April 11, 2008
February Existing-Home Sales Up, Prices Down
I guess by now the secret is out that the U.S. housing market is a little soft. The February report isn't going to change anybody's mind. The median sales price fell another 2% (actually 1.9%, but who's counting) to $195,900, 8.2% lower than a year ago. Prices fell in all 4 regions of the country. There were 2 positive signs; a slight increase in the number of transactions from 4.89 million to 5.03 million homes, and a reduction in the inventory of homes for sale from 4.16 million to 4.03 million homes. You can see the full report by clicking here, Existing Home Sales, February, 2008.
There are also signs that mortgage-backed securities are beginning to trade again. That's what we need to fix the problem. Don't hyperventilate yet but this report is OK, Dog.
JR
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April 10, 2008
Initial Unemployment Claims 357K, Down 53K from Last Week
Initial unemployment claims fell sharply this week, reversing out the big jump the week before. In the week ending April 5, initial claims were 357K, a decrease of 53K from the previous week's revised figure of 410K. The 4-week moving average was 378K, up slightly from the previous week's revised average of 376K. You can read the full report by clicking here, Unemployment Insurance Weekly Claims Report.
As I wrote out last week, the big jump the week before was caused by the impact of the American Axle strike, which forced a number of auto assembly plants to close, resulting in 42K layoffs. This week's number, 357K, is based on data collected a week after the layoffs, which gives us a clearer picture of the demand forces at work in manufacturing. The 4 week moving average of 378K is consistent with slow, positive GDP growth but not consistent with the negative GDP growth we would need to be a recession.
JR
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April 8, 2008
Dubai World launches Web site in Chinese
Interesting article in today's Khaleej Times, Dubai World launches Web site in Chinese. Investors from China and Gulf countries are getting acquainted because there is a real resource complementarity between the regions. And because both have been repelled by the U.S. authorities in recent attempts to invest their vast stocks of dollars. I think the U.S. has triggered the dollar selloff not by increasing the supply of dollars (the monetary base and bank reserves have each grown less than 2% in the last year), but by eroding the demand for dollar assets by showing investors that they will not be allowed to use the dollars to buy assets.
JR
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April 7, 2008
February Consumer Credit +2.4%
Consumer credit increased at an annual rate of 2.4% in February; revolving credit grew at a 5.9% rate, and nonrevolving credit was up 0.4%. You can read the full report by clicking here, FRB: G.19 Release--Consumer Credit--April 7, 2008.
Interest rates on new car loans at banks (7.27%) are down from their peak (7.92%) a year ago, but not nearly as much as the Fed funds rate. Auto finance company rates (5.37%) are substantially higher than they were as recently as December (4.33%). Credit card rates (11.40%) are down a full percent from a year ago (12.57%).
Apparently these guys did not get the memo about Fed ease and falling Fed funds rates. They did get the memo, however, about falling used car prices and rising credit card risk. tough time to have to borrow money.
This report is consistent with slow, positive growth. Reports of the death of the American consumer have been exaggerated.
JR
PS: This report of a +2.4% increase in February consumer credit was brought to you by the miracle of seasonal adjustment. The actual number ($2538.6 billion) is down a little from January ($2555.8 billion), just down less than the normal January-February drop. I am always skeptical of seasonally adjusted numbers. This one too.
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Egyptian Workers Riot Over Rising Food Prices
Government programs in the US and other countries to force consumers to use ethanol in place of gasoline have led to skyrocketing corn, grain, and meat prices around the world. (The irony--ethanol requires more fossil fuel than gasoline, is more expensive and produces more carbon emissions. Double irony--the US restricts ethanol imports from Brazil.) That's a problem here in the US but it is a disaster in poor countries where food purchases still take one-third of family income. This is producing political unrest in many places. Egypt is the latest victim.
Nearly 40 percent Egypt's 76 million people live below or near the poverty line of $2 a day. The prices of staples such as cooking oil and rice have nearly doubled in recent months, amid widespread shortages of government-subsidized bread.
