Monday, October 17, 2011

Miscellaneous updates

No sign in these charts of anything like a double-dip recession or even a meaningful economic slowdown.

September industrial production data show that US manufacturing production expanded 3.9% in the past year, and rose at a 5.9% annualized pace in the third quarter of this year. This, plus other signs of growth, suggest that Q3/11 GDP is likely to come in above market expectations of 2.5%.

Commercial & Industrial Loans at U.S. banks (a good proxy for bank lending to small and medium-sized businesses) have increased by just over $100 billion since last November, and are up at a robust annualized rate of 10.6% in the past six months.

After surging by $400 billion or so from last June through late August, the M2 money supply appears to have settled back down to its normal routine of 6% annualized growth. The bulge in M2 corresponds closely to the rising concern that the European banking system is at risk of collapse should one of the PIIGS default, but those concerns have apparently not intensified further.

Despite the 10-15% drop in commodity prices since last April, and despite widespread concerns that global economic activity—and especially that of China—has slowed, these two measures of shipping costs for bulk commodities in the Pacific have jumped significantly since their February lows.

Over the past few months the dollar has risen about 4-5% against a basket of major currencies, thanks to a flight to safety sparked by Eurozone default concerns. But as this chart shows, it still remains at very weak levels from an historical perspective.


Benjamin Cole said...

Nice round up of charts by Scott Grannis.

I dislike the term 'weak" as it applies to the US dollar. The dollar has traded at levels similar to this several times, including periods of robust growth and low inflation, as the chart shows.

A strong dollar is one that boost exports and the US GDP. The dollar is ding that now.

McKibbinUSA said...

Here's a hypothetical question: If a) US GDP growth rose to an annual rate of 30%; b) inflation was hovering at near zero annually; and c) unemployment rose to 90%, would the nation be in a "double-dip"...?

Benjamin Cole said...

The above cite is fascinating. Goldman Sachs has embraced nominal GDP targeting by the Fed, a position I wholeheartedly agree with.

The Market Monetarism school has been promoting this view for a couple of years, and it is wonderful to see a mainstream institution adopt the view.

Bernanke and the Fed have been choking the economy for years, as the Bank of Japan has done to to the Land of the Rising Sun.

Sustained, embedded and chronic low interest rates are not a sign of easy money--they are a sign of tight money and a suffocated economy, as Milton Friedman said.

brodero said...

A recession requires a drop in y-o-y growth of industrial production of business equipment below 5% to get a recession..we are
still posting 10% growth....

P.S. you can still have a decline to that level and still not get a recession...which is why you look
at other factors to confirm

McKibbinUSA said...

Hi Bodero, in other words, unemployment is irrelevant to whether we are in recession or not? I ask because if employment is irrelevant, and all eyes are on growth and holding inflation down, then why not accelerate outsourcing and manufacturing to other countries? Of course, I ask that because isn't the employment challenge someone germane to whether or not the economy is prospering -- I am starting to realize that a large number of people truly believe that growth and inflation trump employment in macroeconomics -- if that's now the prevailing thinking, then I suppose that macroeconomics is a dead language replaced with what...? Something is very amiss when people somehow segment growth and inflation from employment as factors that affect prosperity...

brodero said...

Scott look at the Johnson Redbook
y-o-y change on is
a great high frequency indicator.

Squire said...

Unemployment isn't irrelevant. It is just that it is normal for it to be high under the circumstances.

Productivity through technology and process is part of the reason.

Another part is that employees are a liability in the U.S.

I was volunteering at the unemployment office and a large corporation HR manager was desperate for a Philippine female cost accountant and was so desperate to fill the diversity requirements she was angrily yelling at me, "Surely with all those unemployed people you have you must have one".

We didn’t have one but we had other cost accountants qualified for the job that she wouldn’t look at.

surfsalterpath said...

what about the record these guys have?