Is the economy finally turning a corner? American consumers seem to think so. The readings for the November consumer confidence index are the strongest we've seen in a long time, with the largest single-month gain since April 2003. As it generally does, Bloomberg News had surveyed economists before the release of the November figure, and not a single one of them predicted the jump would be as large as it turned out to be.
While it's dangerous to read too much into short-term prices swings, the solid early results from the Christmas shopping season combined with the strong consumer readings could be buoying some sectors of the stock market. Among the biggest gainers in the Dow yesterday were consumer bulwarks Home Depot, Wal-Mart and Coca-Cola. The S&P 500 posted its biggest one-day gain in over a month.
It's a good sign that all this is happening even before we get to December. December has historically been the best month for the stock market, which means that we have several indicators in place to end 2011 on a high note.
Wednesday, November 30, 2011
Tuesday, November 29, 2011
Debt Drops, but Not Spending
Whether it's through a new sense of discipline or merely because people are still afraid of ending up broke, consumer indebtedness continues to decline in America. The Federal Reserve released a study yesterday indicating that our collective debt fell by $60 billion in the quarter ended September 30. Mortgage debt was responsible for pretty much all of that, dropping by a total of $114 billion. Consumer indebtedness outside of mortgages or home-equity loans rose by 1.3 percent.
The downside of that falling debt is that it could drive consumer spending downward right along with it. But that doesn't seem to have been the case. In that third quarter, the Fed reports, consumer spending rose by 2.3 percent, the biggest gain we've seen so far in 2011.
And what of the brand-new holiday shopping season? So far, so good: retail sales for the Thanksgiving weekend were up 16 percent over last year. Shoppers spent an average of nearly $400 apiece.
The downside of that falling debt is that it could drive consumer spending downward right along with it. But that doesn't seem to have been the case. In that third quarter, the Fed reports, consumer spending rose by 2.3 percent, the biggest gain we've seen so far in 2011.
And what of the brand-new holiday shopping season? So far, so good: retail sales for the Thanksgiving weekend were up 16 percent over last year. Shoppers spent an average of nearly $400 apiece.
Monday, November 28, 2011
Corporate Profits Continue to Surge
Though there are still troubled spots for this economy, one sign that augurs well for our future is that corporate profits continue to grow to record levels. The federal government released its estimate of corporate profits for the third quarter last week, and reported them at an annual rate of $1.56 trillion. For the 12 months that ended in September, corporate profits increased by 11.4 percent.
That $1.56 trillion accounts for 10.3 percent of our entire gross domestic product, up slightly from 10.1 percent in the second quarter. That's an enormous share of our economy. Prior to last year, the biggest share of GDP ever taken up by corporate profits was in 1929, when they topped out at 8.98 percent. As recently as 2008, that figure was down below 7 percent.
Then, in 2010, corporate profits grew to a then-record of 9.56 percent. Their current level marks the first time ever that they have reached 10 percent of GDP. The next question will be to see what our companies intend to do with all those profits.
That $1.56 trillion accounts for 10.3 percent of our entire gross domestic product, up slightly from 10.1 percent in the second quarter. That's an enormous share of our economy. Prior to last year, the biggest share of GDP ever taken up by corporate profits was in 1929, when they topped out at 8.98 percent. As recently as 2008, that figure was down below 7 percent.
Then, in 2010, corporate profits grew to a then-record of 9.56 percent. Their current level marks the first time ever that they have reached 10 percent of GDP. The next question will be to see what our companies intend to do with all those profits.
Friday, November 25, 2011
Happy Black Friday
Going shopping today? The nation's retailers certainly hope you have the dedication - and extra spending money - of those hardy souls who pitched a tent in front of a Best Buy in Union and camped out all Thanksgiving Day in anticipation of the Black Friday sales. Today is the day that many feel will tell the tale for the success or failure of the all-important Christmas shopping season.
What should we expect? The National Retail Federation forecasts sales in November and December to be up 2.8 percent over last year, which would be a solid rise but well below the 5.2 percent annual gain we saw in 2010. The NRF expects 152 million people to hit stores this weekend, up 10.1 percent from last year, which means there will be more people shopping, but each of them will be buying less.