Thousands of demonstrators angry about rising prices and stagnant salaries torched buildings, looted shops and hurled bricks at police who responded with tear gas Sunday in a northern industrial town as Egyptians staged a nationwide strike. You can read the full story here, Egyptian Workers Riot Over Rising Prices.
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April 6, 2008
Some Truth About Trade
Interesting editorial in the New York Times calling out presidential candidates for using protectionist rhetoric on the campaign trail. You can read the piece by clicking here Some Truth About Trade.
I don't like either party's approach to trade. Overall trade raises GDP and incomes, but it helps some people and hurts others, especially during the period when industries, companies and workers have to adjust to new patterns of production and work. We don't want it to go away. We couldn't make it go away anyway--it is the law of gravity. But we can do things to make the adjustments easier on people. I wold like to scrap all the rhetoric and see a reasoned discussion of how to best live in today's global economy. It's pretty clear to me that we want to get as much capital as possible to (voluntarily) locate in the U.S. And we want to help prepare people for the most productive work.
JR
There’s nothing like international trade to help bridge the nation’s ideological divide. As Barack Obama and Hillary Clinton travel the Rust Belt, the Democratic candidates seem to be eschewing the advice of their economic advisers and turning to Karl Rove’s playbook.
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April 4, 2008
March Employment Down 80,000
(April 4, 2008) - The BLS released The Employment Situation: March 2008 on Friday morning, announcing that the unemployment rate rose from 4.8% to 5.1% in March while non-farm payroll employment fell by 80K jobs. Payroll employment has declined by 232K over the past 3 months. Both average hourly earnings (+0.3%) and total hours worked (+0.2%) increased. The Household Survey showed a smaller job loss (22,000) in March.
The 80K job loss number was not a complete shock. The day before, we saw 407K initial unemployment claims--a big number. It is worth noting, however, that 51K of the jobs were lost in construction due to the housing crunch. And 42K jobs in March were lost as a result of the American Axle strike that shut down a number of auto plants.(The strike was on March 10; the initial claims number was for the week of March 12). Together, that accounts for -93K jobs in March.
Bottom line. Medium ugly but more consistent with modest positive growth than falling GDP. I still think we will see 1%-ish Q1 growth with a pickup after that.
JR
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March 2008 Non-Manufacturing Index (NMI) at 49.6%
(April 3, 2008) - The ISM released the March 2008 Non-Manufacturing ISM Report On Business last week, reporting that the Non-Manufacturing Index (NMI) increased 0.3 percentage point to 49.6 from 49.3 in February. Although both numbers indicate mild contraction (both are below 50) they are a welcome rebound from the scary 44.6 number reported in January. This confirms my suspicion that the January number was hit hard by the change in seasonal adjustment factors they made that month. The figures, taken together, show a flat economy, which would produce a growth number in the 1-1.5% range for the first quarter.
Non-manufacturing business activity increased for the second consecutive month. The New Orders Index increased 0.6 percentage point to 50.2%, and the Employment Index contracted for the third consecutive month, remaining at 46.9%. The Prices Index increased to 70.8% in March, indicating a faster rate in price increases than in February. According to the NMI, 11 non-manufacturing industries reported growth in March. Members' comments reflect concern about rising fuel and energy costs and the impact they are having on commodity prices.
JR
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Initial Claims Down 9,000 to 366,000
(April 3, 2008) - The Department of Labor released their Unemployment Insurance Weekly Claims Report, announcing that in the week ending March 29, the advance figure for seasonally adjusted initial claims was 407,000, an increase of 38,000 from the previous week's revised figure of 369,000. The 4-week moving average was 374,500, an increase of 15,750 from the previous week's revised average of 358,750.
Note that this report measures initial claims for the week of March 12. That number is inflated because the American Axle strike that shut down a number of auto plants took place on March 10. That makes the number not a reliable indicator of the strength of product demand.
The advance number for seasonally adjusted insured unemployment during the week ending March 22 was 2,937,000, an increase of 97,000 from the preceding week's revised level of 2,840,000. The 4-week moving average was 2,859,000, an increase of 32,250 from the preceding week's revised average of 2,826,750.
