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January 22, 2008
Some quotes in case you missed them.
Factory activity plunged sharply in January, as December homebuilding fell to its slowest pace since the 1990s, reinforcing recession fears. The Philadelphia Fed manufacturing index fell to negative 20.9 in January from negative 1.6 in December, which puts it firmly in recession territory.
Consumer spending is in the toilet, according to the Wall Street Journal:
“The retail industry appears to be skidding toward its first big wreck in 17 years.
“Chains are slamming the brakes on store openings, cutting back on inventory and girding for leaner times as consumer spending chills. The speed with which sales slowed during the holidays caught even cautious retailers off-guard, prompting a flurry of profit warnings.
“And while data on December consumer spending won’t be released until the end of the month, plummeting sales suggest consumers are snapping shut their pocketbooks.”
The National Bureau of Economic Research’s most important number used for determining recession is non-farm payroll. And according to The Bureau of Labor Statistics, December non-farm payrolls rose by a scant 18,000, the smallest gain since 2003. Slow job growth like that has historically been a recession warning sign. Worse, even the anemic 18,000 non-farm gain can’t be taken at face value. Reportedly, during periods of slow growth, there’s a tendency to overstate gains initially, and reduce later. Let’s hope that didn’t happen this time.
We’re seeing weakness in the Chicago National Activity Index:
“The Chicago Fed National Activity Index was –0.27 in November, up from –0.89 in October. Three of the four broad categories of indicators--employment, consumption and housing, and sales, orders, and inventories--made negative contributions to the index in November, while the production and income category made a slight positive contribution.”
New home sales and home prices are coming down. Corporate profits are being drained. Spending trends are down. And Q4 GDP is expected to have grown only 0.4%. The only surprise we’re seeing is the uptick in consumer confidence, as a result of a “stimulus package” shot in the arm. |
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