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Sunday, August 16, 2009

Good News Wrap - First Half of August Filled with Good News

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  • Consumer and Investor Confidence Now at 2009 Peak Levels

    Posted: Thu, 13 Aug 2009 03:16:00 +0000

    The Rasmussen Consumer Confidence Index, rose to its highest reading so far this year on Wednesday. At 79.9, the index is now at its highest level since just a few days after the Lehman Brothers collapse -- which many analysts mark as the start of last year's financial crisis. The consumer index (which is refreshed daily) is now up 20 points from the start of 2009.

    The Rasmussen Investor Index, also spiked up two points on Wednesday. The investor confidence guage is now up 23 points from the beginning of the year.

    The consumer reading is more evidence that Q3 GDP growth will likely be much stronger than most economists expect or are currently predicting.

  • Clunkermania Part 2: Senate Agrees to Move Forward

    Posted: Thu, 06 Aug 2009 04:05:00 +0000

    $2B More Appropriated for Popular Green Car Rebates

    It looks like packed US car dealerships will continue. Late Wednesday the Senate majority leader Harry Reid announced that the US Senate now has enough votes to pass the House version of a bill to extend thepopular automobile stimulus program.

    Car manufacturers, their dealerships, and factory workers across the country are cheering. The firms have stated that the clunkers program is significantly driving up sales with most consumers buying smaller, "greener" vehicles.

    General Motors Co (which just emerged from bankruptcy earlier in July) reported the best news among all the car makers accounting for nearly 1 out of 5 vehicles sold under the program. The program's extension is now likely to lead all automakers to increase production and bring back laid-off workers. Several have already announcing plans to increase production cycles and others likely will follow suite once "part 2" of the program funding is in place.

    Late Wednesday night, Ford's chief financial officer, Lewis Booth, said his firm would decide on production increases shortly and make an announcement in several weeks.

    The Clunkermania developments provide more evidence of the increasing potential for a strong bounce inQ3 GDP growth.

  • Pending Home Sales: Longest String of Monthly Gains in 6 years

    Posted: Wed, 05 Aug 2009 03:29:00 +0000

    On Tuesday, the National Association of Realtors announced that the pending home sales index for June jumped 3.6 percent. The gain is the fifth such monthly gain in a row and represents the longest string of surges in six years! Year-over-year comparisons also now show improvement -- up 6.7 percent since June of 2008. In fact pending home sale contract levels are registering their greatest activity since June of 2007 -- two years ago.

    The consensus forecast was that the index would increase only 0.7 percent. In fact in a Bloomberg survey of 35 projections everyone was surprised by the strong jump. Forecasts had ranged from predicting a 1.2 percent drop to a estimate of a 3 percent gain.

    Tuesday's report from the national association follows the July 23 release showing home resales in June rising for a third straight month. That was following by further good news on July 27th when data showed that sales of new homes soared 11 percent in June, the most since 2000.

    In early June we made the claim that recovery had started for this US growth cycle. All of June's housing data now supports that claim as well.

    Another big surprise to most economists will be the strength of the recovery as measured by GDP growth in Q3.
  • Don't Be Surprised By Robust Growth in Q3

    Posted: Tue, 04 Aug 2009 05:24:00 +0000

    Last week saw another string of surprisingly good news. And Monday kicked off another week of robust economic data.

    Late last week the advance estimate for Q2 GDP gave more evidence to our claim that the US economy as a whole began its return to GDP growth in June. The economy contracted in the second quarter by only 1.0 percent annualized. That's only a quarter of a percent point for the entire quarter.

    What is extremely surprising however is how strongly growth is returning. Early in the year we were observing data that pointed to the manufacturing sector returning to growth by Q4. Based on the ISM manufacturing data released on Monday, it now appears that manufacturing growth is bouncing significantly and a return to overall manufacturing growth is likely in a few weeks, not next quarter. The ISM July composite index jumped to 48.9 from June's reading of 44.8. That is it's highest level since August of last year and a significant jump above the trend line that we've been tracking since March. Remember that according to the ISM correlation models an index reading a reading above 50 percent indicates that the manufacturing economy is generally expanding. A reading below 50 percent indicates that it is generally declining. But perhaps more importantly a reading in excess of 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding. We are no doubt past that 41.2 threshold. (see chart below)

    Additionally Q2 earnings continue to surprise to the upside. And in significant manufacturing news, the government'sclunkermania campaign has started yielding tangible sales results. On Monday, Ford reported its first monthly U.S. sales increase in nearly two years and other major automakers said sales are showing signs of stability.

    Okay, let's recap. New home sales are rising with prices seeming to stabilizing (but rising in many markets), our big banks are turning profits again, the car industry sees signs of stability, manufacturing orders have spiked, and Q2 GDP only contracted by a quarter of a percentage point.

    No wonder investor confidence surged to a five year high.
  • Investor Confidence Surges to Five Year High

    Posted: Wed, 29 Jul 2009 00:20:00 +0000

    Confidence among institutional investors rose sharply in July according to the State Street Index report released on Tuesday.
    Unlike other consumer and investor confidence surveys, the State Street Index measures institutional investor confidence by looking at actual levels of risk in their portfolios. This is not a subjective attitude survey. It measures confidence directly by assessing the changes in investor holdings of equities.

    The index climbed 3.6 points to 119.4 for a five-year high. According to the State Street press release Tuesday, "Investors are now adding risk to their portfolios at an impressive rate, faster than we have seen in several years. In fact, this is the highest level the ICI Global index has reached since mid 2004. That is an impressive turnaround over last October, when the ICI Global reached its lowest-ever-recorded level of 82.1. Note the marked contrast with Consumer Confidence, which remains more focused on lagging unemployment."

    According to State Street, "the more of their portfolios that professional investors are willing to devote to riskier as opposed to safer investments, the greater their risk appetite or confidence."

    This is just one more set of data that demonstrates that most monetary experts see clearly that recovery has begun.

  • New Home Sales Jump; Supply Plummets; Prices Bouncing

    Posted: Tue, 28 Jul 2009 03:51:00 +0000

    New home sales added to our run of good news in the housing market on Monday. Sales jumped 11.0 percent in June to an annual rate of 384,000 and the highest rate this year -- well above any economists' estimates. In fact the month-to-month percentage change was the highest in nearly 9 years. But the best news in the data was that the strong sales sucked down new home market supply. Supply fell precipitously from 10.2 months in May to 8.8 months in June for the lowest supply reading in 23 months. With the significant supply shrinkage, the total number of new homes now on the market is the lowest in 11 years.

    Fishing for something negative, doomsayers continued to point to year over year home price declines. However, when closely examining data for the more recent 4-5 months, it should be no surprise that home prices have bottomed and that in many markets the prices are rebounding.


  1. GNE,

    Are you concerned that the stock market sell-off is a sign of a double-dip recessions to come? It certainly seems as though the commercial real estate market is getting worse with more retail tenants going out of business.

  2. No I don't see any signs in the fundamentals that would indicate a double-dip recession. In fact, I continue to see more and more signs that economic activity is accellerating more rapidly than anyone expected. (See today's post for two more pieces of evidence)

    Don't look at daily or weekly short term corrections in the stock market as any indication of underlying economic fundamentals.



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