JR
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April 3, 2008
Russia Moves to Limit Foreign Investment
Protectionism is alive and well in Russia too, as you can see in this article Russia Moves to Limit Foreign Investment.
Last year I wrote a paper for the International Finance Forum Journal likening protectionism to the turbulence that is created when fluid flows more rapidly through a cylinder. It is the result of increased velocity in the presence of friction. In the case of protectionism, it is faster global growth and faster capital flows in a world where it is costly for people to change jobs and careers. It is a side-effect of faster growth--a good thing. But we must find a way to manage it by reducing frictions via education, job training and relocation assistance.
JR
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March 28, 2008
Fed Policy
JR
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India World's Second Largest Mobile Phone Market
(March 28, 2008) - This is important. India has crossed the 250 million mark with the addition of 8.53 million mobile phone subscribers in February. India will become the second largest wireless network in the world after China in the first half of April 2008. (Hint: That makes the U.S. #3.) Click here to read the full article in the Economic Times.
Future growth of income, productivity and jobs will depend on who has the best information and communications technology, because high-speed communications allows the economy to perform as a massive parallel-processing information network. Hats off to China and India for making R&D and investment in new networks a priority. Wouldn't hurt if the U.S. government were a positive force for investment here too.
JR
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Instructional Technology
We need to do more to use the fact that high-speed communications networks can distribute top quality educational materials at zero incremental cost. Here is an article that shows how it helps. College Students Score Higher In Classes That Incorporate Instructional Technology Than In Traditional Classes
JR
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Bank Loans Still OK
(March 28, 2008) - I have written lately that the reason the banking crisis has not killed GDP and jobs--at least not yet--is that the infarction has not spread to business lending. More than 50% of GDP is produced by small, private companies that have no access to the public markets. They get the working capital they use to buy raw materials, make payroll and tread water until their customers pay from banks and private equity firms. As you can see in the latest data in the chart below, so far so good. Bank Commercial and Industrial Loans
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March 27, 2008
Initial Claims Down 9,000 to 366,000
(March 27, 2008) - Like Randy says on American Idol, this number is just OK for me, Dog. Just not a memorable number. The Department of Labor reported in its Initial Claims Report, announcing that in the week ending March 22, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 9,000 from the previous week's revised figure of 375,000. The 4-week moving average was 358,000, an increase of 1,750 from the previous week's revised average of 356,250.
This week's number is further support for the view that we are stuck in a range of low but positive growth. Bet this goes on for a while.
JR
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How to smite Smoot
(March, 28, 2008) - Here is a great article in the current issue of the Economist that gives measures of the amount of GDP at stake in today's battles over global trade and immigration. The numbers are huge! Worth thinking about. Click here to read the full article.
JR
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March 26, 2008
Rice Prices Forcing Cuts in Refugee Aid
(March 26, 2008) - The law of unintended consequences strikes again. The U.S. mandated ethanol requirements have forced a huge spike in corn, grain and meat prices; they have done tremendous damage to the poorest people in the world. Read the latest example here, Rice Prices Forcing Cuts in Refugee Aid.
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Advance Report On Manufacturers' Shipments (-2.8%), Inventories (+0.5%), and Orders (-1.7%)
(March 26, 2008) - Another ugly one. The Census Bureau released their Advance Report On Manufacturers' Shipments, Inventories, and Orders this morning, announcing that new orders for manufactured durable goods in February decreased $3.6 billion or 1.7% to $210.6 billion. This was the second consecutive monthly decrease and followed a 4.7% January decrease.
Posted by John Rutledge at 9:22 PM
U.S. Chamber Report - Strengthening U.S. Capital Markets
(March 26, 2008) - Here is the link to the U.S. Chamber of Commerce report on Strengthening U.S. Capital Markets that I wrote about earlier today.
Equity Raised in U.S. and Non-U.S. Public Markets
And this is the chart from the report that we need to put on the back of milk cartons. the chart speaks for itself. Read this report. It's important.
