Economic Rollercoaster: Some Days Good, Others Not So Good
Econintersect LLC | Jul 29, 2012 12:26AM ET
This is the time of the month that Econintersect begins to prepare their economic forecast for August 2012. Sitting here working on the forecast and listening to CNBC in the background – the images in my head are one of an economic roller coaster with an abyss in the distance.
This past week saw many economic ups and downs:
- Consumer sentiment worsens (bad)
- Initial unemployment claims down significantly (good)
- Spain debt financing at post-Euro high, all while further evidence that Europe/UK in recession (bad)
- European Central Bank President Mario Draghi says he will save the Euro (good)
- Soft existing home sales and pending home sales (bad)
- Durable goods new orders strong (good)
- GDP at 1.5% (I don’t know if it is good or bad – the data is mixed and the BEA reset the baseline).
The USA economy is running so close to zero that the question on everyone’s mind is not if, but when, the next recession will start. This creates a mindset (at least for me), to look extra hard for recessionary evidence in the coincident data. Every piece of bad data gets magnified, while good news is shrunk out of proportion.
I have no special crystal ball to share about the timing of any upcoming recession. All I can say is the data we have seen for June (which is subject to revision) shows an expanding economy. Going with the big four economic elements the NBER considers other than GDP – the latest data was improving.
Month-over-Month Growth Personal Income less transfer payments (blue line), Employment (red line), Industrial Production (green line), Business Sales (orange line).
Personal income was in a 3-month improving trend, employment has been growing for two months, all while industrial production has been up and down but, overall, expanding for the last 3 months. The final data is not in on noisy business sales for June – but this too seems likely to be positive based on advance data.
I keep getting a flashback to Econ 101, and business and economic cycles. I keep wondering how another recession could be upon us without a typical expansion cycle – where was the boom part of the cycle? Was I asleep? The Great Recession it seems was artificially terminated by extra-ordinary fiscal and monetary moves, and the extra-ordinary measures may be expiring before its excesses cleared.
As GDP was released, and the Real (inflation adjusted) growth came in at 1.5%, I flashed back to the Click here to view the scorecard table below with active hyperlinks.
Bankruptcy this week: None
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