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Thursday, June 17, 2010

Philly Fed

This one's a bit worse, although still in growth territory. The current conditions index took a mighty fall from 21.4 to 8. Interactive charts here.

Employment decreased slightly. Shipments declined slightly, and inventories tended to move a bit higher. Not surprising that work hours dropped slightly. Six month expectations were still good, though. Capital expenditures were barely positive at 3.0.

In recent years I have noticed that Philly Fed seems somewhat linked to home construction, so I expect this one to be worse than the others for a while. Housing starts are in the basement, and I can't see them going anywhere else very quickly:


The bend in the long T-bill yields vs shorts appears to be getting unkinked today.

Comments:
MOM-I seem to recall you saying a while ago that your grocery store research indicated a downward trend in consumer spending, and that it matched up with the trend the Consumer Metrics Index was showing (although with different methodologies) http://www.consumerindexes.com/index.html#13Jun2010. I note that the CMI is quite negative right now and was wondering if your own consumer research was still confirming that signal. I have to say that here in Boston, in the middle class areas in which I hang out, things seem to be rebounding--grocery stores, pharmacies, shopping districts, are all much more crowded than this time last year. So it's a little hard to reconcile--maybe a lull before the storm? Thanks for your posts, btw! Really educational. js
 
Anon - we now appear to be in a nail-biting oscillation between somewhat higher input costs for basics and deflationary trends.

My feeling is that Consumer Metrics (which picks up electronic data) is slightly biased toward the more discretionary purchases.

I have more spending on basics, more cash spending, but a slowly weakening picture.

On the other hand, deposits show that future months won't be as bad. Unless, of course, people get really freaked out by higher oil costs.
 
There's a corollary though.

Politically, the agitation over taxes and government spending are baseline - they have nothing to do with party/ideological affiliation for the most part, but rather are due to the fact that many households are having trouble making ends meet.
 
MOM--thanks for the response. One followup question--I do try to (1) read most of your posts, and (2) look at the links to all the primary sources you provide, but, as my training is in history and not economics, I'm not really sure how it is that you come to the conclusion that many households are having trouble making ends meet. Doesn't the fact that "other deposits" are rising indicate that people are able to make ends meet, if not consume as extravagantly as in the mid-naughts? Such a scenario would align with your observation that CMI's more discretionary spending is dropping, but your metrics of necessities is firming up while Other Deposits are rising. Sorry if I'm dense, but I sometimes (often?) have trouble following your logic train unless you spell it out. I should say, given how much time and effort you put into this blog already, that I realize I sound like a petulant child screaming for ice cream in addition to his pizza, but there ya go. I'm a product of my times.... I blame my mother for spoiling me unmercifully as a lad. :)

js (ANON at 2:03)
 
In Sonoma County there is some building,but very little.Mostly the few with money building their dream homes.I am investigating a couple of abandoned infill developments (Small ones)to see what the potential is for building smaller homes suitable for a aging populace.This is for a year or 2 out and may be feasible due to the totally unsuitable nature of the existing housing stock...people in their '50's don't need 5 bedroom 5 bath two level mcmansions that will blow over in a moderate breeze.
 
FWIW, js, I think what we are seeing is a bifurcated economy. Folks in the middle class that haven't been laid off by now are feeling like they aren't going to get laid off so they are loosening up and spending, however cautiously and not taking on debt to do it. People on the upper end feel their portfolios have been saved and so are more or less back to normal for themselves, cognizant that ostentation is now gauche. Conversely, people that have been laid off haven't seen any improvement, and haven't seen any reason to believe improvement is forthcoming. They are as reliant on govt transfer payments as they ever.

That is why we are getting so many mixed signals. There is growth but it is not strong, only coming from half the population, and not in any areas that traditionally have had large multipliers.

If there is a wave of govt lay-offs that could tip us back into recession. If there is a global panic of any sort which causes people to hunker down that could tip us back into recession. If we are able to keep the extend and pretend game going for the banks and govt debt issuance we'll probably keep muddling along as we have been.
 
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