JR
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Jim Dorn on Sovereign Wealth Paranoia
(March 26, 2008) - Jim Dorn and I were in graduate school together at the University of Virginia. In addition to being a great guy, he is China specialist at the Cato Institute. Jim's article in the South China Morning Post on Sovereign Wealth Paranoia is a good antidote to the things we read in the press. Enjoy.
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Cardiac Plasticity
(March 26, 2008) - An article in the current issue of the New England Journal of Medicine titled Cardiac Plasticity is worth thinking about. The concept of plasticity--especially neural plasticity--plays an important role in recent microbiology research. I think there are important applications in economics, finance, and policy that may help us to avoid, or mitigate, future conflicts among cultures and nations.
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U.S. markets seen losing ground to global competitors
(March 26, 2008) - This is a big problem. The world's companies are increasingly avoiding the US and raising capital in other markets. Today the U.S. Chamber of Commerce's held their second annual capital markets conference to examine the issue. You can read about it by clicking here.
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Parental Controls & Online Child Protection
(March 26, 2008) - My friend Adam Thierer at the Progress and Freedom Institute has just released a new report on Parental Controls & Online Child Protection Report. It is a great review of the market for parental control tools, rating schemes, education efforts, and initiatives aimed at promoting online child safety. You can read the full report by clicking here.
JR
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March 25, 2008
Goldman sees $1.2 trillion global credit loss
(March 25, 2008) - Okay, here's a big number for you. A new number from Goldman Sachs forecasts that global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses. Click here to read the report, Goldman sees $1.2 trillion global credit loss.
That's real money, even in Washington.
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February Used Car Prices - My Favorite Measure of Pressure on Consumer Balance Sheets
(March 25, 2008) - I love the Manheim Index. Manheim runs used car auctions all over the place and collects the actual sales prices of 5 million used car transactions every year. (Way better than any government agency collects data.) They report the index about the 5th business day of every month. It is absolutely, hands down, the single best measure of household balance street pressure and liquidity I have ever seen.
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Case-Shiller Home Price Indices
(March 25, 2008) - The new Case-Shiller home price numbers are out today showing that home prices in January were still dropping like, uh, something real heavy . They are so bad that I had to ask my daughter what to call them. She says uber-butt-ugly is the appropriate term. You can read the full report by clicking here, Case-Shiller Home Price Indices. The Case-Shiller numbers are the best source of price information because they work hard to deal with the price/mix problem by actually matching consecutive sales for specific properties.
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Rich Karlgaard on Korea
(March 25, 2008) - My friend Rich Karlgaard at Forbes--a staunch defender of freedom and growth and a very nice man to boot--wrote about Korea's new President is taking to energize small businesses. You can read Rich's blog entry by clicking here, Forbes.com: Digital Rules By Rich Karlgaard.
Rich and I normally appear together on the Forbes on Fox show, which airs Saturday mornings. I missed last week's show and will miss the next one. Am home after a minor surgery to get 2 basal cell skin cancers removed. (Thank you Maui sunshine. Be smarter than me. Wear your sun screen!) Bandages off now; down to 2 bandaids. (Today it is Mickey Mouse.) Will be back on the air in a week. Be there or be square.
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March 24, 2008
That's What I'm Talking About - Banks allowed to lift MBS holdings
(March 24, 2008) - Today a good thing happened. To help thaw the frozen mortgage markets, the Federal Housing Finance Board will allow regional U.S. banks in the Federal Home Loan Bank system to increase their holdings of agency MBS--mortgage-backed securities issued by Fannie Mae and Freddie Mac--by $150 billion for a period of two years. This roughly doubles the $150 billion of mortgage-backed securities that banks can already buy under existing rules. This should improve liquidity in the $4.5 trillion market for agency MBS that is the ultimate home for the bulk of mortgages. You can read the full story by clicking here.
