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Wednesday, October 17, 2007

Round Up

Industrial Production came out yesterday. It was up .1 in September compared to August's downwardly revised 0. Still, the numbers were better than that would indicate, because August would have been sharply negative if it hadn't been for a heatwave which pushed utilities up 4.6%. So this was a real improvement, although the last two months are disappointingly flat compared to the prior two months' figures of .5 and .6.

Stagflationary Mark did a very interesting graph of percentage of away from home food sales compared to total food sales:

Also see this Markian news nugget, and his two oil per capita posts.

The market is going to get a kick in the rear from the housing starts and permits for September. Permits were down 7.3% from August and 25.9% from last year. Starts (a more immediate employment/spending indicator) were down 10.2% from August and 30.8% from last year. I want to stress that the first few months on this report come very substantially from imputed data, and that I don't regard the month to month statistics as worth much until four months have passed. But I will concede that these numbers are so high that they accurately indicate at least the trend.

On an even more sobering note, completions were down 11.6% from August and 31.1% from last year. As what's in the pipeline fades, the construction industry will get hit again. It's too soon to tell how single-family is really doing. Most of the building companies are going to continue to build out land for cash flow, because in most cases they can't sell the land. They will probably do these until there are bankruptcies and consolidations in the industry sufficient to cut capacity to conform to demand. In other words, look for a recovery in this industry after a large consolidation, and not before. Perhaps 2010, 2011. Calculated Risk should put up one of his comprehensive, graph-rich posts on the subject today.

Consumer Price Index, which you must take with a grain of salt, is out. The headline number is .3 for September.The 9 month is 3.6%, which would be the highest for years and years.
      Percentage change 12 months        SAAR 9                            
ended in December mos. ended
in Sep.
2000 2001 2002 2003 2004 2005 2006 2007
All items 3.4 1.6 2.4 1.9 3.3 3.4 2.5 3.6
Food and beverages 2.8 2.8 1.5 3.5 2.6 2.3 2.2 5.7
Housing 4.3 2.9 2.4 2.2 3.0 4.0 3.3 2.7
Apparel -1.8 -3.2 -1.8 -2.1 -.2 -1.1 .9 -1.7
Transportation 4.1 -3.8 3.8 .3 6.5 4.8 1.6 6.0
Medical care 4.2 4.7 5.0 3.7 4.2 4.3 3.6 5.1
Recreation 1.7 1.5 1.1 1.1 .7 1.1 1.0 .5
Education and
communication 1.3 3.2 2.2 1.6 1.5 2.4 2.3 3.0
Other goods
and services 4.2 4.5 3.3 1.5 2.5 3.1 3.0 3.4

Special indexes
Energy 14.2 -13.0 10.7 6.9 16.6 17.1 2.9 11.7
commodities 15.7 -24.5 23.7 6.9 26.7 16.7 6.1 20.6
services 12.7 -1.5 .4 6.9 6.8 17.6 -.6 1.3
All items less
energy 2.6 2.8 1.8 1.5 2.2 2.2 2.5 2.8
Food 2.8 2.8 1.5 3.6 2.7 2.3 2.1 5.7
All items less
food and energy 2.6 2.7 1.9 1.1 2.2 2.2 2.6 2.3
Please look at the correlation between energy and the headline numbers by year. Note that we have more structural inflation apparently off lower energy costs. That is largely because of food inflation related to the ethanol adventure of a politically correct but economically illiterate Congress.

Energy costs are far and away the largest contributor to inflation, no matter how adamantly it is officially ignored. And yes, we are due for another round of inflation in retail prices due to diesel's rise:

The strategy of a weakened dollar accelerating US manufacturing will only work well if we can boost internal energy production, especially electricity. The renaissance of the 80's was really due to a massive shift in energy consumption and production which boosted our oil production greatly. Until we correct our energy imbalances, the domestic economy will continue to suffer and consumers will take the brunt of it. Basically, we are being politically correct at the expense of the lower 40% of our society. A more regressive, vicious set of policies can not be imagined.

We urgently need to expand domestic production of all sources of energy, but oil, coal and nuclear power are the most important. Manufacturing is energy-intensive, and unless you have currency internal production to meet the demand rise in manufacturing, you don't really get much of the benefit from the weakened currency.

Maybe recycling of surplus housing will provide the energy for next industrial boom.
Given the amount of vandalized and stripped empty houses out there, it's a certainty that the housing stock we have is providing some of the metal for the next round to be built.
The other thing I noticed was medical. It's just crazy the way that medical costs continue to climb, year after year.
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