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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

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Euro lending to households contracts for 28th month

Posted by WARREN MOSLER on 25th September 2014

Weak euro zone lending data underscores need for ECB stimulus

By Eva Taylor

Sept 25 (Reuters) — Lending to euro zone households and companies contracted for the 28th month in a row in August, though at a slower pace, putting a keener spotlight on European Central Bank efforts to get credit flowing again.

Euro zone banks, particularly in the crisis-stricken countries, have tightened up on lending as they adapt to tougher capital requirements and undergo health checks, while companies are holding back on investments, unsure of the future.

The euro zone economy ground to a halt in the second quarter and with inflation in what ECB President Mario Draghi has called the “danger zone” below 1 percent for almost a year now, the ECB saw the need to add new stimulus steps in June and September.

The ECB has now started to offer banks four-year loans at ultra-cheap rates and plans to buy asset-backed securities and covered bonds from October to lighten the weight on banks’ balance sheets and entice them to lend.

But economists in a Reuters poll are skeptical about whether the plan will work, saying bank lending to private euro zone businesses needed to grow at a 3-percent annual rate on a sustained basis to stir inflation.

August lending rates are nowhere near such levels.

In August, loans to the private sector continued to fall, down 1.5 percent from the same month a year earlier after a contraction of 1.6 percent in July, ECB data showed on Thursday. Private sector loans have not grown since April 2012.

“It remains questionable as to how much all the liquidity measures announced by the ECB will encourage banks to lift their lending,” IHS Global Insight economist Howard Archer said.

“…it is also questionable how much businesses’ demand for credit will pick up while the economic and political outlook looks so uncertain,” he said.


Draghi told Lithuanian business daily Verslo Zinios in an interview published on Thursday a continued weakness in credit growth was likely to curb the euro zone recovery.

Euro zone companies rely mainly on bank funding rather than capital markets, which is why it is so crucial to fix lingering problems in the sector.

For that purpose, the ECB is putting the bloc’s top banks through a thorough review of their balance sheets to weed out bad loans, update collateral valuations and adjust capital.

The picture varies across the euro zone. While lending to companies in Ireland fell at an annual rate of 11.8 percent in August – the fastest decline in three years – and 8.8 percent in Spain, it rose in Finland, Germany and France.

Euro zone M3 money supply – a more general measure of cash in the economy – grew at an annual pace of 2.0 percent in August, up from 1.8 percent in July.

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Chart from Pavlina Tcherneva

Posted by WARREN MOSLER on 25th September 2014

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Business Roundtable survey falls from 95.4 to 86.6

Posted by WARREN MOSLER on 22nd September 2014


Third quarter US growth outlook cloudy: Survey

Sept 6 (CNBC) — Corporate executives are scaling back plans for sales, capital spending and job creation this quarter, according to a the Business Roundtable (BRT) survey Tuesday, consistent with other indicators that have tempered growth expectations.

The group’s Economic Outlook Index—a snapshot of CEO expectations for the next six months of sales, capital spending and employment—fell to 86.4 from 95.4 in the second quarter of 2014, the association of top corporate CEOs said. The long-term average of the Index is 80.2.

The majority of the BRT’s members see plans for capital investment, hiring and revenues falling from the second quarter, with job plans declining the most. The 135 members who responded to the BRT’s survey expect 2014 gross domestic product of 2.4 percent, barely above last quarter’s 2.3 percent showing.

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Industrial production

Posted by WARREN MOSLER on 22nd September 2014

The chart looks true to the ‘down for the cold winter, followed by a bounce back, then back down’ narrative as previously discussed:

Industrial Production

Industrial production slipped 0.1 percent in August after a gain of 0.2 percent the month before. Analysts expected a 0.3 percent boost for the month. The decline may be deceiving on auto assemblies on retooling schedules.

Manufacturing production fell 0.4 percent after a 0.7 percent increase in July. Weakness was led by motor vehicles which dropped a monthly 7.6 percent. In contrast, motor vehicle sales have been healthy, indicating that this is just a retooling timing issue. Manufacturing excluding motor vehicles rose 0.1 percent after a matching rise in July.

For other industries, mining rebounded 0.5 percent after slipping 0.3 percent in July. Utilities made a partial comeback of 1.0 percent, following a drop of 2.7 percent the month before.