As I am sure you have noticed, I have been whining about the stimulus package since it was first announced. The package is old-religion fiscal stimulus, straight out of the textbooks. It is designed to fix a problem that we don’t have--people who won’t spend their money. The textbook remedy is to give them some more money to spend. This time it’s $600. Problem is, it never works.
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February Existing Home Sales +2.9% but Prices Still Falling
(March 24, 2008) - The NAR released the February Existing Home Sales report this morning, showing that sales of existing homes increased 2.9% to a seasonally adjusted annual rate of 5.03 million units in February, but remain 23.8% below the 6.60 million-units one year ago.
Home prices fell again in February. The median existing-home price was $195,000 in February, down 2.0% from January and 8.2% from the February 2007 figure of $213,500. Over the year, prices fell most in the West (13.4%), by 8.6% in the South and 7.1% in the Midwest. Prices rose by 0.4% in the Northeast. In the coming months, however, I believe the eye of the hurricane will shift to the Northeast where investment banks, commercial banks and other financial firms will be busy reducing headcount. Less heads, smaller bonuses, fewer starter mansions, lower home prices--do the math.
(click tables to enlarge in a separate window)
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Hey, I Knew That - Coffee Keeps Your Brain Happy
(March 24, 2008) - An interesting article in the current issue of the journal Neuroscience shows that if you want to keep your mouse happy, you have to give him coffee all the time. Read the abstract here: Neuroscience : Chronic but not acute treatment with caffeine attenuates traumatic brain injury in the mouse cortical impact model
I show you this article only half in jest. I am convinced that cognitive science has more to offer than any other field over the next 20 years. I am especially interested in the way brains encode repeated doses of fear and how that plays into conflict. If you want a sneak preview read Wexler's Brain and Culture.
JR
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March 22, 2008
The Secret to Happiness? Giving.
(March 22, 2008) - Here's a great article to read on Easter weekend. The Secret to Happiness? Giving. It reports a recent study by social psychologist Elizabeth Dunn of the University of British Columbia showing that people who donate their dollars to charities or splurge on gifts for others are more content than those who squander all the dough on themselves.
The real question is why this is such a hard lesson for all of us to learn--and remember. I know it's true for myself. When people ask what I did last year that gave me the most joy, the answer is easy. 1) Being with my daughter Manda the day she had her first child and meeting granddaughter, Isabela for the first time, and 2) helping a group of student build a library in a school for disabled orphans in Llasa, Tibet. (I will write more on both later.) Good days in the market and fancy dinners don't seem to hold their value.
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IMF to boost transparency of sovereign wealth funds
In China, the Xinhua News Agency reported today on the work the IMF is doing to establish a best practice blueprint for sovereign wealth funds. Currently 36 countries or regions have SWFs, with assets worth some 2.5 trillion U.S. dollars. You can read the full article by clicking here.
JR
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March 21, 2008
This is a good thing - Abu Dhabi US sovereign fund accord
(March 21, 2008) - Transparency is a good thing. Arabianbusiness.com reported today that Abu Dhabi signs landmark US sovereign fund accord.
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Goldman, Lehman outlooks cut to negative by S&P
(March 21, 2008) - Here's a wild idea. Why don't we come up new ratings agencies that actually tell you whether the company will be able to pay its debts in the future instead of the past? Read this article for an example of what I mean.
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This is Cool! Reverse Genetic Problems Before They Happen.
(March 21, 2008) - There is a cool article in today's ScienceDaily reporting a successful attempt to prevent Menkes Disease by reversing a genetic defect before birth. You can read the full article by clicking here, Deadly Genetic Disease Prevented Before Birth In Zebrafish.
JR
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Investment Firms Tap Fed for Billions
(March 21, 2008) - On Monday I wrote about the Achilles heel of the Fed's new loan facilities. Every dollar they lend to troubled banks through the new facilities sucks one dollar of existing reserves out of healthy banks through offsetting open market operations. Total reserves do not go up at all. Reserves in the hands of healthy institutions actually decline.
