Author Topic: The Great American Reopening , , , or not?  (Read 4389 times)

Crafty_Dog

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Wesbury
« Reply #50 on: August 05, 2020, 09:14:03 PM »
The ISM Non-Manufacturing Index Rose to 58.1 in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/5/2020

The ISM Non-Manufacturing index rose to 58.1 in July, easily beating the consensus expected 55.0. (Levels above 50 signal expansion; levels below signal contraction.)

The major measures of activity were mixed in July. The new orders index surged to 67.7 from 61.6 in June, while the business activity index rose to 67.2 from 66.0. The employment index declined to 42.1 from 43.1 in June, and the supplier deliveries index moved lower to 55.2 from 57.5.

The prices paid index declined to 57.6 from 62.4 in June.

Implications: Another surprise to the upside from the service sector, as the ISM Non-Manufacturing Index continued to climb following the largest single-month increase in series history back in June. The composite index stands comfortably in growth territory at 58.1 (remember, readings above 50 signal expansion), marking the highest level since early 2019. In total, fifteen of eighteen companies reported growth in July, while three reported contraction. The two most forward-looking indices – business activity and new orders – both rose again in July. New orders improved the most, up 6.1 points to a reading of 67.7, the highest mark for the new orders index in the series history dating back to the late 1990s. Business activity, up 1.2 points to 67.2 in July, recorded the second highest reading in series history, and the best mark in more than fifteen years. Two indices declined in July; supplier deliveries and employment. It's worth noting that the supplier deliveries index increases when companies report longer delivery delays (typically a sign of more demand than companies can fill in a timely manner), so the continued decline in July means fewer delays. While supply chain disruptions and manufacturer back orders continue to result in longer lead times, deliveries are gradually moving in the right direction. The employment index continues to remain in contraction territory, and declined in July to 42.1 from 43.1 in June. While we do anticipate a slowdown in the pace of jobs growth when we get the employment report this Friday, we are currently forecasting two million nonfarm payroll jobs were added last month. With most states now on the downside of the curve in new confirmed COVID cases, progress in job gains look likely to continue for the foreseeable future. On the inflation front, the prices paid index declined to 57.6 from 62.4 in June. In other words, prices rose in July, but at a slower pace than in June. Cleaning products, medical supplies (like N95 masks), and construction contractors led the index higher. The data will likely remain volatile over the weeks and months ahead as the virus – and state responses – impact the ability for companies to operate. Cases look to have peaked and turned in the "second wave" states, but nobody knows with certainty where exactly things will go from here. What we do know is that our ability to identify, respond to, and treat cases as they arise continues to strengthen with each passing day.


Crafty_Dog

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Wesbury
« Reply #52 on: August 10, 2020, 10:54:43 AM »
Monday Morning Outlook
________________________________________
A Healing Economy To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/10/2020

It's going to take years for the US economy to fully heal from the economic disaster brought about by COVID-19 and the government-mandated shutdowns which continue to limit economic activity across the country. When we talk about a full recovery, we don't simply mean getting real GDP back where it was in late 2019; a full recovery comes when the unemployment rate gets back below 4.0%, and we don't see that happening until at least late 2023.

Yet last week's key reports on the economy clearly show we're recovering. The ISM Manufacturing and Service indices, autos sales, and the employment report all beat expectations. The Manufacturing index came in at 54.2, while the sub-indices for new orders and production both exceeded 60.0 for the first time since 2018. The ISM Services index hit a robust 58.1 for July, the highest reading so far this year, including back in January and February when the economy was doing quite well. The new orders sub-index for services hit 67.7, the highest on record (dating back to 1997).

Meanwhile, consumers felt healthy enough to keep increasing auto purchases. Cars and light trucks were sold at a 14.5 million annual rate in July, the highest since February, when sales were 16.8 million annualized. To put this in perspective, auto sales bottomed at an 8.7 million annual rate in April, so this is one sector which is very nearly healed.

Of course, the big news for the week came with Friday's employment report, which showed payrolls expanding faster than anticipated while the unemployment rate declined further. Nonfarm payrolls rose 1.763 million, while civilian employment, an alternative measure of jobs that includes small-business start-ups, increased 1.350 million. Combined with jobs gains in May and June, these figures show that we've recovered roughly 40% of the jobs lost in the carnage of March and April.

The best news was that both average hourly earnings and the total number of hours worked rose in July, with earnings up 0.2% and hours up 1.0%. Recently, these two figures have moved in opposite directions. At first, layoffs tilted toward lower paid workers, which meant average earnings for the remaining workforce were rising while total hours worked fell. Then, as hours rebounded and (disproportionately) lower-paid workers were rehired, the pattern reversed. Now they're rising at the same time.

In addition, recent declines in unemployment claims signal that the improvement in the labor market is continuing. Initial jobless claims came in at 1.186 million in the latest week, 249,000 fewer than the prior week and the lowest level since March. Continuing claims for regular benefits fell 844,000 to 16.1 million, the lowest since April.

It's still early – the initial report on real GDP growth in the third quarter won't be released until October 29 – but plugging all these reports, as well as earlier ones, into our models suggests growth at a 15.0% annual rate.

But along with faster growth, we're also going to see higher inflation. Broad measures of the money supply are growing rapidly, while the Federal Reserve remains committed to keeping short-term rates low as far as the eye can see. The Fed doesn't think we'll hit its 2.0% inflation target until at least 2023. We think inflation will get there, and beyond, before the calendar closes on 2021.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #53 on: August 12, 2020, 07:40:51 PM »
The Consumer Price Index Rose 0.6% in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/12/2020

The Consumer Price Index (CPI) rose 0.6% in July, coming in above the consensus expected 0.3%. The CPI is up 1.0% from a year ago.

