7 percent for January releases.

CPI not bad, IP not good

On a seasonally adjusted basis, the CPI-U decreased 0.7 percent in December, the third consecutive decline. The index is now only 0.1 percent higher than in December 2007. Declining energy prices, particularly for gasoline, again drove most of the decline.

Excluding energy, the index was virtually unchanged for the third straight month. The index for all items excluding both food and energy also was virtually unchanged in December.

Excluding food and energy, the CPI declined at a 0.3 percent seasonally-adjusted annual rate (SAAR) during the last quarter of 2008, after increasing at rates of 2.0, 2.5, and 2.7 percent during the first three quarters. The volatile energy component of the CPI fell at a SAAR of 76.6 percent during the fourth quarter, driving an overall rate of decline of 12.7 percent.

For the 12 month period ending December 2008, the CPI-U rose 0.1 percent. This was the smallest calendar year increase since a 0.7 percent decline in 1954 and compares with a 4.1 percent increase for the 12 months ended December 2007. The “core” CPI (exclude food and energy) rose at a moderate 1.8 percent December to December.

As much as I suspect judgment calls, I am willing to say that there is enough good news below the energy-driven topside declines to rate this as a “mixed” report. The core numbers are within my somewhat arbitrary price stability parameters (+ or – 4 percent per year) and there is relative stability in about three-quarters of the major expenditure categories in monthly, quarterly, and annual time frames.

Real average weekly earnings rose by 0.6 percent in December 2008. A 0.3 percent increase in average hourly earnings and a 0.9 percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) were partially offset by a 0.6 percent decrease in average weekly hours. Over the year, real earnings increased 2.9 percent.

While no one is happy with the hours component of this story, a substantial increase in real hourly wages and a pretty solid over-the-year increase in weekly earnings is hard to classify as anything other than good news.

Industrial production fell 2.0 percent in December, and declines were again widespread. For the fourth quarter as a whole, total industrial production decreased at an annualized rate 11.5 percent. Capacity utilization for total industry fell to 73.6 percent in December, a level 7.4 percentage points below its average level from 1972 to 2007.

Again, a report that doesn’t take a particularly keen judgment to classify as bad news. In historical perspective, the capacity utilization rate is as low as it got during the 2001 recession and five points below its trough in 1990-91.

With a good, a bad, and a mixed report, the good news index for January is at 17.9 percent. There are only a handful of reports left to go this month, and given that two of them are direct measures of the housing market, I’d not bet on this going up much as we close out.

Wholesale pricing weak

The seasonally-adjusted Producer Price Index for Finished Goods fell 1.9 percent in December. This decrease followed a 2.2-percent decline in November and a 2.8-percent drop in October. At the earlier stages of processing, prices received by producers of intermediate goods fell 4.2 percent in December after decreasing 4.3 percent in the prior month, and the crude goods index declined 5.3 percent following a 12.5-percent drop in November.

Just about all the current (last month, last three months) data in the report's summary tables were outside the parameters I use to determine a bad news price report. While consumers may get a bit of relief as the significant price weakness portrayed in this release gets passed through, such weak pricing is symptomatic of very weak demand. Thus, even though I gassed up recently, this is very much a bad news report.

The January GNI is now at 9.1 percent, with over half of the reports due out in the month already made public. BLS will release its next look at wholesale prices on February 17.

Slowing trade, falling prices

Foreign Trade

Exports of $142.8 billion and imports of $183.2 billion resulted in a November goods and services foreign-trade deficit of $40.4 billion, down from $56.7 billion in October. November exports were $8.7 billion less than October exports of $151.5 billion. November imports were $25.0 billion less than October imports of $208.2 billion.

While this decline in the trade deficit will have a good impact on the arithmetic of the national accounts, the fact that it came as a result of declines in production (exports) and consumption (imports) means the over all rating of the report is “mixed news,” at best. The Commerce Department will issue its next bulletin on goods and services trade on February 11.

Domestic trade

Retail and food services sales for December 2008, were $343.2 billion, a decrease of 2.7 percent from the previous month and 9.8 percent below December 2007. The previously-reported October-November 2008 change was revised from –1.8 percent to –2.1 percent.

