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Wednesday, February 16, 2011

Quick Roundup

Chinese PPI & CPI. Pace still increasing, PPI increasing faster than CPI. This would lead one to expect further tightening measures. CPI:
The price of foodstuff increased 10.3 percent year-on-year. Of the total, the price of grain, poultry and their products, fresh eggs, aquatic products, fresh vegetables and fresh fruits rose by 15.1, 10.9, 20.2, 11.1, 2.0 and 34.8 percent respectively.
The Chinese rebalanced CPI to include more of a housing component.The PPI is clearly not going to last at this pace. Housing costs are going up very fast:
The price of articles related to dwelling expanded 6.8 percent over the same period of the previous year. Of which, price of water, electricity and fuel, construction and decoration materials, and housing rent was respectively climbing 3.9, 4.3 and 7.1 percent.
It's not a great time to be lower income in China. There is still a lot of the old government housing available, most at low rates. But look at the food prices!

US PPI: The 12-month on crude goods is 10%, on intermediate goods 6%, finished 3.6%. That is unadjusted.

US Housing starts for January: This is being touted as good news, but I don't see it. Multi-family starts are up 80/81% compared to December & YoY, which made the starts index look good, although still down YoY. But under construction is still falling, completions are falling, and even with the rise in multi-family starts it looks like the overall pace of activity is doomed to keep falling for most of this year (multi-family starts, even with the big rise in Jan, have fallen from 192 to 159 over the last year). Authorizations (permitted/not yet started) were down again. Multi-family authorizations were down about 10% both MoM and YoY. There was a sharp increase in December for multi-family permits. These tend to go in spurts, and the projects usually take years to complete.

After all, we really don't need that much more housing. However I guess the good news is that construction pace will probably drift down in 2011 instead of collapsing, although that shift really took place a while ago. We shifted into drift territory around last summer. Housing activity is at such an amazingly low pace for the US historically that the data is very noisy, and even a big relative increase of 5-10% wouldn't mean much. Go look at this chart - we're talking nuthin'burger.

Industrial production fell very slightly in January, although I wouldn't put too much weight on it. If you look at the details, the declines were centered on construction and utilities (people turned off their Christmas lights). Given the unusually bad weather south, that is not a surprise. No capacity growth over the last year. That's for both total industry and total manufacturing.

One thing to remember about this report is that the sample is not statistically representative. See documentation. They do probably capture most of it, though:
The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle. The industrial detail provided by these measures helps illuminate structural developments in the economy.
Utility data should be pretty good, so you can use that as a parity check on the rest of it. Over the entire year, utility production only rose 0.1%.

This is not to say that manufacturing activity isn't picking up. It is, but not at the pace that you would expect if you just read the ISM/PMI/NACM reports, which are biased upward because some companies have gone bankrupt and some production has been shifted off-shore. There's a conservation effect in the utilities figures; a lot of people and many companies are using much more efficient lighting. But the mere fact that utility production dropped sharply in October, rose decently in November (store displays), shot up 4.1% in December and then fell 1.6% in January (these are seasonally adjusted figures!) tells you something about the split between industrial production and retail/household power usage, and what it tells you is that domestic production isn't rising that fast.

Rail data in January continued to show healthy YoY gains. It's worth noting that a distinct downward trend in Canadian rail traffic has developed and firmed. Probably this is due partly to currency effects. The US ATA tonnage index rose an originally reported 2.2% in December, since revised down to 1.3%, and 3.1% in January, so that's a positive. In other news, ATA is irked at the Obama administration over hours of service rules.

MBA purchase and refi apps continue their inexorable downward climb. Last week's average rate of 5.13% dropped to 5.12%. It appears that more would be needed to generate a shift in trend. I live in fear of the discussions probably happening up in the Fed Ivory Tower over this issue.

If you have bravely staggered this far through the post, you deserve something for your efforts.

Two enjoyable articles: The first is snark on the scale of Mark over the kerfuffle happening at the FCIC on their report.