Energy prices rose 2.5% in July, while food prices declined 0.4%. The "core" CPI, which excludes food and energy, rose 0.6% in July, versus a consensus expected 0.2%. Core prices are up 1.6% versus a year ago.

Real average hourly earnings – the cash earnings of all workers, adjusted for inflation – declined 0.4% in July but are up 3.7% in the past year. Real average weekly earnings are up 4.3% in the past year.

Implications: Mirroring yesterday's report on producer prices, consumer prices also posted above consensus gains in July, rising 0.6% for the second month in a row. The typically volatile food and energy categories moved in opposite directions in July as the effects of gradual re-openings from Coronavirus lockdowns began to show up in the data. Energy prices rose 2.5%, primarily due to a 5.6% increase in the price of gasoline as demand for fuel continues to rise along with other measures of mobility. Meanwhile, the 0.4% decline in food prices was largely driven by the food at home category which fell 1.1%, as Americans became less reliant on grocery stores for their meals and food supply chains finally caught up with demand. Strip out the impacts from the food and energy sectors, and "core" prices also increased 0.6% in June, the largest monthly increase since 1991! One of the biggest drivers of "core" prices in July was used cars and trucks which saw prices rise 2.3%, as dealers had lower inventory levels due to fewer trade-ins during the pandemic while they also experienced a surge in buyer demand. Some other contributors in July were apparel (1.1%), new vehicles (0.8%), and medical care services (0.4%). Amazingly, consumer prices never fell on a year-over-year basis during the short but sharp coronavirus recession, bottoming out in May at 0.1%, and rebounding since then to 1.0% in July. We expect prices will continue to rise in the months ahead toward the 2% - 3% annual pace of inflation that was in effect before the Coronavirus wreaked havoc on global economies. However, underlying fundamentals point to a higher risk of rising inflation than during the 2008 recession. The Coronavirus pandemic is the first recession on record where personal income has actually risen, due to government stimulus checks and boosted unemployment insurance payments that replaced greater than 100% of wages for many workers. Meanwhile, measures like industrial production and the unemployment rate demonstrate that the actual production of goods and services remains depressed relative to pre-pandemic levels. That mismatch between supply and demand will eventually mean too many dollars chasing too few goods, especially if further stimulus measures continue to lean on the same policies. That said, it's clear that the economic recovery has begun, the worst economic quarter in the post-World War II era is behind us, and the question now shifts to how quickly we recover.

DougMacG

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The Great American Reopening , , , or not? GDP Growth rate 20.5%?
« Reply #54 on: August 12, 2020, 08:21:55 PM »
Atlanta Fed: GDP Now estimates current GDP Growth rate:
"Latest estimate: 20.5 percent — August 7, 2020"
https://www.frbatlanta.org/cqer/research/gdpnow

Those are summer doldrum numbers.  September should be yuge.

3rd quarter GDP results are scheduled for announcement October 29, Thursday before the election, right when the truly undecided must make their choice. 

Two Americas:  By election time we will have separate measures of economic growth:
One for blue and one for red states.  The idea that both parties offer similar economic results is far behind us.  The so called blue states now only lead in crime rate growth.  Landslide?


DougMacG

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Re: The Great American Reopening , , , or not?
« Reply #55 on: August 14, 2020, 04:38:49 AM »
Goldman Sachs projects 3rd qtr growth at 25%.

This 'recession' was 4 months, March, April, May and June.  Two quarters in bureaucratic statistics only, not two quarters meaning six months.  The comparison with the Great Depression is what?  One side wants to keep us shut down and screwed up with bad economic policies for a decade?

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #56 on: August 15, 2020, 07:47:54 AM »
Industrial Production Increased 3.0% in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/14/2020

Industrial production increased 3.0% in July, matching consensus expectations. Utilities output rose 3.3% in July, while mining increased 0.8%.

Manufacturing, which excludes mining/utilities, increased 3.4% in July. Auto production jumped 28.3%, while non-auto manufacturing rose 1.6%. Auto production is down 1.4% versus a year ago, while non-auto manufacturing is down 8.3%.

The production of high-tech equipment increased 1.6% in July and is up 4.6% versus a year ago.

Overall capacity utilization increased to 70.6% in July from 68.5% in June. Manufacturing capacity utilization rose to 69.2% in July from 66.9%.

Implications: The industrial sector continued its recovery in July, posting the second largest monthly gain (beaten only by June) going back to 1959. However, that improvement continues from a low baseline. Even with July's impressive headline gain, industrial production has made up roughly half of the decline seen in March and April. While there is still some ways to go before a full recovery, the details of today's report were healthy. Within manufacturing, auto production surged 28.3% in July, following 100%+ increases in May and June, as car and truck factories continued to resume operations. With the July jump, auto manufacturing now stands just 1.4% below year-ago levels, and is virtually even with where the index stood back in February. Meanwhile, non-auto manufacturing rose 1.6% in July, also a multi-decade high with the exception of last month's surge. While some sectors of the economy - like restaurants, bars, and hotels - remain at risk, the factory sector appears better positioned for further recovery. Outside the factory sector, activity was also positive. Utilities output rose 3.3% in July, led by electricity demand. Meanwhile mining increased 0.8%, as oil and coal extraction led most mining categories in moving higher on the month. Crude oil prices are comfortably off the lows seen during the heart of shutdown activity, but remain down roughly 35% since the beginning of January and below the break-even level for many US producers, constraining growth in activity. One bright spot is that the number of oil and gas rigs in the US has leveled off after falling roughly 65% since the pandemic began, so it looks like most of the damage is behind us. As economic activity continues to rebound, demand for energy grows, and the surviving firms consolidate, mining eventually will be a tailwind for industrial production. On the capacity side, utilization ticked up to 70.6 in July, steadily inching back towards the readings in the mid-to-upper 70's seen to start this year. The path to recovery is under way, and today's data provides further evidence that the march forward is on steady ground.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #57 on: August 21, 2020, 11:07:30 AM »
Existing Home Sales Increased 24.7% in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/21/2020

Existing home sales increased 24.7% in July to a 5.860 million annual rate, easily beating the consensus expected 5.410 million. Sales are up 8.7% versus a year ago.