Among all retailers, gasoline stations sales were down 35.5 percent from December 2007 and motor vehicle and parts dealers’ sales were down 22.4 percent over the year.

This is unambiguously a bad news report. The decline is big and accelerating from a downward revision of the previous month. Census will issue the next advance retail and food service sales report on February 12.

Foreign trade prices

The Import Price Index declined 4.2 percent in December, following decreases in each of the previous four months. Export prices also fell for the fifth consecutive month, declining 2.3 percent in December after a 3.4 percent drop the previous month.

Continued lower prices for both petroleum and non-petroleum prices in December contributed to the decrease in import prices. Overall, import prices fell 9.3 percent in 2008, the first year the index declined since 2001. The 2008 decrease was the largest in any calendar year since the index was first published in 1982.

Export prices fell 2.3 percent as both agricultural and nonagricultural prices declined in December. Prices for exports were down 7.5 percent in the last quarter of 2008, the largest three-month decrease since the index was first published in 1983. Export prices declined 3.2 percent in 2008, the first calendar year drop since 2001 and the largest since 1998.

While consumers may enjoy some relief from these numbers and the slower relative decline of export prices is vaguely suggestive of an improvement in the terms of trade, the magnitudes of price decline are far too big to be interpreted as anything other than bad news. BLS will issue its next report on international prices on February 18.

Domestic business

The combined value of distributive trade sales and manufacturers’ shipments for November was $1,057.0 billion, down 5.1 percent from October 2008 and down 8.9 percent from November 2007.

Manufacturers’ and trade inventories at the end of November were $1,485.1 billion, down 0.7 percent from October 2008, but up 3.3 percent (±0.5%) from November
2007.

The total business inventories/sales ratio at the end of November was 1.41 (based on seasonally adjusted data). The November 2007 ratio was 1.24 and the ratio in October 2008 was 1.34.

The only glimmer of not-bad news in this release was the very modest decline in inventory levels. The fact that such a fall came in the context of widespread sales and shipment declines puts this release pretty firmly in the “bad news” category. Census will release its next business sales and inventories report on February 12.

Over the past few business days, the Federal statistical system has disgorged three reports with bad or very bad news versus one with mixed news (if viewed optimistically). As a result the good news index (GNI) is now running at 10.0 percent in January.

The mix of reference months in today’s summary brings up another interpretive nuance. What little good news there was in this packet of reports came in November’s slight narrowing of the trade deficit. The other “mixed” report in the index so far referred to retailers’ financial statements for the third quarter of last year. Thus, the GNI is largely a measure of the perceptions of the economy that are being placed in the public consciousness in a particular month. An extension of the GNI concept might key the time coding to the reference period rather than the release date; film at 11:00.

Labor market laments

Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.

Since the start of the recession in December 2007, the number of unemployed persons has grown by 3.6 million, and the unemployment rate has risen by 2.3 percentage points. The employment-population ratio fell to 61.0 percent in December, and was down 1.7 percentage points in 2008.

Over the past 4 months, payroll employment has fallen by 1.9 million, or 1.4 percent. In December, large job losses continued in manufacturing, construction, and employment services, while health care continued to add jobs.

The index of aggregate weekly hours of production and nonsupervisory workers on private nonfarm payrolls fell by 1.1 percent in December and has dropped 4.0 percent since peaking in December 2007.

My own composite index of current labor market indicators dropped 3.2 percent to 83.2 (2007=100) in December. All five indicators had notable declines. From largest contributor to the overall fall in the index, the indicators are goods-producing employment, workers unemployed 15 weeks or more as a percent of the labor force, employment-to-population ratio, aggregate hours index, and the unemployment rate.

Didn’t take much analytical horsepower to decide this was a “bad news” release. The running average of my nascent good news diffusion index is 10.0 percent in January.

It may be noteworthy that my labor market index went beyond 4 points below its trailing 6-month moving average. In past recessions, this has indicated what stock market technicians might call an “oversold” labor market and the index has troughed very quickly after dropping so far below that rough measure of short-term trend. Interestingly enough, the trough in this divergence has exactly coincided with the trough of the recession in half the recessions it encompasses in its history. (It missed by one month in 1975 and by greater leads in 1970 and 1982.)

