Recent data on durable goods orders is raising some concerns about economic stability. While the numbers don’t currently indicate an imminent recession, they are remarkably close to a threshold not seen since the U.S. experienced significant economic downturn in 2008.
UK slides back into recession
Reuters | April 25
According to new data released on Wednesday, the UK economy has entered its second recession since the financial crisis. The unexpected contraction of 0.2 percent in gross domestic product (GDP) during the first quarter of 2012 has taken many by surprise, particularly as forecasts had predicted a modest growth of 0.1 percent.
Concerns about oil scarcity persist, yet recent global production figures suggest that the specter of peak oil may not materialize imminently. Last December, global oil output reached a record high of 75.384 million barrels per day, surpassing the prior peak of 75.170 million barrels a day observed in January 2011, according to the U.S. Energy Information Administration (EIA).
I will be moderating a panel at IMN’s 3rd Annual World Series of ETFs & Investment Management conference, scheduled for May 7 at the Seaport World Trade Center in Boston. The discussion will focus on employing ETFs to manage downside risk.
In presidential elections, the two predominant influences are war and the business cycle. While other factors also play a role, navigating against these major trends makes victory challenging.
● Land of Promise: An Economic History of the United States
By Michael Lind
Review via History Book Club
In this election year, Americans face a distinct choice between two contrasting visions for the future. One emphasizes a minimal government role with a lightly-taxed populace, while the other advocates for a government that actively intervenes in economic and social matters to enhance public welfare. Michael Lind’s compelling economic history of the U.S. illustrates that these competing perspectives are deeply rooted in the nation’s foundation. Though both Jeffersonian and Hamiltonian views have shaped American policy for ages, the current landscape sees the Tea Party Republicans as true Jeffersonians, while Democrats often lean Hamiltonian. Lind’s enlightening narrative unravels these complexities, presenting American economic history as a series of evolving “republics,” each defined by unique economic dynamics and policies, leading to the rise of subsequent systems.
US Leading Economic Indicator Increases
Conference Board | Apr 19
In March, the Conference Board Leading Economic Index (LEI) for the U.S. experienced a 0.3 percent increase, reaching 95.7 (2004 = 100). This follows a 0.7 percent rise in February and a 0.2 percent increment in January. Economist Ataman Ozyildirim from The Conference Board noted that this marks the sixth consecutive month of growth in the LEI, suggesting a more optimistic outlook despite subdued consumer sentiment and slow manufacturing. Additionally, the LEI’s six-month growth rate continues to improve, with the Coincident Economic Index (CEI), reflecting current economic conditions, rising in five of the last six months across all components.
A week ago, I raised a question about whether the surge in jobless claims during the first week of the month was influenced by seasonal factors. As the discussion unfolds, today’s update adds complexity to the situation, with Easter’s seasonal effects being a possible contributor. In terms of the actual numbers, new jobless claims saw a slight decrease of 2,000, settling at a seasonally adjusted total of 386,000. It’s essential to place this figure in historical context, which is more critical now than usual given the current economic backdrop.
Last month, we examined the “new abnormal,” which suggests a firm linkage between market expectations for inflation and economic growth. A month later, this relationship appears unchanged, which is a positive sign. The correlation between implied inflation—measured by the yield gap on the 10-year Treasury and its inflation-indexed counterpart—and the S&P 500 index, which serves as an indicator of growth expectations, remains strong. Historical data indicates that falling inflation expectations often precede economic weakness, but there are currently no indications of such concern, suggesting that market participants are not anticipating significant new challenges beyond the usual economic fluctuations we’ve experienced.
Debate Grows as Europe Fears Return of a Crisis
New York Times | April 17
Recently, signs suggest that the European financial crisis may be resurfacing, intensifying the debate between austerity proponents and those calling for more expansive policies to spur growth. Even the traditionally stringent International Monetary Fund urged on Tuesday for stronger European nations to ease fiscal constraints by extending budget cuts. However, this message seems likely to go unheeded by Chancellor Angela Merkel, especially with state elections approaching next month, as her stance of resisting additional aid for struggling European economies remains popular among voters.
This collection of recent articles highlights various economic indicators and events that may influence future market conditions. While some data suggest challenges ahead, others present a more hopeful outlook. Keeping a close eye on these developments will be crucial for understanding the broader economic landscape moving forward.