Sales in June rose in all major regions. The gain was due to both single-family homes and condos/coops.

The median price of an existing home rose to $304,100 in July (not seasonally adjusted) and is up 8.5% versus a year ago. Average prices are up 6.5% versus last year.

Implications: You would be hard pressed to find a better example of a V-shaped recovery than existing home sales. From February (pre-pandemic) to the bottom in May, sales collapsed 32.1% as lockdown measures and widespread economic uncertainty took hold across the country. However, following two record-breaking monthly gains in a row in June and July, sales are now up from the previous February high. It's also important to remember that existing home sales are counted at closing, so July's 24.7% surge mostly reflects contracts that were signed in June as the "second-wave" of coronavirus cases was erupting across the country, signaling the resilience of the ongoing housing market recovery. One major contributor to the recent recovery has been the Fed's liquidity policies, which have pushed 30-year fixed mortgage rates below 3.0% for the first time on record, boosting affordability. In fact, demand for existing homes has remained so strong that 68% of homes sold in July were on the market for less than a month. That said, sales face an increasing headwind from a low inventory of existing homes, as rising demand continues to more than fully offset new listings. In fact, today's report showed that inventories were lower than any other July on record and down 21.1% versus a year ago (the best measure for inventories given the seasonality of the data). This lack of options has caused median price growth to reaccelerate as well, up from a year-ago comparison of 1.9% in May to 8.5% in July. With employment growing, new and future construction boosting inventories, and an easy fed which will keep rates low for the foreseeable future, expect the housing market to continue to improve. In other recent news on the employment front, initial jobless claims unexpectedly rose 135,000 last week to once again come in above one million, remaining stubbornly high despite recent improvements in new infections in the "second wave" states. Meanwhile, continuing claims, which lag initial claims by a week, declined 636,000 to a reading of 14.844 million. In spite of the increase in initial claims, we still anticipate a payroll increase for August. Finally, on the manufacturing front, the Philly Fed Index, a measure of East Coast factory sentiment, declined to a still robust +17.2 in August from +24.1 in July. This number continues to show a healthy rebound in manufacturing activity versus the deeply negative readings early on in the pandemic.

G M

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Cones of shame!
« Reply #58 on: August 22, 2020, 05:38:12 PM »
https://pjmedia.com/culture/victoria-taft/2020/08/21/restaurant-servers-in-maine-ordered-to-wear-dog-cones-of-shame-while-serving-food-n823081

The Governor that gets their citizens to wear dildos strapped to their foreheads wins.


My money is on California.

DougMacG

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Re: The Great American Reopening , , , V Shaped Recovery? No, Super-V!
« Reply #59 on: August 24, 2020, 05:52:25 AM »
Latest estimate: 25.6 percent — August 18, 2020
The next GDPNow update is Wednesday, August 26
https://www.frbatlanta.org/cqer/research/gdpnow
--------------------------------------------------------

Average GDP Growth during Obama "recovery"  =   1.5%
https://www.hudson.org/research/12714-economic-growth-by-president

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #60 on: August 27, 2020, 05:42:46 PM »
New Orders for Durable Goods Increased 11.2% in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/26/2020

New orders for durable goods increased 11.2% in July, easily beating the consensus expected gain of 4.8%. Orders excluding transportation rose 2.4% in July, beating the consensus expected gain of 2.0%. Orders are down 5.0% from a year ago, while orders excluding transportation are down 1.0%.

The increase in orders in June was led by motor vehicles and defense aircraft.

The government calculates business investment for GDP purposes by using shipments of non-defense capital goods excluding aircraft. That measure increased 2.4% in July. If unchanged in August and September, these shipments will be up at a 23.7% annualized rate in Q3 versus the Q2 average.

Unfilled orders declined 0.8% in July and are down 5.4% in the past year.

Implications: New orders for durable goods soared in July, easily beating the consensus expected increase to post a third consecutive monthly gain. New orders now sit just 6.7% below the February pre-pandemic high, signaling a sharp recovery in the manufacturing sector as you can see in the chart to the right. The volatile transportation sector was the biggest source of strength in July, jumping 35.6%, as a surge in orders for motor vehicles and parts as well as defense aircraft more than offset declining civilian aircraft orders. However, even excluding transportation, orders came in above expectations, rising 2.4% in July. It's also worth noting that orders for every core non-transportation category rose for the month. Electrical equipment registered the largest improvement, up 4.1%, followed by fabricated metal products (+2.0%), machinery (+2.0%), computers & electronic products (+2.2%), and primary metals (+0.2%). Meanwhile, the only major category to post a decline in July was civilian aircraft, where orders continued to fall (but at a slower pace than in June) as major airlines continue to cancel prior purchase orders due to a highly uncertain economic outlook related to the pandemic. One of the most important pieces of data from today's report, shipments of "core" non-defense capital goods ex-aircraft (a key input for business investment in the calculation of GDP growth), rose 2.4% in July. Even if these orders remain unchanged in August and September, this measure will be up at a 23.7% annualized rate in Q3 versus the Q2 average, suggesting that business investment, which was a major drag on real GDP in the second quarter, will be a major tailwind in Q3. While this represents growth from a very low base, Q3 is on track to see double-digit positive real GDP growth. At present, we estimate real GDP growth at a 20.0% annual rate, but the risk is more to the upside than downside. For example, the Atlanta Fed's "GDP Now" model currently has Q3 growth at a 25.6% annual rate, but we are sticking with a slightly more conservative forecast as we expect inventories reductions to show a drag on growth. We also expect the economy will continue to grow at an above-trend pace in Q4 and through 2021, but the road to recovery will take time. What matters most, is that we have started our way down the path.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #61 on: August 28, 2020, 12:46:18 PM »
Personal Income Rose 0.4% in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/28/2020

Personal income rose 0.4% in July (+0.8% including revisions to prior months), easily beating the consensus expected decline of 0.2%. Personal consumption rose 1.9% in July (+2.5% including prior month revisions), beating the consensus expected gain of 1.6%. Personal income is up 8.2% in the past year, while spending has declined 2.8%.

