Friday, September 17, 2010

Data, data everywhere....

There has been a wealth of data out this week so here's a quick recap...

* The Philly Fed survey was below expectations and showed contraction again in August. This is a broader indicator of manufacturing activity than the Empire survey and it provides further evidence that the economy is at least slowing if not contracting again.

"The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -7.7 in August to -0.7 in September. The index, which has been negative for two consecutive months, suggests that growth has stalled over the last two months. Indexes for new orders and shipments continued to indicate weakness this month: The new orders index fell 1 point, remaining negative for the third consecutive month, and the shipments index decreased 3 points, remaining negative for the second consecutive month."

* Consumer sentiment seems to still be slipping. After a sharp rebound in '09-'10 consumer sentiment has now slipped for three consecutive months.

"The UMich index declined to 66.6 in September - the lowest level since August 2009 -- from 68.9 in August."

It is troubling that we now sit only about 6-8 pts off the lowest levels of consumer confidence that we saw during the deepest part of the financial crisis.

* There remains a great deal of buzz around the increasing bond spreads in Europe. There is also a great deal of talk that a couple of European countries (maybe Ireland and Portugal) may have to go back to the IMF soon for additional funding.

* Remember how China is going to save the global recovery? What happens if you build enough homes to house roughly 2/3rds of the US and no one shows up?

"Recent media reports citing information from China's electricity authority claimed that 64.5 million urban electricity meters registered zero electricity consumption over the past six months, equating to enough empty flats to house 200 million people. The electricity authority has since denied the figure."

So this means one of two things: China has a ton of empty homes that have been built without any buyers or China puts the same quality into their data collection as they do their manufacturing.

* Local economic data also seems to be a bit disturbing. New car registrations fell 13% from the sugar-high induced activity of 2008 (cash for clunkers), but were also down 8%from Aug 2008 when the financial crisis was just beginning. Vehicle registrations are down a staggering 39% from 2006.

Also, the fact that local unemployment continues to trend above the same period last year seems to be confirming two dangerous trends converging in NNY. Our heavy reliance on Federal and State government employment and declining private payrolls are meeting budgetary headwinds in Albany and Washington. Even if the US economy begins a sharp rebound it is likely that budgets will be cut for the foreseeable future. This could lead to NNY having elevated unemployment rates (which are now below the national average) for the next 2-4 years.

One final thought - I'm really puzzled by our stated positions on the global currency markets. On one hand we seem to be encouraging Japan to intervene in the market (which will be futile given the size of the currency market), while we continue to allege that China is manipulating their currency. Either both Japan and China are manipulating their currency or no one is. We can't have it both ways.


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