The Bureau of Labor Statistics will issue the next Employment Situation report on Friday, February 6.

Back in business!

I'm back after my Christmas break. One of my New Year's resolutions is to be more systematic about posting to this blog and to initiate a "good news diffusion index." This good-news index is based on the textual characterizations of developments in 20 of the Principal Federal Economic Indicators. It actually does take some judgement because some agencies asterik their characterizations if the data don't pass a test of statistical significance. Also, I will not be attempting to interpret or index agricultural data (at least until I've had more time to get familiar with them) and will only be indexing monthly and quarterly reports. So, the list of reports being indexed is:

Construction PIP
New factory orders
Productivity
Employment
Wholesale trade
Retail financials
Manufacturing financials
Trade deficit
IPP
Bus. Sales
Adv. Retail
PPI
CPI
Real earnings
Industrial prod.
Housing starts
GDP
Pers. Inc. & Exp.
Durables orders
New Home Sales
Consumer Credit

If a production-oriented report is categorized as "good news," it will receive a score of 1, if it is mixed or unchanged, a 0.5, if it is bad news, a 0. Price reports require a little more thought. If the annual (or annualized) change is in the range -3 to +3 percent, it will be deemed good news and scored accordingly. Annual price changes of -6 to -3 percent and +3 to +6 percent will be 0.5s. Price changes exceeding 6 percent up or down will be treated as bad news.

The index is the average of the scores for all reports available in a given month multiplied by 100. I will maintain a record of the monthly totals and keep a running score within each month. As you can reconstruct from the reports below, the current January GNI is at 16.7.

Construction spending
Construction spending during November 2008 was at a seasonally adjusted annual rate of $1,078.4 billion, 0.6 percent below the revised October estimate of $1,085.3 billion. [The Census Bureau notes that this “change” is not statistically significant.]

The current figure is, however, 3.3 percent below the November 2007 level of $1,115.3 billion, and during the first 11 months of this year, construction spending amounted to $998.4 billion, 5.3 percent below the same period in 2007.

These weak figures reflect, in part, the adjustment to the credit crunch and the housing market’s turmoil. It is interesting to note that 2007 was actually a more consistently down year for construction than 2008 has been—there was a negative sign on the percent change in 10 of 12 months in 2007 versus 7 of 11 so far in 2008.

(Census)

Factory orders
New orders for manufactured goods decreased for the fourth consecutive month in November, dropping 4.6 percent to $384.6 billion. There had been a 6.0 percent decrease in October.

Shipments, also down for the fourth consecutive month, decreased 5.3 percent to $393.8 billion. This was the largest percent decrease since the series was first published on a NAICS basis in 1992 and followed a 3.6 percent October decrease.

Unfilled orders decreased 0.6 percent to $815.4 billion. This, following a 0.9 percent October decrease, was the second consecutive decline. The unfilled orders-to-shipments ratio was 5.82, up from 5.69 in October.

Inventories decreased 0.3 percent to $553.4 billion. This followed a 0.6 percent October decrease and was the third consecutive decline. The inventories-to-shipments ratio was 1.41, up from 1.33 in October.

Not much acumen needed to see that these are very poor numbers. The lack of new orders is especially bad news for efforts to turn the economy back up, or even to stabilize it.

(Census)

Retailers’ financials (3Q08)
In the third quarter of 2008, after-tax profits of U.S. retail corporations with assets of $50 million and over totaled $8.3 billion, down 33.2 percent from second quarter 2008, and down 35.1 percent from the third quarter of 2007.

Sales revenues for large retailers in the third quarter of 2008, at $517.4 billion, were down 2.7 percent from the second quarter of 2008, but up 2.9 percent from the $502.9 billion recorded in the third quarter of 2007.

After-tax profits for these corporations averaged 1.6 cents per dollar of sales for the third quarter of 2008, down 0.7 cents from the 2.3 cents recorded in the second quarter of 2008, and down 0.9 cents from the 2.5 cents recorded in the third quarter of 2007.

The over-the-year sales figures could be the last of the good news we see in this report for a while. It is worth noting that the revenue increase came in part as a result of considerable pricing strength, especially among consumer nondurable commodities. One should note, however, the pressure on margins. The quarterly changes can be discounted as largely seasonal.

(Census)