Disposable personal income (income after taxes) rose 0.2% in July and is up 9.5% from a year ago.

The overall PCE deflator (consumer prices) rose 0.3% in July and is up 1.0% versus a year ago. The "core" PCE deflator, which excludes food and energy, also rose 0.3% in July and is up 1.3% in the past year.

After adjusting for inflation, "real" consumption increased 1.6% in July, but is down 3.8% from a year ago.

Implications: Rising income paired with a pickup in spending in July, comfortably beating expectations in a report where the details are even better than the already impressive headline readings. The move higher in income came as rising private sector wages and salaries more than offset a decline in government transfer payments. In other words, the data improved as the economy continued to move further into reopening. Outside of government transfer payments, personal income rose by 0.9% in July, which should come as little surprise given the increase of 1.8 million jobs in July. Spending followed suit, up 1.9% in July after historically large increases in May and June. The increase in spending on services was led by health care, food services, and accommodations. Spending on goods was led by motor vehicle sales, up 19.1% in July. While spending rose across most major categories, a few highlights from the July report include spending on spectator sports (+2800.0%), casino gambling (+40.7%), air transportation (+38.6%), and hotels and motels (+23.5%). And while the return to spending through the recovery has been uneven, with areas like autos, food, housing, and recreational goods up from both year ago levels and where they stood back in February, the above-mentioned categories that saw large gains in July remain well off prior highs. This data helps explain why a company like MGM is laying off 18,000 furloughed workers and American Airlines has announced plans to cut 19,000 jobs in October, while companies like Home Depot and Amazon are announcing the expansion of distribution centers and adding to their payrolls. With spending rising more than income, the saving rate declined to a (still very elevated) 17.8% in July. This is down from 33.7% back in April, but still well above "normal" levels. The next few months will continue to see the numbers muddled by the extraordinary measures taken in response to COVID-19, but what is clear is that the economy has turned the corner and the recovery process is under way. On the inflation front, PCE prices rose 0.3% in July and are up 1.0% from a year ago. Core prices, which exclude food and, more importantly, the very volatile energy component, also rose 0.3% in July, and are up 1.3% from a year ago. We expect inflation will continue to trend higher in the months ahead, moving toward – and then above – the 2% pace that has historically stood as the Fed's target. But don't expect that to mean that monetary policy will be tightening any time soon. The Fed announced yesterday a shift in the inflation targeting process to make abundantly clear that inflation can run above the long-term target for at least a little while before it will raise rates. In other news this morning, the Chicago PMI remained in expansion territory in August, but declined to a reading 51.2 from 51.9 in July. This comes on the heels of yesterday's report from the Kansas City Fed which showed activity in that region rose, pushing the manufacturing index to 14 in August from 3 in July. Plugging this into our models suggests the national ISM index, reported next Tuesday, will show a rise to about 54.7 for August from 54.2 for July. In other recent news, pending home sales, which are contracts signed on existing homes, increased 5.9% in July, suggesting that strong gains in existing home closings continued in August.

DougMacG

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Re: The Great American Reopening , , , Real GDP Growth Estimate 28.9%
« Reply #62 on: August 28, 2020, 03:20:08 PM »
This is not a very reliable measure but it is from a federal reserve bank (Atlanta) where they have access to the best, real data available. 
"GDP NOW is a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model."

Latest estimate: 28.9 percent — August 28, 2020
https://www.frbatlanta.org/cqer/research/gdpnow

Recall that 3% was the elusive number Pres. Obama could not hit - even when he kept predicting 4%. 
Broken promises 2010, 2011, 2012, 2014:
"In January 2010, President Obama predicted his economic policies would produce 4.3 percent GDP growth by 2011. When that growth did not happen, the president did not admit failure, rather he simply revised his prediction in 2011 for better growth in 2012. He has continued to predict strong growth, but each year he moves the goal post further away."
https://www.rpc.senate.gov/policy-papers/obamas-false-predictions-on-the-economy

G M

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Re: The Great American Reopening , , , Real GDP Growth Estimate 28.9%
« Reply #63 on: August 28, 2020, 06:42:30 PM »
Obviously economic structural racism!


This is not a very reliable measure but it is from a federal reserve bank (Atlanta) where they have access to the best, real data available. 
"GDP NOW is a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model."

Latest estimate: 28.9 percent — August 28, 2020
https://www.frbatlanta.org/cqer/research/gdpnow

Recall that 3% was the elusive number Pres. Obama could not hit - even when he kept predicting 4%. 
Broken promises 2010, 2011, 2012, 2014:
"In January 2010, President Obama predicted his economic policies would produce 4.3 percent GDP growth by 2011. When that growth did not happen, the president did not admit failure, rather he simply revised his prediction in 2011 for better growth in 2012. He has continued to predict strong growth, but each year he moves the goal post further away."
https://www.rpc.senate.gov/policy-papers/obamas-false-predictions-on-the-economy

DougMacG

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Re: The Great American Reopening , , , or not?
« Reply #64 on: August 31, 2020, 06:21:15 AM »
Head of Graco, headquartered in Minneapolis:

https://players.brightcove.net/940277650001/default_default/index.html?videoId=6185108523001

5 minute straight talk

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #65 on: August 31, 2020, 10:30:30 AM »
S&P 500 3650, Dow 32,500 To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 8/31/2020

If you pay close attention to our stock market forecasts, the title of this piece will look familiar.