The real action this year may be happening online. The research firm comScore estimates that Americans could spend $37.6 billion on e-commerce this holiday season, which would be up 15 percent from last year. The 2010 increase in online sales was just 12 percent.
What should we expect? The National Retail Federation forecasts sales in November and December to be up 2.8 percent over last year, which would be a solid rise but well below the 5.2 percent annual gain we saw in 2010. The NRF expects 152 million people to hit stores this weekend, up 10.1 percent from last year, which means there will be more people shopping, but each of them will be buying less.
The real action this year may be happening online. The research firm comScore estimates that Americans could spend $37.6 billion on e-commerce this holiday season, which would be up 15 percent from last year. The 2010 increase in online sales was just 12 percent.
Thursday, November 24, 2011
Thoughts for Thanksgiving
“We often take for granted the very things that most deserve our gratitude.” ~ Cynthia Ozick
“You know that just before that first Thanksgiving dinner there was one wise, old Native American woman saying, “Don’t feed them. If you feed them, they’ll never leave.” ~ Dylan Brody
“Thanksgiving was never meant to be shut up in a single day.” ~ Robert Caspar Lintner
Wednesday, November 23, 2011
The Fed Gets Frustrated
The minutes from the Federal Reserve meeting earlier this month were released yesterday, and their disappointment with the direction of the economy was notable. Fed chairman Ben Bernanke called the pace of economic growth "frustratingly slow," and the Fed accordingly ratcheted down its forecasts for the coming year. It now sees GDP growing at 1.7 percent this year and 2.7 percent next year - and remember, it was making these predictions before the new came out that the official GDP rate for the third quarter was revised down from 2.5 percent to 2.0 percent.
The Fed also sees unemployment settling at 8.6 percent by the end of 2012. That means it expects little change over the next year, since the official rate is currently 9.0 percent.
There wasn't any action taken after the meeting, but the overall sense of pessimism makes it more likely that the Fed will take future steps, perhaps a third bout of quantitative easing. The Fed next meets on December 13, and we'll keep an eye on that date.
The Fed also sees unemployment settling at 8.6 percent by the end of 2012. That means it expects little change over the next year, since the official rate is currently 9.0 percent.
There wasn't any action taken after the meeting, but the overall sense of pessimism makes it more likely that the Fed will take future steps, perhaps a third bout of quantitative easing. The Fed next meets on December 13, and we'll keep an eye on that date.
Tuesday, November 22, 2011
Families Slowing Down
Everyone understands that the economic downturn has led to a decrease in family expenditures, but has it led to a decrease in families as well? According to the National Center for Health Statistics, American births fell to around 4 million last year, the lowest they've been in 11 years.
The Department of Agriculture estimates that it costs an average of $226,920 to raise a child to the age of 17. So it's no wonder people would put off having children till they feel a bit more financially secure. One ramification of this demographic slowdown, though, is that it's going to make a housing recovery all that much harder to come by. If people's families aren't growing, there's less incentive to buy a bigger house.
Other data bears out that hypothesis. The Census Bureau announced that the number of Americans who moved last year hit a historic low - the lowest the figure has been since they started tracking this number, back in 1948. Only 11.6 percent of all Americans found a new residence between 2010 and 2011. As recently as 1985, the number was nearly double that, at 20.2 percent.
The Department of Agriculture estimates that it costs an average of $226,920 to raise a child to the age of 17. So it's no wonder people would put off having children till they feel a bit more financially secure. One ramification of this demographic slowdown, though, is that it's going to make a housing recovery all that much harder to come by. If people's families aren't growing, there's less incentive to buy a bigger house.
Other data bears out that hypothesis. The Census Bureau announced that the number of Americans who moved last year hit a historic low - the lowest the figure has been since they started tracking this number, back in 1948. Only 11.6 percent of all Americans found a new residence between 2010 and 2011. As recently as 1985, the number was nearly double that, at 20.2 percent.
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