August 2009

Clunkermania: Top Good News Economic Story of the Year
Posted: Sun, 30 Aug 2009 02:44:00 +0000
This week marked the end of the Cash for Clunkers program. Many have called it one of the best economic stimulus programs ever implemented. Of course the White House has called it "Wildly Successful."

"This is one of the best economic news stories we’ve seen and I’m proud we were able to give consumers a helping hand," said US Transportation Secretary Ray LaHood.

The White House Council of Economic Advisers, released preliminary analysis on the program:

1. Their analysis estimates that the program will boost Q3 economic growth by 0.3-0.4 percentage points because of resultant automobile sales in July and August.

2. The program will sustain the increase in Q4 GDP because auto production will continue in order to replace depleted showroom inventories.

3. Clunkermania will create or save 42,000 jobs in the second half of 2009. It is further expected that those jobs will remain well after the program’s close.

The program, combined with earlier economic stimulus, has second half economic growth coming on strong.
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Second Half Growth: Coming on Strong
Posted: Sat, 29 Aug 2009 03:56:00 +0000
Back in mid-July, Intel gave us the first glimpses of a stronger than expected Q3. They made it clear then that Q3 growth would be anything but lackluster. On Friday they underscored that assertion by further raising their Q3 outlook. Now it's likely that their strong growth will extend into Q4.

Intel also surprised in the second quarter when its sales and profit easily beat Wall Street's expectations. Not only did Intel raise sales estimates on Friday, but also signaled better profit expectations by announcing a better gross margin forecast for the quarter.

In addition to the good news wrap from Intel on Friday, this week was full of positive indications of a better than expected rest of the year...

1. Most economists forecast the government to downgrade their GDP estimates for the second quarter to -1.5%. Instead the government's revised reading on gross domestic product was unchanged from a previous estimate at -1.0% for Q2.

2. Computer maker Dell reported earnings that easily beat analysts' estimates on Thursday. Like Intel, Dell also expects stronger sales in the second half of the year. Dell hasn't had much good news to report in the last year and many analysts use Dell results as a barometer for corporate spending in the coming months.

3. Also on Thursday, the government reported that initial and continuing claims for unemployment continued to fall. Earlier in the week the Conference Board reported that its Consumer Confidence Index skyrocketed to 54.1 in August from an upwardly-revised 47.4 in July.

4. And news on the home front was also extremely positive. In a joint report issued by the Census Bureau and Department of Housing and Urban Development, new homes sold at an annualized rate of 433,000 during July. That was up almost 10% from the rate in June and the highest rate since last September. The report comes right on the heels of earlier home market positives including spikes in existing home sales, home prices and housing purchase affordability.

5. But what is likely the best evidence of significant second half growth was a durable goods order surge in July. Those orders rose 4.9%, the largest increase in two years. Civilian aircraft orders jumped, while the reopening of Chrysler and General Motors assembly plants reflects a welcome increase in orders for motor vehicles.

Earlier in the month we warned to not be surprised by a strong Q3. It now appears that Q4 will be quite strong as well.
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Another Dozen Housing Markets Improve
Posted: Fri, 28 Aug 2009 04:08:00 +0000
Back in June we pointed out a dozen housing markets that were showing pricing improvement. This week revealed a dozen more.

A jump in the national S&P/Case-Shiller Home Price Index further clarifies that the price drops of the past few years are now over. The 20-city index rose quarter-over-quarter by 1.4%

"This is great news; prices may be starting to grow again" said Pat Newport, of IHS Global Insight. "Three independent sources, the National Association of Realtors, the Federal Housing Finance Agency and Case Shiller are showing price improvement."

Repeatedly we said that the strength of this recovery will be measured in part by how well the housing industry fares.
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Eight Straight: 52% Ain't Bad
Posted: Fri, 28 Aug 2009 03:28:00 +0000
Another Good News Thursday saw major US stock indexes closing at fresh 2009 highs. The Dow Jones Average was up for the eighth straight day -- the best winning run since April 2007.

As we predicted here, the bull market move has been swift and steep leaving many investors in the dust. Stocks have essentially risen for the last five months, with the S&P 500 index now up better than 52% from the 12-year low on March 9.

It continues to amaze me how the stock market charts for 1974-75 look so similar to the 2009 stock graphs.
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Home Sales Spike Up; Asian Shares Surge
Posted: Mon, 24 Aug 2009 03:20:00 +0000
To close out last week, existing-home sales were reported to spiked up to their highest level in nearly two years from June to July with home resales bouncing 7.2%. It was the highest month-over-month percentage increase in more than 10 years.

"The housing market has decisively turned for the better," said Lawrence Yun, the National Association of Realtor's chief economist.

Not only are sales now rising precipitously, but distressed property sales are also falling. Foreclosures and short sales now only reflect 31% of sales in July.

More and more economists now see that "the U.S. economy is recovering more strongly than expected," according to a report by Reuters last Thursday. Manufacturing surveys from NY and Philadelphia last week showed strong recovery signs in those regions.

As this week kicks off, the optimism is not lost on the Asian markets. Late Sunday some Asian stock indexes were surging more than 3%.

It is no wonder that consumer and investor confidence continue at 2009 peak levels.
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Manufacturing Returns to Growth, Leading Indicators Up, Car Factories Recall Workers
Posted: Fri, 21 Aug 2009 02:41:00 +0000
Manufacturing in the Philadelphia Federal reserve's region unexpectedly expanded in August for the first time in almost a year. Thursday's report is yet another sign that Q3 economic growth will indeed be stronger than many continue to purport.

According to the report: "The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -7.5 in July to 4.2
this month. This is the highest reading of the index since November 2007"

The growth in manufacturing activity was far better than any of 52 economists had forecast in a Bloomberg survey of the prognosticators.

It was the second strong regional showing for manufacturing this week. The New York Fed’s Empire index, released on Monday, showed that the NY region’s manufacturing sector also grew for the first time in more than a year.

Additionally the Conference Board's index of leading economic indicators climbed 0.6 in July after rising 0.8 percent the prior month. It is the first time the index has climbed for four straight months since 2004.

Earlier this week GM said it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as new car sales are significantly exceeding expectations. Across the board US auto factories are now adding shifts, scheduling overtime, and restoring weeks of production at select factories following the significant success of the Cash for Clunkers stimulus program.
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NY Regional Manufacturing Spikes, Loan Charge Offs Continue to Fall
Posted: Tue, 18 Aug 2009 07:38:00 +0000
On Monday two more signals pointed to a stronger Q3 than many are expecting.

The behemoth credit card issuer JPMorgan Chase reported that its bad debt charge-off numbers have now falling for two months in a row. Not surprising as the unemployment rate has now peaked for this cycle and is now on its way down, unsecured loan defaults are decreasing as well. Other large plastic issuers have reported similar declines in such charge-offs.

Even more noteworthy was the spike up in the NY Empire State Manufacturing Index reported Monday. You may recall the "giant sucking sound" lurking below the Empire readings earlier in the year. Those sounds are no longer lurking as the general business conditions index spiked by 13 points in July, to +12.1, its highest level since November of 2007. If the upward spiking trend continues into Aug and Sept, by the time the quarter closes, business conditions in the NY region will be at positive levels not seen for over ten years -- no doubt leading to surprisingly strong Q3 in manufacturing for the NY region.

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