ECRI Weekly Leading Index hangs in there and even rises a little

A little recovery on the unemployment insurance initial claims front, a slight improvement in mortgage applications, and a growing money supply helped the Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) recover a little bit this week and the WLI annualized growth rate did manage to eek out a slight gain, to -9.9%, bringing it a hair above the psychologically important -10.0% level that some pundits (but not ECRI) view as the threshold for a recession. The bottom line is that the WLI has remained roughly flat since the beginning of July. That is not great, but this is at least not a worsening of the outlook. The much-feared double-dip recession is being kept at bay.

The WLI is well below its peak in April, and modestly lower than the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI of -9.9% remains moderately below zero, but modestly higher than its low of -11.0% reached in July. It is hovering near the -10.0% threshold that some pundits view as indicating a recession on the way, but ECRI does not concur. Actually, what ECRI said last week was that "With the WLI staying essentially flat for the last six weeks, following a nine-week plunge, it is premature to predict a new recession, though risks remain" and a week before they said that "if it turns down once again, that would signal heightened recession danger." That's an "if" and we're not currently headed in that direction. Still, it will take more than a couple of weeks to determine the true trend now that the trend is essentially flat.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

ECRI Weekly Leading Index weakens and hovers near flat line

Another weak unemployment insurance initial claims report, slowing of mortgage applications, and a declining stock market finally took their toll on the Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) which declined and gave up most (but not all) of its gains of the previous two weeks. But, the WLI annualized growth rate did manage to eek out a modest gain, although that is really a modest decline from the level of a week ago before it was revised lower. The bottom line is that the WLI has remained roughly flat since the beginning of July. That is not great, but this is at least not a worsening of the outlook.

The WLI is well below its peak in April, and modestly lower than the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI remains moderately below zero, but modestly higher than a week ago. At -10.0%, it is now right at the -10.0% threshold that some pundits view as indicating a recession on the way, but ECRI does not concur. Actually, what ECRI says is that "With the WLI staying essentially flat for the last six weeks, following a nine-week plunge, it is premature to predict a new recession, though risks remain" and "if it turns down once again, that would signal heightened recession danger." That's an "if" and we're not currently headed in that direction. Still, it will take more than a couple of weeks to determine the true trend now that the trend is essentially flat.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

Q3 GDP tracking at an annualized real growth rate of 2.4%

Despite all of the chatter about an allegedly imminent double-dip recession, GDP is holding up fine. According to Macroeconomic Advisors, LLC, real annualized growth of GDP is tracking at 2.4% for Q3. Not bad. Not great, but not bad either. It is still too soon to talk about anything other than guesstimates for Q4 and beyond, but the actual evidence is only for a slowing, not renewed recession. For the record, MA had forecast Q2 GDP growth of 2.4% that actually came in at 2.3%, so they are a reasonably reliable outfit. (Note: MA is now forecasting that Q2 will be revised down to growth of only 1.1%.) They actually calculate GDP on a monthly basis. June was a second consecutive down month, but MA expects a healthy rise in July related to exports.

-- Jack Krupansky

Unemployment insurance initial claims not as bad as it seems

At first blush, that "5" handle on the weekly unemployment insurance initial claims number of 500,000 seemed awfully scary, seeming to strongly suggest that a double-dip recession is now a "slam dunk", but it's not quite that simple. First, the unadjusted initial claims number was only 401,856. That is a rather large adjustment and I have gotten used to taking the seasonal adjustments with a grain of salt, especially with an economy going through a major transition. Second, the more reliable 4-week moving average rose by only 8,000 to 482,500. A cardinal rule in econometrics is to never put any faith in a single data point in a data series, especially the latest data point which is always subject to revision. Sure, 482K is quite elevated, but is still well below the level a year ago of 567,250, so if we really are in a double-dip, it is nowhere near as severe as a year ago. In fact, both the adjusted and unadjusted initial claims numbers are well below the levels of a year ago, 575K and 458K, respectively. And just as a reminder, the overall economy was growing, albeit only at an annualized rate of 1.6%, in Q3 of last year. Finally, as of yesterday, Macroeconomic Advisers is still projecting annualized GDP growth of 2.4% this quarter. So, yes, the economy has slowed a bit, but nowhere near enough to run the risk of a true double-dip recession.

The bottom line is that the economy is still doing a bit better than a year ago, when GDP grew by 1.6% in Q3 of 2009.

-- Jack Krupansky

Made my eighth payment to pay down the public debt of the U.S. government

I just made my eighth monthly payment to pay down the public debt of the U.S. government. Not much, just another $25, but it is a matter of principle, albeit mostly symbolic. It may take me another 44 billion years to pay it all down all by myself at this rate, but, as I said, it is matter of principle.

According to the U.S. Treasury web site, the total public debt outstanding was $13,317,048,837,517.10, as of August 12, 2010. It was $13,199,290,856,204.30, as of July 13, 2010, for an increase of about $118 billion over 33 days, about $3.6 billion a day or $1.30 trillion per year (annualized daily deficit.)