At the end of 2019 we made the same exact forecast for the end of 2020 — the strangest year in our lifetimes, and it's not even over. Compared to most analysts, this was a very bullish call. And then, when the market hit a pre-COVID19 peak of 3386 in mid-February, if anything we looked not bullish enough.

Then the bottom fell out of both stocks and the economy, struck by a combination of COVID19 and overly-strict government shutdowns. The S&P 500 bottomed at 2237 on March 23, pricing in an 80% drop in corporate profits from the year before, making our call of 3650 look obsolete.

About seven weeks later, on May 8, stocks had recovered back to 2930, but we figured 3650 was probably still obsolete, and so revised our year-end forecast for the S&P 500 to 3100. Still bullish, but from a lower base.

Then, only four weeks later, the S&P 500 had blown through our updated year-end target and was sitting at 3194. So we revised up our year-end target again, this time to 3350.

But, here we are at the end of August and once again stocks have blown through our updated target, closing last week at 3508. As a result, we're moving our target back up to exactly where we started: 3650.

The key lesson in all this should be that it is a fool's errand to try to time the market. Imagine being told on February 15 that the world was about to be hit by a widespread virus for which there was no known therapy or cure, that governments were going to react by shutting down massive swaths of their economies, and that US real GDP was about to drop at the fastest rate for any quarter since the Great Depression.

Then imagine you had to make a choice about how you would allocate your investments through year end. Many investors would have opted to sell their equities and not look back. But, as we now know, the better choice would have been to grit your teeth and stay invested.

In order to make a stock market forecast we use a model based on capitalized profits. Our model takes the government's measure of profits from the GDP reports, divided by interest rates, to measure fair value for stocks.

To be cautious, we're using the level of corporate profits in the second quarter, when they were down 20.1% from a year ago, and at the lowest level in nine years, a level from which they are very likely to recover in the third quarter and beyond. In addition, we are NOT using the current 10-year Treasury Note yield of 0.7%, which generates absurdly high targets for equity prices. Instead, we're using a 10-year yield of 2.0%. And at that yield, with profits remaining at second quarter levels, our model says the S&P 500 is fairly valued at 4052.

In other words, we would not be shocked if stocks went even higher than our year-end target of 3650 and barring a major shift in public policy as a result of the election in November, expect further gains in the 2021.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #66 on: September 03, 2020, 10:47:50 AM »
The Trade Deficit in Goods and Services at $63.6 Billion in July To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 9/3/2020

The trade deficit in goods and services came in at $63.6 billion in July, larger than the consensus expected $58.0 billion.

Exports increased $12.6 billion, led by autos and crude oil.  Imports rose $22.7 billion, led by autos, cell phones & other household goods, and civilian aircraft.

In the last year, exports are down 20.1% while imports are down 11.4%.

Compared to a year ago, the monthly trade deficit is $12.6 billion larger; after adjusting for inflation, the "real" trade deficit in goods $3.9 billion larger than a year ago.  The "real" change is the trade indicator most important for measuring real GDP. 

Implications: International trade continues to improve after some very ugly reports earlier this year. The trade deficit in goods and services came in at $63.6 billion in July, which some may believe is not good.  But what really matters is that both exports and imports rose, consistent with the economic recovery in the US and global economic activity slowly picking back up.  Imports rose faster than exports, which is why the trade deficit rose, and signals a faster rebound here than abroad.  The total volume of trade (imports plus exports), which signals how much businesses and consumers interact across the US border, rose 9.7% in July, by far the largest monthly gain recorded going back to at least 1992, but is still down 15.3% versus a year ago.  Expect trade to continue expanding rapidly in coming months as the shutdowns of business across the US and the world slowly dissipate, and new trade deals with key trading partners take effect.  Some other good news in today's report was that for the seventh month in a row, the dollar value of US petroleum exports exceeded US petroleum imports. Horizontal drilling and fracking have transformed the global energy market and the US is no longer hostage to foreign oil.  In other news this morning, initial jobless claims declined 130,000 last week to 881,000. Meanwhile, continuing claims for regular benefits declined 1.238 million to 13.254 million.  Note, however, that the Labor Department changed the way it seasonally adjusts these figures, so don't read too much into this particular week's report.  Also on the employment front, data out yesterday from the ADP employment report showed 428,000 jobs gained in August.  The consensus was expecting a larger gain of 1.0 million. Plugging all these figures into our models suggests a nonfarm payroll gain of 1.67 million for August with an unemployment rate down to 9.5%.  In other recent news, cars and light trucks were sold at a 15.2 million annual rate in August.  Sales were up 3.9% from July but still down 11.0% from a year ago.  Expect sales to continue to pick up over the next few months as the economy continues to reopen and heal.

DougMacG

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Re: The Great American Reopening , , , or not?
« Reply #67 on: September 04, 2020, 06:19:36 AM »
U.S. created 1.37 million jobs in August, vs 1.32 million expected; unemployment rate falls to 8.4%
https://www.cnbc.com/2020/09/04/jobs-report-august-2020-.html?

By election day, the news will be fastest growing American economy ever.

GDPnow, Atalanta Fed:  Latest estimate: 29.6 percent — September 3, 2020
https://www.frbatlanta.org/cqer/research/gdpnow

Crafty_Dog

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WSJ
« Reply #68 on: September 05, 2020, 11:34:57 AM »
Looks like the expiration of the $600 encouraged a lot of people to go back to work  , , ,

================The Jobs of August
The economy creates another 1.4 million jobs, defying the pessimists.
By The Editorial Board
Sept. 4, 2020 6:56 pm ET


So much for the economy falling off an August cliff. That was the prediction in progressive economic circles amid a summer Covid-19 surge and the reduction in government payments to individuals. But Friday’s blowout jobs report for August reveals a labor market and economy that continue to recover in encouraging fashion.