Capacity utilization eased to 78.8 percent from 79.1 percent in July.

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follow up on today’s releases

Posted by WARREN MOSLER on 12th September 2014

Consumer Sentiment up but stuck at historically low levels:

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The chart shows how, over time, technology allows inventories to be lower than otherwise. The latest ‘counter trend’ drift to somewhat higher inventories have been ‘inflating’ GDP- adding over 1.5% to GDP in Q2- and could indicate inventories are getting excessive:

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Retail Sales, Univ of MIch consumer sentiment

Posted by WARREN MOSLER on 12th September 2014

Seems 16 states had sales tax holidays in August that might have caused August sales to be up a bit and perhaps ‘borrow’ from September:

Tax Holidays

Note the area circled in orange shows a steady decline in the monthly growth rate, with a small uptick in August. We’ll see if that holds through September:

Retail Sales

The consumer sector appears to be stronger than indicated by employment data. The consumer is out spending. Retail sales jumped 0.6 percent in August after a rise of 0.3 percent the month before. Analysts projected 0.6 percent for August. The July upward revision was significant-previous estimate of zero.

Excluding autos, sales gained 0.3 percent in both August and July, matching expectations. Excluding both autos and gasoline sales were quite healthy, increasing 0.5 percent, following a rise of 0.3 percent in July. Expectations were for 0.4 percent.

By detail, not surprisingly, motor vehicles increased 1.5 percent. Next, building materials & garden equipment gained 1.4 percent-suggesting some improvement in housing. Food services & drinking places sales were up 0.6 percent, showing healthy improvement in discretionary spending. This is a good sign for the consumer sector.

Weakness was led by a 0.8 percent decline in gasoline sales. Also, general merchandise dipped 0.1 percent.

Overall, August retail sales were healthy and point to moderately strong third quarter GDP growth. Economic news has oscillated in recent months but consumer spending may be suggesting that the economy is stronger than suggested by labor market numbers.

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Wholesale Sales

Posted by WARREN MOSLER on 10th September 2014

This came out today and was up some from last month, and touted as a show of strength.

Nothing to write home about best I can see:

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Posted by WARREN MOSLER on 9th September 2014

Nothing happening here.

Note from the chart that it’s still near the lows of prior cycles.

From the National Federation of Independent Business (NFIB): NFIB SBET Sees Slight Bump in August

August’s Optimism Index rose 0.4 points to 96.1 making it the second highest reading since October, 2007. …

NFIB owners increased employment by an average of 0.02 workers per firm in August (seasonally adjusted), the eleventh positive month in a row but basically a “zero” net gain. emphasis added

Hiring plans decreased to 10.

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ADP, productivity, trade, PMI services, Toll Bros. report

Posted by WARREN MOSLER on 5th September 2014

Maybe some evidence the 1.2 million who lost benefits at year end and took menial jobs phenomenon has run its course, and H2 will show substantially lower employment growth than H1?

When it was going up it was ‘accelerating’, so now it must be ‘decelerating’, right?


Mark Zandi, chief economist of Moody’s Analytics, said, “Steady as she goes in the job market. Businesses continue to hire at a solid pace. Job gains are broad based across industries and company sizes. At the current pace of job growth the economy will return to full employment by the end of 2016.”

Productivity and unit labor cost also figure into employment.

Higher unit labor costs and lower productivity can be a sign sales are falling and headcount is too high:

The current account continues to modestly narrow as a % of GDP, which supports GDP some but not a lot.

Not withstanding that it represents a reduction in real terms of trade/standard of living, of course.

International Trade

The trade deficit in July shrank marginally to $40.5 billion from $40.8 billion in June,

Exports rose 0.9 percent in July after no change the month before. Imports gained 0.7 percent, following a 1.1 percent drop in June.

ISM Non-Mfg Index

The ISM’s non-manufacturing sample is reporting extending acceleration in composite activity with the index rising 0.9 points to 59.6 from an already very strong 58.7 in July. The August reading is near the top end of the Econoday consensus.

The gain is led by the business index which rose 2.6 points to 65.0 in a reading that indicates exceptionally strong output. Employment is also a big plus, up 1.1 points to 57.1. This gain may offset to a small degree this morning’s weakness in ADP’s estimate for Friday’s jobs report.

