> Sales at wholesalers fell in May and inventories rose more than at any time in the
>last 6 months, a sign that businesses may be reluctant to order more goods until the
>economy picks up.<
A bit of rational behaviour that helps put the whole at risk: I won't buy
until things get better, which won't happen until others who won't buy until
things get better, suddenly buy while things are getting worse ...
> The United States economy is getting a boost from an unexpected
source: falling energy costs ... Add the impact of lower interest rates,
coming tax rebates, and an upturn in stock prices, and some economists now see
modest growth in the year's second half, up from nearly zero this spring. In
effect, cheaper energy acts like a tax cut, fattening consumer wallets.<
All very nice, except the BLS Report told us yesterday of ...
"a little secret in the employment report that you should know about. The
Labor Department said payroll employment fell 114,000 in June. What it did
not tell you is that this reported change includes a "bias adjustment factor"
that adds about 160,000 jobs a month. This bias factor is basically picked
out of thin air, and is supposed to capture employment in newly started firms
that Labor misses in its survey. In other words, Labor doesn't know how many
new hires occurred at new companies, so it assumes a number. In its June
report, it continued to guess that it missed 155,000 new hires. The problem
is, that when the economy slumps, so do new business start-ups. A good
indicator of new business starts is the Conference Board's index of
help-wanted advertising. This index has plummeted back to levels last seen at
the end of the 1990 recession."
Which little statistical fib might mean these fatter consumer wallets will be
counteracted by the fact there are fewer of them.
> Economic forecasts indicate that while the slumping U.S. economy won't slide into
>recession, it is enduring a "flat spot" that will last longer than originally
>predicted before growth finally rebounds sometime next year, says St. Louis Federal
>Reserve Bank President William Poole. Poole stressed in an interview with USA TODAY
>that he was merely repeating the consensus forecast, not making one of his own.<
Because he doesn't believe it, because no-one says why there should be such a
rebound. Overseas demand doesn't look likely to help, months of rate cuts
aren't budging an inventory fattened in a sated economy nor a substantial
capacity utilisation shortfall ...
> "a real resumption of growth won't occur until next year," he said
> (USA Today, page 2B).
So everyone keeps telling us, but why should it? Where's the demand boost
gonna come from. In neither department (nor in the equity markets) are we
seeing a sign that months of rate cuts and the prospect of a drawn out bunch
of incremental tax cuts are inducing capitalists to invest or employ ... or
consumers to buy that third refrigerator.
So what am I missing, penpals?
Cheers,
Rob.