Declining reserves at healthy institutions is a problem because it will force them to either call in existing loans or tighten non-price lending standards. Either way it runs the risk of shrinking the availability of the business loans that comprise the working capital for the private companies that make up all job growth. Translation, local and regional banks and their business customers shrink.
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Shocking Story - South Korea Lifts Tariffs to Fight Inflation
(March 20, 2008) - In a shocking move today, the South Korean government broke step with almost every other government in the world, including ours, and decided to move away from protectionism by reducing tariffs. You can read the story by clicking here.
Starting April 1, President Lee Myung-bak's government will reduce import tariffs on about 70 grains and raw materials, including wheat, corn, soybean cake and coffee cream, while cutting tariffs on 18 other items.
When asked about the move, Senator Schumer responded, "It's sad, really. These guys obviously don't understand how the political game is played."
In separate news, Korea today reported its GDP increased 5% in the last year.
JR
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March 20, 2008
Initial Claims +22,000
(March 20, 2008) - This week's initial unemployment claims number is about as exciting as kissing your sister. (Well, maybe except for Angelina Jolie's brother--those lips are huge!) Initial claims numbers bobbing around in this range tell us what we already know. The economy is in the hardly growing but not shrinking range it has been in for some time. It will take a jolt to move it out of the range--one way or the other.
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March 18, 2008
February PPI +0.3%, 6.4% over last year
(March 18, 2008) - This morning the Bureau of Labor Statistics released Producer Price Indexes – February 2008 report. The February number was better than last month, but the 12 month number is still huge.
The Producer Price Index for Finished Goods rose 0.3% in February, seasonally adjusted, following a 1.0% advance in January and a 0.3% decline in December. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.8% in February subsequent to a 1.4% advance in January, and the crude goods index rose 3.7% after climbing 2.5% in the prior month.
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Fed's FOMC Press Release
(March 18, 2008) - The Federal Open Market Committee released the FOMC Press Release today, cutting the Fed funds and discount rates by 0.75%, a little less than the full point many expected in the wake of last weekend's Hail Mary events.
As I have written recently, I believe the Fed's recent moves are inadequate to restore order to the financial markets. They are trying to be clever by targeting (micromanaging?) exactly who has access to the available stock of reserves, rather than increasing the amount generally available.
This problem is not going to be solved by squeezing on a balloon.
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March 17, 2008
The Fed Giveth, and The Fed Taketh Away
(March 17, 2008) - The Fed almost got it right.
I have been whining for some time about the need to use asset market policies, rather than giving people checks so they can buy another iPod, to fix the current blackout in the credit markets. Friday's run on the bank at Bear Stearns has apparently gotten somebody's attention.
The Fed cannot ease the credit crisis until they increase the Monetary Base and grow bank reserves. It's as simple as that. They must stop giving with one hand and taking away with the other. Until they do, we are doomed to more crises and more alphabet soup rescue measures.
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Q4 Current-Account Deficit Down to $172.9 billion
(March 17, 2008) - This morning, the BEA released U.S. International Transactions: Fourth Quarter and Year 2007 Current Account , reporting that the U.S. current-account deficit decreased to $172.9 billion in Q4/07 from $177.4 billion in Q3/07. The decrease was more than accounted for by increases in the surpluses on income and on services.
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February Industrial Production Down 0.5%; Capacity Utilization Decreases to 80.9%
(March 17, 2008) - The Federal Reserve Board released the Industrial Production and Capacity Utilization report for February this morning. Industrial production fell 0.5% in February after having increased 0.1% in January. Although almost 3/4 of the of the February decrease resulted from a weather-related 3.7% drop in output of utilities, the report was not good news.
Today's crisis is not a GDP event, i.e., not the result of a slowdown of spending, building inventories, and production cutbacks and layoffs like the textbooks say. This time it is almost entirely a balance sheet, or capital market event.
Some people, who only see my TV spots, have the wrong impression of my current view of the economy. The spots are usually set up so some person says there is a terrible recession, then I say no there's not a recession--end of spot. What I really want to say is that this is something different, and far more serious, than a recession. It is the total collapse of the information networks we call the capital markets.
