Vital Signs: Economy Slides into Deeper Slump
On deck: pending home sales, federal budget, drive a trade balance, import prices, run of funds, vend in small quantities sales, producer price index, consumer sentiment
By James Cooper
Finally, the National Bureau of Economic Research (NBER) has declared the open: The U.S. economy is in a recession. Upcoming economic reports this week will offer more evidence of that, as if any were really needed. The official arbiters of peaks and troughs in the business cycle say the eleventh downturn since World War II began in December 2007.
However, investors are more interested in how severe the recession is, and when will it end. Recent reports inform the slump, which started along mild, is now backsliding into a much else methodical stage.
The control’s roundup of November retail sales and proemial data on December consumer sentiment, both due on Friday, will shed light adhering the biggest factor dragging into disfavor the economy: consumer spending. Weak October outlays state real spending on a passage to decline at about a 4% annual rate in the fourth quarter, about the third quarter’s 3.7% drop, and November outlays may be calm weaker. Already, data show November car sales fell to a 10.1 million occurring every year scold, a 25-year low and down from a paltry 10.6 the public October.
Business activity in both manufacturing and services continued to deteriorate in November, according to surveys by the Institute for Supply Management, and not just in the U.S. JP Morgan’session complex Purchasing Managers Index of global activity plunged in November, suggesting global GDP is contracting at a 2.7% annual rate this quarter. Thursday’s report on October foreign trade will be an important signpost for how badly U.S. exports will suffer amid the weakening global outlook.
Overall, manifold economists are still downgrading their U.S. growth forecasts, especially given the sharply worse terms in the labor markets. Given the NBER’s December 2007 start be dated and current expectations for the next few quarters, this recession direction very probable be the longest in 75 years. The recessions in 1973-75 and 1981-82, the longest since the Great Depression, each lasted 16 months and came with peak to trough declines in GDP of 3.1% and 2.6%, respectively. Current forecasts generally put the expected depth of the 2007-2009 recession in that ball park.
Despite the gloom, policy efforts will eventually stem the damage. By January, an expected package of fiscal stimulus worth some $500-$700 billion over two years will break the ice to add about 2 percentage points per year to economic vegetation. Equally important, the Federal Reserve is pouring billions of dollars into the fiscal markets. By all signs, the Fed is shifting toward a Japanese-style skill of quantitative easing, force it is pumping out more funds to the banking rule than needed to maintain it’s target interest rate. Plus, its drawing to make instantly purchases of mortgage debt from Fannie Mae (FNM), Freddie Mac (FRE), and the Federal Home Loan Banks has already sharply lowered mortgage rates and set done a wave of mortgage refinancing.
This is easily the most unique downturn in the postwar era, but the fall through is also set apart by the agency of the massive policy action aimed at reversing it. Those efforts are laying the foundation for at in the smallest degree a modest upturn in economic growth later nearest year. Right it being so that, though, that’sitting a calamitous sell to shell-shocked investors.
Here’sitting the weekly economic calendar, from Action Economics:
Top Economic Reports
Reports
Date
Time
For
Median Estimate
Last Period
Wholesale Trade Sales
Wednesday, Dec. 10
10:00 a.m.
October
-1.5%
-1.5%
Treasury Budget ($Billions)
Wednesday, Dec. 10
2:00 p.m.
November
-$185.0
-$237.2
Trade Balance ($Billions)
Thursday, Dec. 11
8:30 a.m.
October
-$52.7
-$56.5
Goods & Services Exports ($Billions)
Thursday, Dec. 11
8:30 a.m.
October
$154.0
$155.4
Goods & Services Imports ($Billions)
Thursday, Dec. 11
8:30 a.hotch-potch.
October
$205.5
$211.9
Export Price Index
Thursday, Dec. 11
8:30 a.m.
November
-1.3%
-1.9%
Import Price Index
Thursday, Dec. 11
8:30 a.m.
November
-4.5%
-4.7%
Retail Sales
Friday, Dec. 12
8:30 a.gallimaufry.
November
-1.2%
-2.8%
Retail Sales (Excluding Autos)
Friday, Dec. 12
8:30 a.m.
November
-1.2%
-2.2%
Producer Price Index
Friday, Dec. 12
8:30 a.m.
November
-1.6%
-2.8%
Producer Price Index (Excluding Food & Energy)
Friday, Dec. 12
8:30 a.m.
November
0.2%
0.4%
Business Inventories
Friday, Dec. 12
10:00 a.m.
October
-0.2%
-0.2%
Consumer Sentiment Index (Preliminary)
Friday, Dec. 12
9:55 a.m.
December
55.3
55.3
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