The economy added 1.4 million jobs in the month while the unemployment rate declined 1.8 percentage points to 8.4%. Temporary Census hires filled 238,000 of those jobs. But the economy has nonetheless added 10.5 million private jobs in four months, about half as many as were lost in the recession caused by government-ordered lockdowns. The recovery after the 2008-2009 recession took three years to make this much progress, and the jobless rate was still 8.1% in August 2012.

U.S. jobless rate July 2009-August 2020
Source: Bureau of Labor Statistics
Jobless Rate
Month/MonthChange
2010
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
-4
-2
0
2
4
6
8
10
12
14
16
Labor force participation increased 0.3 percentage points to 61.7%, up 1.5 points from its April low. This is still 1.7 percentage points below its February peak, but the increase means that hundreds of thousands of Americans are continuing to return to the workforce. By contrast, labor force participation declined in the five years after the 2009 recession. Our contributor Donald Luskin notes that the number of Americans receiving Social Security disability payments is 9.8 million, one million fewer than in August 2012.

One reason the Barack Obama-Joe Biden jobs recovery was so slow is that Congress increased government transfers such as food stamps and Medicaid and repeatedly extended 99 weeks of unemployment benefits, which didn’t lapse until the end of 2012. The expansion of government transfer payments reduced the incentive for Americans to return to work.

Democrats call that compassion, but it’s a cruel sort of kindness for many. Skills atrophy when they aren’t put to use, making it harder to re-enter the workforce later. Notably in August, as in 2013, the job market didn’t go into a tailspin when the $600 a week in federal enhanced unemployment benefits expired at the end of July. Two-thirds of unemployed Americans had been making more by not working. Most states have signed up for President Trump’s $300 a week substitute for the $600, and that is much less of a disincentive to work.

Job growth was especially notable in lower-paid industries like retail (249,000), leisure and hospitality (174,000), and transportation and warehousing (78,000). Unemployment rates also fell sharply among teens (16.1%), blacks (13%) and Hispanics (10.5%).

All of this means the economy is growing again as the lockdowns ebb and despite the lack of another spending blowout from Washington, D.C. The downturn was a recession, not the depression that many feared in March. The Atlanta Federal Reserve’s GDPNow formula is predicting third-quarter growth of nearly 30% year-over-year.

Consumer spending may slow without more federal checks, but perhaps not as much as feared with a recovering job market and average hourly earnings up 4.65% from August last year. They’re up 4.9% for production workers. People have pent up savings—the savings rate was 17.8% in July—and the wealth effect from rising home and stock prices despite the selloff in tech stocks this week will also help. Home prices are up 12% year-over-year, and the Dow Jones Industrial Average has risen 51% from its March trough.

Manufacturing is also rebounding as Europe and China reopen their economies, supply-chain bottlenecks ease, and home building surges. The Institute for Supply Management reported this week that its manufacturing index last month hit a 21-month high. Most industries reported that their biggest challenge is a shortage of raw materials and supplies.

The economy still has a long way to go to return to its pre-Covid heights, and that will take time and probably a vaccine. Covid aside, the biggest barrier to recovery now is election uncertainty and the potential for anti-growth policies if Democrats take the Senate as well as the House and Presidency. Meanwhile, happy Labor Day.

DougMacG

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Re: WSJ
« Reply #69 on: September 05, 2020, 07:09:56 PM »
"Looks like the expiration of the $600 encouraged a lot of people to go back to work  , , ,"

Yes.


Crafty_Dog

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Producer Price Index up
« Reply #71 on: September 10, 2020, 11:56:21 AM »
second

The Producer Price Index Rose 0.3% in August To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 9/10/2020

The Producer Price Index (PPI) rose 0.3% in August versus a consensus expected 0.2%. Producer prices are down 0.2% versus a year ago.

Food prices declined 0.4% in August, while energy prices fell 0.1%. Producer prices excluding food and energy rose 0.4% in August and are up 0.6% in the past year.

In the past year, prices for goods are down 1.6%, while prices for services have risen 0.4%. Private capital equipment prices rose 0.3% in August and are up 0.5% in the past year.

Prices for intermediate processed goods rose 0.6% in August, but are down 2.6% versus a year ago. Prices for intermediate unprocessed goods jumped 7.0% in August but remain down 9.0% versus a year ago.

Implications: Producer prices continued to rise in August, coming off a substantial jump in July, and would be up faster but for declining costs of food and energy products. Prices for services led the way in August, as margins received by wholesalers and retailers rose 1.2%. In particular, the margins for machinery, equipment, parts, and supplies accounted for roughly 20% of the service price increase. On the goods side, the typically volatile food and energy categories continue to live up to their reputations, with energy prices falling 0.1% (after three consecutive months of 5%+ increases) while food prices declined 0.4% on lower costs for eggs. Strip out these volatile categories, and "core" producer prices rose 0.4% in August, just a tenth of a percent off the largest monthly increase in the series' (short) history dating back to early 2010. Core producer prices are up a modest 0.6% over the past twelve months, but expect that to move higher in the months ahead. Supply constraints, limitations on activity, and the general economic disruptions related to COVID-19 will continue to muddy the data for the foreseeable future, but what is clear is the massive increase in the M2 money supply, up 23.3% in the past year. Once the dust finally settles – and it eventually will – we expect inflation to trend back toward 2% and then higher. The Federal Reserve is loose and, as it has made abundantly clear, plans to stay that way for the foreseeable future. Meanwhile, businesses operating at limited capacity will remain a headwind to economic activity. The result will eventually be too much money chasing too few goods (and services), meaning higher – but not hyper – inflation. Further down the pipeline, prices for intermediate demand processed goods rose 0.6% in August, while intermediate demand unprocessed goods rose 7.0%. Both intermediate demand categories continue to show prices broadly lower compared to year-ago levels. The data is starting to shift higher, though, tracking the emergence of the economy from what was a severe – but short – recession. We still have a long way to go to get back to where we were at the start of 2020, but the initial steps of recovery are under way, and we expect growth will march onward through the close of this year and beyond. In other news this morning, initial jobless claims were unchanged last week at 884,000. Meanwhile, continuing claims for regular benefits rose 93,000 to 13.385 million. Changes to the seasonal adjustment methodology of these series make comparison to month-ago levels a fool's errand, but this jobs data will remain under intense focus in the weeks ahead for signs of progress or a stall on the path of the workforce recovery.