The reason that's so important is because different tools are required to fix a GDP problem than those to address an asset market collapse. Anti-recession policies, like the ones now being implemented by policy makers ($600 checks, etc.) will do no good at all. We need balance sheet fixes for today's problem.
Balance sheet sheet fixes must be designed to repair the balance sheet problem--the inability of investors to understand, project, and trust the future cash flow streams embodied in securities. I will write more later about just what that means.
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March 16, 2008
Protectionism and the Phillipine Class War
(March 16, 2008) - An op-ed in today's Manila Times (OK, so I read unusual newspapers) talks about the link between protectionism and poverty in the Phillipines. Click here to read the full article, Poverty in the middle of plenty.
Americans may notice similarities between the themes of the article and those of our current Presidential campaign. Note especially, the role of protectionism in keeping poor people poor and its counterpoint, the existence of prosperous globalized enclave economies in the midst of falling real incomes for low-skilled, low-income families. It is this dual economy, the author argues, that is responsible for the class war that has paralyzed the Philippine society. Like Disraeli’s England of the 1850s, Filipinos still are divided into two nations, “between whom there is no intercourse and no sympathy.”
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Posted by John Rutledge at 4:04 PM | Comments (5) | TrackBack (0)
March 15, 2008
Vietnam to launch satellite to improve telecommunications
(Mar 13, 2008) - Here's a jaw-dropper. Telecomasia.net reports that Vietnam has decided it needs to launch its own satellite to make sure that its communications infrastructure is up to the demands of today's global economy. You can click here to read the full article.
Vinasat No. 1 is scheduled to be launched April 12 from South America, and will be ready for use in May. The $200-million satellite will make internet and television accessible nationwide.
"Vietnam has reached the point where significant improvements of the telecommunication infrastructure are needed for its economic and social development," said a Vietnamese telecom official. Better telecommunications would bring more investment into the country. Vietnam's economy has grown at an average annual rate of more than 7% for the last 10 years. It has 19 million internet users, and more than 40 million telephones.
That means Vietnam has joined the club of developing nations, including China, India, and Brazil that has figured out that high-speed telecommunications networks, information technology and technical education are the best strategy for providing the rising productivity, jobs and living standards for their people without ruining the air and water and fighting over oil.
Competing for capital. Competing for technology. Competing for scientists, engineers and entrepreneurs. That's the policy game of the future. All three are in danger in the current US election.
JR
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January Business Inventories +0.8%; Sales +1.5%
(March 13, 2008) - The Census Bureau released their Manufacturing and Trade Inventories and Sales: January 2008 report, announcing that seasonally adjusted business inventories rose 0.8% in January 2008, to $1,457.9 billion, an increase of 4.8% from January 2007. Sales increased 1.5% to $1,163.5 billion from December, an increase of 8.6% year-over-year. The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.25, down from 1.30 a year earlier.
January sales went up for manufacturers (1.1%), wholesalers (2.7%), retailers (0.5%) and total business (1.5%). Inventories rose more slowly than sales. But remember that all are seasonally adjusted numbers, which can be dramatically different than unadjusted numbers. Unadjusted total sales in January, for example, fell by 7.2% but seasonally adjusted total sales increased 1.5%. For retailers, the difference is more striking; unadjusted -20.5%, adjusted +0.5%. I'm not saying the seasonal adjustments are wrong, just that they are big and, at a time of a major event in the economy, could be misleading.
But all in all it was a pretty good report showing that excess inventories are not a big issue. That's why I keep telling people this is not a textbook recession, where consumers buy less stuff, inventories of stuff pile up on retailers shelves, wholesalers warehouses and manufacturers shipping docks, and factories lay off their workers because they have more stuff than they need. Our problems today stem from a blockage in the capital markets. Textbook recession policies won't fix it. We need capital market-specific fixes for this one.
