Post-war collapse theme intact:
Falling back to the pre-Covid war trend line:
We’re back burning fuel with abandon:
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Retail sales, homebuilder sentiment, housing starts
Not growing when adjusted for inflation:
Down but still high vs historical data:
Trend still intact:
Trend still intact:
Consumer sentiment, NY manufacturing, oil prices
2008 type of collapse:
Lowest ever:
Saudi OSPs are still at premiums to fair market value, and the price trend is still up. If it keeps going all heck breaks loose:
The President threw the strategic petroleum reserve at it, and lots of other nations did the same, to no avail. And the calendar spreads in the futures market is indicating absolute spot shortages:
Small business optimism index, record budget surplus, commodities
Not good:
This is the automatic fiscal stabilizers doing their thing to slow things down during a recovery, and they keep increasing the pressure until growth goes negative. Additionally, with some $30 trillion of public debt, an 8% increase in prices means the value of the public debt- the net money supply in the economy- has contracted by about $2.4 trillion. This is a direct ‘removal of savings’ and functions the same as a tax on savings, thereby slowing the economy. It is reflected in the debt/GDP ratio which is falling rapidly.
This is how a typical post war slump develops- high wartime deficit spending followed by a reduction in deficit spending.
The US posted a budget surplus of USD 308 billion in April of 2022, the highest on record, switching from a USD 226 billion gap in the same period last year and above market expectations of a USD 226 billion surplus. April has traditionally been a budget surplus month due to the traditional April 15 tax filing deadline, except in 2009, 2010 and 2011 after a financial crisis, and in 2020 and 2021 due to the Covid-19 pandemic. Receipts jumped 97 percent to an all-time high of USD 864 billion, underpinned by tax receipts on the back of a strong economic recovery. At the same time, outlays slumped 16 percent to USD 555 billion, reflecting lower spending for COVID-19 relief. For the first seven months of the 2022 fiscal year, the US federal deficit was at USD 360 billion, a 81 percent decline from the same period of fiscal 2021. source: Financial Management Service, US Treasury Monthly Treasury Statement
State and local governments are also getting flooded with tax payments:
Here’s the culprit:
Hopefully they level off, but if energy takes another run up the inflation numbers won’t turn down:
CPI
My take is we’ve had a one time upward adjustment in prices due to increased costs from Covid-related supply issues, along with supply side disruptions from the Trump/Biden tariffs.
Prices seem to have begun to level off and go sideways, which would mean CPI increases returning to the lower, pre-Covid monthly increases:
However, if energy costs don’t level off and instead rise dramatically, CPI will be dragged upward as well:
Personal income and spending
This series keeps drifting lower as personal income isn’t keeping up with price increases:
And the economy itself isn’t growing real personal income the way it did pre-covid:
Likewise, personal consumption is sluggish:
People are saving less and less every month:
GDP, jobless claims
Typical post war recession type of outcome, as previously discussed:
One reason for the low unemployment in the US is that for a lot of people you need a job to get health insurance:
https://tradingeconomics.com/united-states/jobless-claims
Reported inflation will fall rapidly unless energy prices increase from current levels,
which is likely given current Saudi OSP’s and EU responses to the war:
Mtg purchase apps, housing starts and permits, Saudi pricing vs benchmarks, oil inventories
Covid dip, recovery, and now a decline:
Covid dip, recovery, and now sideways at levels of some 25 years ago when there were a lot fewer people:
Through June,
Saudis caused the big dip and recovery, then attempted to stabilize.
The most recent Reuters report suggested price increases vs benchmarks,
which is a move to firm prices over time:
Employment by wage level, claims, durable goods, pending home sales, steel prices
Claims continue to drift lower but are still about double what they were pre covid:
Continued claims are also about double pre covid levels:
Fell back some and still below pre covid highs.
This chart is not adjusted for inflation:
Same pattern of recent weakness:
Pending home sales in the US surged 51.7 percent year-on-year in April of 2021, the biggest increase ever amid a low base effect from last year when sales sank at a record pace because of the pandemic. All four US regions recorded year-over-year increases. On a monthly basis however, pending home sales dropped 4.4 percent, compared to forecasts of a 0.8 percent rise, with only the Midwest witnessing month-over-month gains. “Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes,” said Lawrence Yun, NAR’s chief economist. “The upper-end market is still moving sharply as inventory is more plentiful there”. Yun anticipates housing supply to improve as a whole as soon as autumn. He points to an increase in the comfortability of those listing, as well as a rise in sellers after the conclusion of the eviction moratorium or as they exit forbearance. source: National Association of Realtors