One reading is not so positive and that’s new orders. Though coming in at 63.8, the rate of growth is down 1.1 points from July’s 64.9. Other readings include a slowing for supplier deliveries which is in line with the general rise in activity. Pressures on input prices slowed 3.2 points to 57.7 which is moderate for this reading.

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And this housing report:

Lawler on Toll Brothers: Net Home Orders Down, Price Gains Slow; Some “Lessening” in Pricing Power

From housing economist Tom Lawler: Toll Brothers: Net Home Orders Down, Price Gains on Orders Slows; Some “Lessening” in Pricing Power but No “Need” to Increase Incentives Much — Yet

Toll Brothers, the self-described “nation’s leading builder of luxury homes,” reported that net home orders in the quarter ended July 31, 2014 totaled 1,324, down 5.8% from the comparable quarter of 2013. Net orders per community last quarter were down 15.9% from the comparable quarter of 2013. The company average net order price last quarter was $717,000, up 1.4% from a year ago. Toll’s sales cancellation rate, expressed as a % of gross orders, was 6.6% last quarter, up from 4.6% in the comparable quarter of 2013. Home deliveries last quarter totaled 1,364, up 36.8% from the comparable quarter of 2013, at an average sales price of $732,000, up 12.4% from a year ago. The company’s order backlog at the end of July was 4,204, up 5.1% from last July, at an average order price of $737,300, up 4.1% from a year ago. The company controlled 49,037 home sites at the end of July, up 3.9% from last July and up 25.1% from two years ago.

For its “traditional” home building business (i.e., ex city living), net home orders totaled 1,281 last quarter, down 5.0% from the comparable quarter of 2014, at an average net order price of $700,500, up 3.4% from a year ago.

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September govt rush to spend

Posted by WARREN MOSLER on 5th September 2014

I got this emailed to me. Makes sense.

Did US Macro Just Jump The Shark?

As in past years, this spike in activity is extrapolated by the smartest people in the room, leaving the reality to miss expectations for the rest of the year. A glance at the chart above might suggest, we just jumped the shark once more in US macro data for 2014…

* * *

As we concluded previously,

This begs the question: is the only reason why the economy tends to pick up momentum dramatically as the summer ends just a function of a surge in government spending permeating the broader economy as agencies scramble to spend all the money they have before the end of the September 30 Fiscal Year End (just so they get allocated the same or greater budget in the coming fiscal year), which subsequently plunges or is outright halted as the case may be right now?

If so, it would explain so much, and certainly why year after year, the US economy seems to pick up in the mid-to-late Q3 period, only to dramatically fade away in the coming months, as government spending goes from a waterfall to a trickle.

It would also put the government’s role in generating transitory periodic spikes in economic output under a microscope, especially since it is so clearly staggered to recur every September as one after another government agency spends like a drunken sailor. And if that is the case, how long until the BLS or some other agency (upon reopening of course) is taken to task to normalize not only for hedonic indicators and climate-related seasonal factors, but also for what is now clearly an annual aberration of economic output trends?

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Today’s factory order charts

Posted by WARREN MOSLER on 4th September 2014

This doesn’t look like much of a recovery?

The export game is getting tougher as well:

Tech not so hot either:

Here’s the report:

Skewed by Boeing orders at the Farnborough Airshow, factory orders surged 10.5 percent in July. Excluding transportation equipment, which includes both aircraft and vehicles, factory orders actually slipped, down 0.8 percent in the month.

But there are important positives in the report including a sharp 1.2 percent rise for shipments and a 1.4 percent rise for shipments of nondefense capital goods excluding aircraft. Unfilled orders show an unusually outsized gain of 5.4 percent while inventories, up only 0.1 percent, will need to be refilled. Another positive is an upward revision to June orders, now at a very strong 1.5 percent vs a prior reading of plus 1.1 percent.

Aircraft orders are the standout star of the July report and mustn’t be dismissed. These orders are long term but will eventually boost factory shipments and employment. Though orders outside aircraft were soft in July, the trend is still positive. Today’s report, together with yesterday’s exceptionally strong ISM report for August, point to third-quarter strength for the manufacturing sector.

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PMC donation information

Posted by WARREN MOSLER on 14th August 2014

I am now also emailing my posts directly to my PMC donors at the same time they are emailed for posting on this website.