JR
Posted by John Rutledge at 6:25 PM | Comments (0) | TrackBack (0)
February CPI +0.3%
(March 14, 2008) - The BLS released the Consumer Price Index: February 2008 report this morning, showing the CPI-U (All Urban Consumers) increased 0.3% in February, before seasonal adjustment, and 4.0% year-over-year. The CPI-W (Urban Wage Earners and Clerical Workers) increased 0.2% in February before seasonal adjustment, 4.4% higher than a year earlier.
On a seasonally adjusted basis, the CPI-U was virtually unchanged in February, following a 0.4% rise in January. Each of the three groups--food, energy, and all items less food and energy--slowed. The index for food at home, which rose 0.9% in January, increased 0.3%. The index for energy turned down in February as a 1.9% decline in the index for energy commodities more than offset a 1.7% increase in the index for energy services. The index for all items less food and energy was virtually unchanged after increasing 0.3% in January.
Don't get too comfortable with these low numbers. Oil prices in March have gone through the roof. The March report will not be so good.
One final thought. More than half of the basket of goods used to measure the CPI consist of services. Services do not perform well as a store of value. That means the CPI is not a useful measure of inflation when thinking about the impact of inflation on interest rates. For that purpose we need to focus on the prices of storable real assets with low physical depreciation rates--existing stocks of commodities homes and land.
JR
Posted by John Rutledge at 3:41 PM | Comments (0) | TrackBack (0)
February U.S. Import Prices +0.2%; Exports +0.9%
(March 13, 2008) - The Department of Labor announced this morning that the U.S. Import Price Index advanced 0.2% in February, as a 0.6% increase in nonpetroleum prices more than offset a 1.5% downturn in petroleum prices. Prices for U.S. exports rose 0.9% in February after increasing 1.2% the previous month.
The reason for the relatively benign number is the 1.5% decline in oil import prices for the month. All other imports increased 0.6% for the month. Rest assured that we will see a big number in March, driven by $110 oil prices.
The other noteworthy figure is the 4.4% increase in farm export prices. This is driven both by the increase in oil prices--through fertilizer costs--and the impact of mandatory ethanol use on corn, grain, and meat prices. As Walter Williams points out in a recent townhall.com article, it takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That's enough corn to feed one person for a year. Plus, it takes more than one gallon of fossil fuel -- oil and natural gas -- to produce one gallon of ethanol. After all, corn must be grown, fertilized, harvested and trucked to ethanol producers -- all of which are fuel-using activities. And, it takes 1,700 gallons of water to produce one gallon of ethanol.
JR
Posted by John Rutledge at 3:11 PM | Comments (0) | TrackBack (0)
China's Trade Surplus Plunges 63 Percent
China's February Trade Surplus plunged 63 Percent to $8.6 billion, down from $23.7 billion in February 2007, according to customs agency data.
It was the smallest monthly surplus since March 2007, but that month's $6.9 billion gap was considered abnormally low in a fluke caused by changes in export-tax policy. It has been two years since China regularly posted monthly trade surpluses under $15 billion.
China's imports in February surged 35 percent to $78.8 billion from the year-earlier period, according to the customs agency.
Exports grew by 6.5 percent to $87.4 billion - a much slower rate than January's 26 percent. That could spur worries that slowing U.S. demand will hurt Chinese exporters and could wipe out thousands of jobs.
Chinese leaders say they are not actively pursuing a large trade surplus. The communist government is prodding China's consumers to spend more in hopes of reducing reliance on exports and industrial investment to drive growth.
February's monthly trade gap with the United States, China's No. 2 trading partner, shrank 23 percent to $9.4 billion compared with the same month in 2007, the customs agency said.
China's exports to the United States fell 5 percent in February to $16.4 billion, while imports of American goods jumped 33 percent to $6.1 billion.
The surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 15 percent to $10 billion, data showed. Chinese and EU officials are due to meet in April in Beijing to launch a regular high-level dialogue aimed at defusing trade tensions. China holds similar twice-year meetings with the United States.
The U.S., EU and other trading partners are pressing Beijing to ease controls that they say keep its currency, the yuan, undervalued and give Chinese exporters an unfair price advantage.
Premier Wen Ji