Crafty_Dog

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Wesbury
« Reply #72 on: September 28, 2020, 02:20:14 PM »
Full Recovery Requires Reopening To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 9/28/2020

With the presidential election just over a month away, prospects for another round of fiscal stimulus seem to be dwindling. The recent death of Justice Ginsburg and the rapidly approaching election have shifted the Senate's gaze.

Conventional wisdom is worried that a lack of additional stimulus, and the potential for a drawn out and contested election, could impede the economic recovery. And some of those fears seem to be reflected in the stock market recently, with the S&P 500 having fallen 7.9% from its high of 3588 on September 2, as of Friday's close.

While we need to wait for August data on incomes, through July, the Commerce Department's measure of personal income was 4.9% higher than in February, as government transfer payments - which the US borrowed from future taxes - more than fully offset declines in wages and salaries. Think about that for a moment. Even with the end of special unemployment bonus payments, there is likely more money in people's pockets today than there would have been had the pandemic never happened!

Right now, any weakness in the economy is coming from the fact that many sectors (especially service-type activities) remain shut down or lightly used.

Spending on goods in July was up 6.1% from February, while spending on the more pandemic-restricted service sector was down 9.3% over the same period. Overall spending (goods plus services) remains down 4.6%. We doubt a full recovery can happen without a rebound in services. Additional checks can't change Americans' wants and desires. Instead, continued recovery is going to require states to push ahead with reopening in a responsible manner.

Take New York and California. Daily new cases are down roughly 92% and 66%, respectively, from the peak in these states. Deaths are down, 99% and 40%, respectively as well. Yet both still have some of the nation's strictest pandemic-related restrictions in place. This, in turn, has held back their economic recoveries.

According to August data from the Bureau of Labor Statistics, New York and California had unemployment rates of 12.5% and 11.4%, respectively, while the unemployment rate for the US excluding these two states was only 7.7%. If New York and California mirrored the nation's unemployment rate, the result would be an additional 1.2 million Americans employed. New York and California combined have 18% of the US population, but 32% of all people receiving continuing unemployment benefits.

Just this past week, Florida (7.4% unemployment) and Indiana (6.4%) have fully opened their economies. These states, among many others, had lower unemployment than the national average, mainly because their shutdowns were less draconian.

The competition between states that open and those that don't – at the political, business, sports, school, and even family level – will lead to even more opening of the economy in the months ahead.

For a self-sustaining recovery to fully catch hold, it is reopening, not additional stimulus, that is the key.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #73 on: October 01, 2020, 12:45:06 PM »
Data Watch
________________________________________
The ISM Manufacturing Index Declined to 55.4 in September To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/1/2020

The ISM Manufacturing Index declined to 55.4 in September, lagging the consensus expected 56.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)

The major measures of activity were mixed in September. The new orders index declined to 60.2 from 67.6 in August, while the production index fell to 61.0 from 63.3. The employment index rose to 49.6 from 46.4, and the supplier deliveries index increased to 59.0 from 58.2 in August.

The prices paid index rose to 62.8 in September from 59.5 in August.

Implications: The pace of growth in the manufacturing sector slowed in September, but it continues to expand at a healthy clip. Remember, readings above 50 signal expansion, so the September reading of 55.4 is comfortably within growth territory, even if it is a modest decline from the August print of 56.0 (which, it's worth noting, was the highest reading for the index since late 2018). Growth in September remained broad-based, with fourteen of eighteen industries reporting expansion, while four reported contraction. And comments from survey respondents showed more than two positive comments for every cautious comment. Looking at the major indices, the two most forward looking – new orders and production – led the headline number lower in September, showing declines from August's multi-year highs, but remain above 60.0. Given that the customers' inventories index (where a reading below 50 signals inventory levels are too low), hit the lowest reading in more than a decade at 37.9 in September, while at the same time the backlog of orders index (which show orders rising faster than production can fill them) hit a multi-year high at 55.2, the data suggest activity should remain robust for the foreseeable future. Employment, meanwhile, remains on the "bad, but not as bad" path, rising to 49.6 in September from 46.4 in August. We are projecting that tomorrow's report on nonfarm payrolls will show a gain of 1.073 million jobs in September, which would move the unemployment rate down to around 8.0% from 8.4% in August. The index for supplier deliveries, which rises when companies have difficulty meeting demand on a timely basis, and moves lower as delays ease, moved higher in September to 59.0. The coronavirus and related shutdowns have wreaked havoc on supply chains, in particular, transportation challenges, labor shortages, and limitations on the number of workers who can be present at any given time due to safety concerns. These challenges have generated a sustained headwind to the process of getting back to business and are expected to remain for the foreseeable future, representing one of the biggest headwinds to even faster production and inventory growth. On the inflation front, the prices paid index rose to 62.8 from 59.5 in August, as rising costs for aluminum, copper, and freight led the index. This, too, is in part a reflection of the supplier delivery difficulties, as rising costs to acquire and produce input materials are being passed along to manufacturing companies. Recovery is clearly under way, and now the focus shifts towards the ability of companies to return to business and meet demand. It's not smooth sailing yet, but the path ahead continues to improve. In other news this morning, construction spending rose 1.4% in August (+3.5% including upward revisions to prior months). Strong growth in homebuilding, paired with increased public spending on highways & streets, was partially offset by a decline in private sector power projects.