If you wish to be on the list, please make a donation here.

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wealth gap slowing the economy

Posted by WARREN MOSLER on 5th August 2014

It’s always about unspent income.

S&P: Wealth gap is slowing US economic growth

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Posted by WARREN MOSLER on 27th July 2014

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Donation information and new home sales chart

Posted by WARREN MOSLER on 24th July 2014

Also, I’ll be in NYC Friday and Saturday if anyone wants to get together for anything, or play some tennis. Trying to stay fit on the road.

Going from there to the PMC for the annual 170 mile two day bike ride/benefit for Jimmy Fund/Dana Farber cancer research.

Click here to make donation to the PMC

Dana Farber Cancer Institute’s Website

This is the real thing- raises about $40 million.

ALL of your donated $ go to research, 0 to overheads

Dana Farber is the cutting edge of real progress that filters down to all the rest.

Please donate what you think being on this free list is worth to you.
(0 floor, so don’t ask…)

Starting to look like maybe the mortgage purchase applications is in line with home sales:

New Home Sales

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Consumer sentiment, expectations, and current conditions

Posted by WARREN MOSLER on 18th July 2014

This series continues to struggle to get to even the lows of prior cycles:


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Current conditions:

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Vehicle sales hit 17 million

Posted by WARREN MOSLER on 2nd July 2014

This is above expectations, a high for the year, and brings the 2014 average up to just over 16 million annual rate, making up for the winter slowdown.

Motor Vehicle Sales

In an early signal of strength for June economic data, vehicle sales rose 1.2 percent in June to a 17.0 million annual rate which is the strongest rate since way back in July 2006. Sales of both North American-made and foreign-made vehicles rose in the month with domestic cars and imported trucks showing special strength. Today’s data point to yet another strong gain for the motor vehicle component of the retail sales report which rose 1.4 percent in May.

U.S. Light Vehicle Sales increase to 16.9 million annual rate in June, Highest since July 2006

By Bill McBride

Based on an WardsAuto estimate, light vehicle sales were at a 16.9 million SAAR in June. That is up 7% from June 2013, and up 1% from the 16.7 million annual sales rate last month.

This was above the consensus forecast of 16.4 million SAAR (seasonally adjusted annual rate).

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Consumer spending, personal income, PCE prices

Posted by WARREN MOSLER on 26th June 2014

The Commerce Department said consumer spending increased 0.2 percent after being flat in April. Spending, which accounts for more than two-thirds of U.S. economic activity, had been forecast rising 0.4 percent after a previously reported 0.1 percent dip in April.

When adjusted for inflation, consumer spending fell for a second straight month, suggesting spending this quarter could struggle to regain momentum after growing at its slowest pace in nearly five years in the first quarter.

Spending in May was probably constrained by weak healthcare spending as outlays on services barely rose for a second month.

While reports ranging from employment to manufacturing and the services industries suggest the economy has rebounded after sinking in the January-March period, the consumer spending data indicated that growth would probably fall short of the 4.0 percent annual pace that some economists are expecting in the second quarter.

Personal Income and Outlays

From Calculated Risk

Real PCE — PCE adjusted to remove price changes — decreased 0.1 percent in May, compared with a decrease of 0.2 percent in April. … The price index for PCE increased 0.2 percent in May, the same increase as in April. The PCE price index, excluding food and energy, increased 0.2 percent in May, the same increase as in April. … The May price index for PCE increased 1.8 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.5 percent from May a year ago.

Note: Usually the two-month and mid-month methods can be used to estimate PCE growth for the quarter (using the first two months and mid-month of the quarter). However this isn’t very effective if there was an “event”, and in Q1 PCE was especially weak in January and February – and then surged in March.

Still, using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 2.3% annual rate in Q2 2014 (using the mid-month method, PCE was increasing less than 1.5%). Since the comparison to March will be difficult, it appears PCE growth will be below 2% in Q2 (another weak quarter).

Note the now familiar down into winter, up some, and then settling down again pattern:

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“It was 20 years ago today…”

Posted by WARREN MOSLER on 19th June 2014

Nelson Ledges Ohio victory 20 years ago- June 18, 1994, 3rd year of coming in 1st got my cars banned from further competition in this event.

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Humorous question from Italy

Posted by WARREN MOSLER on 17th June 2014

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