The second made me spill my coffee this morning, although it is not meant to be comedic. Our president's grave call to limit the rise in Medicare and Medicaid costs was made in a state of apparent blissful ignorance of the fact that it is health care reform which is going to cause a great deal of the rise in Medicaid costs:
President Barack Obama said the rising cost of Medicare and Medicaid is creating “huge problems” for the nation’s finances that must be dealt with “in a serious way.” He’s just not taking the first step.

In his Feb. 14 budget proposal and at a news conference yesterday, Obama said the entitlement programs were driving the U.S. debt, while offering no details on how to shore them up.
Also unmentioned is that the mandated increase in Medicaid rolls will greatly increase cost-shifting to the privately insured, so this is a business issue and a barrier toward increasing employment.

I mean, if you are going to get slapped with a 2K fee for insurance for every wait person, busbuy, etc, aren't you going to limit the size of your restaurant? See Snarky Mark. Just imagine that that graph is going to look like in 2018.

Also, since we're having fun, Small Dead Animals is juxtaposing again, this time about NPR funding.


What concerns me most about the restaurant industry is that it is just assumed that we'll continue to eat out more and more since that has been the long-term trend.

When I retired, I ate out a lot less. When I had a job, I ate out nearly every day for lunch. That stopped. I wonder how many other baby boomers will be like me?

As the economy fell part in the early 2000s recession, I ate out less. I changed my assumptions about future real returns on investments. In order to make my nest egg last, I'd have to spend less. Eating out less was an easy solution. This was a reactive decision.

Heading into the housing bubble bust, I ate out less. I once again revised down my assumptions about future real returns on investments. This was a proactive decision. I managed to see the pain coming this time.

Nothing over the last 10 years has made me want to eat out more.

I barely eat out at all now.

For what it is worth, this is what I wrote for the last version of that chart back in 2008.

"Let's just hope people don't turn as bearish as I am and/or begin to question their ongoing prosperity. I'm down to around 10% on that chart. There's not one thing Bernanke can do to get me to change my behavior either. Sorry Ben! The more he tries, the more homecooked spaghetti I'll be eating. If you think pushing on a string is bad, try pushing on a wet noodle!"
We can now clearly see that it is your treasonous antipathy to ending life eating a healthy diet of Ramen noodles in your spacious under-the-bridge apartment that is futzing the economy.

Shame on you!
Mark - more seriously, I have often felt the urge to write Krugman after one of his stranger NY Times efforts on the Imperative Necessity To Spend to ask how he is saving for his own retirement.

I bet he has a nice nest egg stashed and routinely adds to it. I don't know if he'd understand the contradiction.

It comes down to the basic fact that a great many people want other people to spend to juice up the economy while they save.

I'm just waiting for Ikea to come out with a line of shelters that can be dissembled and packed in a shopping cart.

"Shame on you!"

Don't blame me! I have a disease. I need help.

I think maybe if I was to stand up in front of a group of similarly minded individuals I could actually admit that I have a problem.

Where's Savers Anonymous?

"I bet he has a nice nest egg stashed and routinely adds to it. I don't know if he'd understand the contradiction."

Are you trying to suggest that Krugman would attempt to profit off Keynesian policies? You can't honestly believe that. He has the conscience of a liberal. If I know him, he'd be splitting his money between shopping at the malls and investing in Michigan.

December 2, 2009
Krugman Says He Plans to Sell Some Brazil Investments (Update1)

"Dec. 2 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman said he plans to sell some of his investments in Brazil on concern that asset prices are overvalued after record inflows made the real the world’s best performing major currency."

This isn't what it seems! There's a Michigan School located in Brazil! Whew! I felt cornered there for a moment.

Krugman no doubt invested in Brazil because of that school.

"When the people of the city go into that office with the huge American flag, they’ll continue to find a little bit of the USA, its language and culture there."

That's how much he loves America.
"I'm just waiting for Ikea to come out with a line of shelters that can be dissembled and packed in a shopping cart."

They already make that, MOM. It's the cardboard box that the IKEA furniture comes in ...
MOM (& Who Struck John),

"I'm just waiting for Ikea to come out with a line of shelters that can be dissembled and packed in a shopping cart."

Check out IKEA's automated warehouse that I found when I was looking for automation videos.

"Nobody Wants to Work Any More"
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