Thursday, December 30, 2010

Impressive signs of economic strength

It's said that "Dr. Copper" is the commodity that is best at diagnosing the health of the economy. If that's true, then the global economy is really humming along, since copper prices are now hitting new, all-time highs.

The CRB spot index measures the price of a collection of very basic, non-energy industrial commodities. It too is at a new all-time high, suggesting that global manufacturing activity is moving forward in robust fashion. Most of the commodities in this index do not have associated futures contracts, so speculative hoarding is not liable to be a distorting factor.

The chart above is the Chicago Purchasing Manager's Index, and it has reached a 22-year high; the employment component of the same index has reached a new post-recession high. Moreover, the December Milwaukee PMI released today rose much more than expected.

The chart above shows the average price of regular gasoline according to the AAA survey, and it has reached a new, post-recession high.

The Korean stock market (KOSPI) is within inches of a new all-time high (the all-time intra-day high was 2085 in Nov. '07).

The chart above shows Commercial & Industrial Loans, a good measure of bank lending to small and medium-sized businesses. Loans have stopped declining and are now rising, a sign that banks have eased their lending standards and/or businesses are once again seeking to borrow more. In either case, that bodes well for future economic growth.

Some of the action in the above charts may be due to accommodative monetary policy and rising inflation pressures, but it's equally likely that they reflect improving economic activity. There are certainly pockets of weakness left, particularly in the housing market, but it's hard to ignore the growing list of signs of strength.


Benjamin Cole said...

I really enjoy these round-ups by Scott Grannis. Very thorough economic reporting and insights.

The chart on loans to middle- and small-businesses looks limp, and that concerns me.

Still, with just a lucky break or two, a nudge here or there, 2011 could turn out to be a barn burner, and I sure hope so.

I wish everyone prosperity next year.

septizoniom said...

why do you always equate high nominal values with improvement? its money debasement pure and simple. if RE were not just recently a garganuan busted bubble, prices would be soaring there too.

Benjamin Cole said...

On commodities--

It will be interesting to see what next decade brings. Many commodities are at high enough levels to spur new production, while curtailing demand.

That could lead to gluts.

honestcreditguy said...

Printed dollars pushing commodities...happens everytime...

nothing more...the inventory build is where is the demand going to come from..

all this hype is able global currency race to the bottom...

nothing more...

the UE report is bs...

In the week ending Dec. 25, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 34,000 from the previous week's revised figure of 422,000

The advance number of actual initial claims under state programs, unadjusted, totaled 521,834 in the week ending Dec. 25, an increase of 24,879 from the previous week.

Isnt propaganda great....america is more like Russia everyday..except they let criminals roam free in the marketplace to reek despair on the poor and middle class...