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)