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.
Monday, March 30, 2009
Friday, March 27, 2009
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.)
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.)
Thursday, March 26, 2009
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.
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.
Wednesday, March 25, 2009
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.
“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.
Thursday, March 19, 2009
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).
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).
Tuesday, March 17, 2009
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.
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.
Friday, March 13, 2009
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.
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.
Friday, March 6, 2009
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.
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.
Monday, March 2, 2009
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).
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).
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