Here is what I wrote back in January 2010 when I made my first donation/gift/contribution/payment:

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction and lack of responsibility of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or debit transfer from a bank account.

So do the right thing and show all those whiners and complainers (including so-called "tax protesters") how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

For the record, the only real way out of the deficit is not to merely cut expenditures or raise taxes or some combination of the two, but through economic growth, which includes a healthy amount of immigration in addition to unemployed workers going back to work and young people entering the work force. Sure, we need to manage the federal budget more carefully as well, but the big focus has to be on achieving sustainable economic growth.

-- Jack Krupansky

ECRI Weekly Leading Index continues to recover modestly and annualized growth rate bounces further off low

Despite the weak unemployment insurance initial claims report these past two weeks, the Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) rose modestly for a third week in a row to a nine-week high. More significantly, the WLI annualized growth rate continued on its recently reversed course and rose modestly from its recent low of two weeks ago. Two weeks do not assure a durable trend, but this is at least not a worsening of the outlook.

The WLI is well below its peak in April, and modestly lower than the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI remains moderately below zero, but modestly higher than a week ago. At -9.8, it is now slightly above the -10.0 level that some pundits (but not ECRI) view as indicating a recession on the way, but ECRI does not concur. Actually, what ECRI says is that "if it turns down once again, that would signal heightened recession danger." That's an "if" and we're not currently headed in that direction. Still, it will take more than a couple of weeks to determine if the trend has indeed turned back up in a sustainable manner.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

T-bill rates

In case anybody was wondering, here are the latest T-bill interest rates as of today's weekly auction:

• 4-week (1-month): 0.147%
• 13-week (3-month): 0.152%
• 26-week (6-month): 0.193%

Rather skimpy, but better than many retail money market funds and bank accounts.

Meanwhile I am still getting 3.26% APY on my HCSB Rewards Checking account that I found using CheckingFinder.com. I am also getting 2.15% APY at SmartyPig.com.

The flip side of skimpy Treasury yields is that taxpayers are paying very low interest for all of the money that the government is borrowing.

-- Jack Krupansky

Soak the very, very rich

I think James Surowiecki has the right idea in his New Yorker piece entitled "Soak the Very, Very Rich." We should focus tax hikes a little more carefully so that it is the "very, very rich" who get "soaked". Leave the "small business owners" alone. To make the point more clearly, LeBron James and LeBron James's dentist shouldn't be paying the same tax rate.

-- Jack Krupansky

What is a ranging run?

I have been following the BP Gulf of Mexico "incident" carefully, reading their status on their web site a couple of times a day in addition to checking out the real-time video from their remotely operated vehicles (ROVs). Here's their latest status update:

The DDIII relief well is currently at 17909 ft and is preparing to drill ahead 30 ft followed by another ranging run. Intersection of the MC252 well annulus is expected towards the end of the week.

A lot of jargon in there, most of which makes sense, but what on earth is a "ranging run"? I tried Google and Wikipedia but came up empty. So, today I contacted BP's press office and here's what they told me:

We use electro magnetic sensors at the drill bit to seek out the existing well by following its steel casing, then drilling a bit more to edge towards the target. Very clever stuff, 18,000 ft from the nearest person.

What is really happening is that normally they drill and then line the hole with casing, but with a ranging run they drill a little and then run the drill bit through that new part of the hole again with the sensors to detect where the new part of the hole is with respect to the other well's steel casing that they are trying to intercept, then they line the new hole and then drill some more with their direction updated to reflect what the sensors told them about where the new well is relative to the existing well.

-- Jack Krupansky

ECRI Weekly Leading Index recovers modestly and annualized growth rate finally bounces off low

Despite the weak unemployment insurance initial claims report this week, the Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) rose modestly for a second week in a row. Maybe more significantly, the WLI annualized growth rate reversed course and rose modestly from its recent low of last week. One week does not assure a durable trend, but this is at least not a worsening of the outlook.

The WLI is well below its peak in April, and roughly at the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI remains moderately below zero, but modestly higher than a week ago. Some pundits view the growth rate (now -10.3%) as indicating a recession, but ECRI does not concur. It will take more than a couple of weeks to determine if the trend has indeed turned back up.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but with a couple of flat weeks now a moderation looks more likely, to me.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

ISM Manufacturing report shows slowing, but still growing

As widely expected, the ISM Manufacturing report showed that the manufacturing sector of the economy slowed a bit in July, but was still growing at a healthy pace. Production was still up. Orders were still up. Exports rose, and at a faster pace. Employment was not only still up, but growing at a faster pace.

In fact, ISM says that "The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually." Of course, the trajectory of the ISM index for the remainder of the year remains an open question.

ISM reports that 10 of the 18 manufacturing industries reported growth in July, with 4 of the 18 reporting contraction.

Prices increased and at a faster pace, suggesting that deflation is not taking root.

-- Jack Krupansky