Looking Global

Bloomberg reported yesterday on a forecast from Joseph Carson, an economist with AllianceBernstein, who noted that the strong 5.7 percent GDP growth we saw last quarter was fueled in large part by exports, which accounted for 2.32 percentage points of that. Carson expects this state of affairs to continue, meaning that he sees annual growth in the 3.5 to 3.7 percent range, rather than the 2 percent that other economists have suggested.

Carson thinks one of the major drivers of our economy will be the growth seen in developing nations. The International Monetary Fund has predicted that emerging and developing nations will see their GDP expand by a robust 6 percent this year, while developing nations are expected to grow by just 2.1 percent.

If the U.S. can continue to feed off that kind of growth through exports, it makes our own landscape of half-finished subdivisions and half-empty strip malls that much less forbidding. UPS for instance, saw its international business increase by 11.8 percent in the fourth quarter of '09, even as its domestic business slipped by 1.9 percent. Perhaps it's time to look overseas for signs of recovery.

Credit Lines

The Credit Card Responsibility and Disclosure act was passed last spring, but some of its provisions were delayed in taking effect, so the full law didn't really take hold until a few weeks ago. This had the result of giving the banks extra time to squeeze whatever the could from their cardholders. A recent article in the Press of Atlantic City took a look at what's happened in the past 12 months to credit card holders, and it's not pretty.

A year ago, the average credit card rate was under 12 percent. Six months ago, it was at 12.1 percent. Now it's 14.4 percent, the highest it's been in five years, even as interest rates overall are the lowest in recent memory. The average for cardholders with inferior credit ratings is a whopping 21.1 percent, up from 14.3 percent six months ago.

Even so, less than half of all consumers say they're using cash more often these days. That may be a sign of the times, and of this treacherous economy that has left many people without a lot of cash on hand.

More than ever, the important thing is to stay apprised of your situation. If a credit card issuer raises your rates beyond what you think is fair, your best weapon is also the simplest: stop using it.

Weather Report

We mentioned yesterday that the Fed's Beige Book reported that retail conditions in both the New York and Philadelphia regions - which together cover New Jersey as well - suffered from the snowstorms we endured last month. Nevertheless, another report out now says that retail sales nationwide rose significantly in the month. Overall, sales were up by the largest amount since November 2007, before the recession began.

Of course, that doesn't account for the horrible spate of winter weather the East Coast endured (and to be fair, the weather was normal in most of the country). These things do tend to be seasonally adjusted - housing sales are expected to be slow in December but pick up once school lets out in the spring, for example - but they can't really be weather adjusted. If the people filing the Beige Book are to be believed, and retail sales in the Northeast really were hampered by the snowstorms, then February's strong sales numbers are even better than they appear.

February's jobs report is due out today, and a Bloomberg survey of economists expects the number to come in around 50,000 jobs lost, following 20,000 jobs lost in January. The severe weather may have played havoc with the employment situation a bit, though we have no way to gauge its effect. It may be hard to get a handle on what the "true" changes are for unemployment for another month or so.

Beige in Winter

The Fed released its quarterly Beige Book yesterday, detailing economic conditions in each of 12 national regions. New Jersey is cleaved down the middle between the New York and Philadelphia regions, so let's take a closer look at those two areas.

One key difference is that the Philadelphia (and South Jersey) report expects business lending to increase just slightly through the rest of the year, but in New York (and North Jersey), the outlook is even more pessimistic: there, "bankers report weakening in loan demand in all categories." Similarly, commercial real estate in the Philly area is expected to advance because of reduced rents, albeit without much new construction, while the New York area is described as "exceptionally weak." Car sales, for some reason, also looked stronger in the Philadelphia area.

The two areas track each other in some key ways: Both report that business conditions are improving, although very slowly. Retail sales were up in both regions. Then again, both regions also reported that economic activity slackened somewhat during the snowstorms of February; it seems that Adam Smith is sometimes no match for Mother Nature.

Watching Buffett

Warren Buffett released his annual shareholder letter last week, full of prescriptions for the American economy and the prediction that the housing market will recover in 2011. To continue our theme from yesterday, though, Buffett's actions are more significant than his words.

These are the Top Ten holdings in Berkshire Hathaway, Buffett's investment vehicle, as of the end of last year:

Coca-Cola

Wells Fargo

Burlington Northern

American Express

Proctor & Gamble

Kraft

Wal-Mart

Wesco Financial

ConocoPhillips

Johnson & Johnson

What's Buffett been buying? Iron Mountain, a document management company; Republic Services a waste-management company; Becton Dickinson, an insurer, and he's been adding to his positions in Wells Fargo and Wal-Mart. Berkshire Hathaway also finished its complete takeover of Burlington Northern.

What's he been selling? Among his top ten, Buffett has recently pared back positions in oil companies ConocoPhillips and Exxon Mobil, and in consumer-products giants Johnson & Johnson and Proctor & Gamble.

More Consumer Confusion

A new report released on Monday showed that consumer spending increased in January for the fourth consecutive month. The 0.5 percent increase was larger than both the December number (which had been 0.3 percent) and the consensus analyst estimate. With consumer spending making up a whopping 70 percent of our national economy, this is good news indeed.

It also makes it a bit more puzzling that last week's consumer confidence report, which we noted in passing, was such a downer. Part of the problem is that the confidence report's biggest falloff was in the area of expectations; people reported that they expect things to get worse - again- than they already are. Also, the confidence report covered February, and these more recent numbers are from January; it's possible that consumer confidence nosedived for some reason around the first of February.

In general, though, when you can choose between hard economic data and surveys of people's opinions, go with the facts. It's instructive to know the consumer mind-set, which is a key factor in why the economy behaves as it does. But you can always trust what people do more than what they say, especially in their economic behavior.

Staving Off Foreclosures

A year ago, our now ex-governor, Jon Corzine, announced the formation of the Foreclosure Mediation Program, which was designed to give homeowners in trouble a chance to sit down with their bankers, and perhaps hammer out a solution that would keep them in the home. With 60,000 properties across New Jersey already in foreclosure, this program was supposed to stem that tide a bit.

But after a year of the FMP, only 750 homeowners have had their loans modified by it. Another 2600 people have signed up for help, but even that's just a drop in the bucket. All the program ensures is that people have a chance to met with their mortgage-holders; there's no guarantee of modification, or even a procedure to move that process along.

Whatever the good intentions of this program, it doesn't look like it will do much to improve overall home values for New Jersey homeowners. We've seen a bit of positive movement on housing values here lately, but at this point, it's clear that market forces rather than government intervention are going to be the key.