Crafty_Dog

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Re: The Great American Reopening , , , or not?
« Reply #74 on: October 02, 2020, 03:44:01 PM »
Nonfarm Payrolls Rose 661,000 in September To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/2/2020

Nonfarm payrolls rose 661,000 in September, below the consensus expected 859,000.

Private sector payrolls rose 877,000 in September. The largest increases were for leisure & hospitality (318,000), retail (142,000), and professional & business services (89,000, including temps). Manufacturing rose 66,000 while government declined 216,000.

The unemployment rate dropped to 7.9% in September from 8.4% in August.

Average hourly earnings – cash earnings, excluding irregular bonuses/commissions and fringe benefits – rose 0.1% in September and are up 4.7% versus a year ago. Aggregate hours worked rose 1.1% in September but are down 6.0% from a year ago.

Implications: The job market continues to rapidly recover from the COVID-19 disaster, but not quite as rapidly as in previous months. Nonfarm payrolls rose 661,000 in September versus a consensus expected 859,000 and an average gain of 3.8 million in May and June and an average gain of 1.6 million in July and August. However, private-sector payroll gains narrowly beat expectations, rising 877,000 versus a consensus expected 850,000. The key drag on payrolls in September was a drop in government jobs at schools. It's also important to recognize that average weekly hours in the private sector ticked up to 34.7 in September versus 34.6 in August, the equivalent of about 350,000 jobs. In other words, the details in the payroll report suggest on ongoing robust recovery in the demand for private-sector workers. Civilian employment, an alternative measure of jobs that includes small-business start-ups, increased only 275,000 in September, but that follows an unusually large gain of 3.8 million in August. After peaking in February, nonfarm payrolls plummeted by 22.2 million in March and April. In the past five months, payrolls have grown 11.4 million, making up 52% of the jobs lost earlier in the year. Over the same timeframe, civilian employment has recovered 56% of the jobs lost earlier this year. In the private sector, retailers and restaurants & bars continued to rebound quickly in September, gaining 142,000 and 200,000 jobs, respectively. Retail jobs have now recovered 80% of the losses in March/April, while restaurants & bars have recovered 62%. The best news in today's report was the drop in the unemployment rate to 7.9%, which is still a very high level but well below the peak of 14.7% in April. Average hourly earnings rose a modest 0.1% in September but are up 4.7% from a year ago. Total earnings, which we calculate by multiplying average hourly earnings by the number of hours worked, rose a healthy 1.1% in September. Although total earnings are down 1.7% from a year ago, they dropped steeply early this year and have since recovered 71% of those losses. The road to a full recovery remains a long one. It's not just a matter of getting back to the level of jobs we had in February because, in the absence of the shutdowns related to COVID-19, jobs would have been rising since then. We think a full recovery means getting back to an unemployment rate of 4.0% or below, which is where it was before COVID-19. And that looks like it won't happen for at least a couple more years. That said, there should be no doubt we are headed in the right direction.



Crafty_Dog

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Webury: Profits poised for growth
« Reply #77 on: October 12, 2020, 11:05:23 AM »
Monday Morning Outlook
________________________________________
Profits Poised for Growth To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/12/2020

COVID lockdowns crushed the economy in the first half of 2020, with real GDP down 5.0% at an annual rate in the first quarter and 31.4% at annual rate in the second quarter, the latter of which was the steepest drop in real GDP for any quarter since the Great Depression in the 1930s.

But for the third quarter, the US is tracing out a V-shaped bounce and likely grew somewhere between 30 - 35% at an annual rate, the fastest increase in real GDP for any quarter since at least World War II. The rebound is due to two things...a shift in activity toward businesses that were able to stay open because they were "essential" or found new ways of getting things done, and the actual reopening of businesses in recent months. Still, because many types of businesses are regulated, and because some companies will never reopen, it looks like it'll take until late 2021 for real GDP to fully get back to where it was pre-COVID-19.

Yet, stock market investors are not buying shares of GDP, they're buying shares of specific companies providing specific goods and services, many of which have had and will have robust profits or healthy rebounds in profits to entice investors.

Economy-wide corporate profits peaked in the fourth quarter of 2019 but then fell 12% in Q1 and another 10.3% in Q2. Converting these figures into annualized changes, profits declined at a 37.6% rate in the first half of 2020, versus a total 2-quarter drop of 19.2% for real GDP.

In other words, profits dropped faster than the overall economy.

Look for this process to go in reverse for the third quarter and beyond.

First, it's normal for profits to grow faster than the economy in the early stages of economic recoveries. The profit share of GDP bottomed at about 7% in both the 2001 and 2007-09 recessions, but eventually peaked north of 12.0% of GDP. They are now 9.4% of GDP

Second, the labor share of GDP (wages, salaries, and fringe benefits) surged in the first half of the year as firms reduced payrolls rapidly but not quite as rapidly as production fell. Many employers operated on a forward-looking basis, realizing they could ill afford to layoff workers who they figured they would want and need when the crisis passed. But that also means less of an increase in payroll costs as the economy heals.

Third, many firms have trimmed other costs, beyond payrolls, supporting the bottom line. Think less travel and less office space, in particular. Yes, of course, airlines, for example, get hurt when fewer people travel for business, but they can trim costs, so a dollar saved by the firm for which someone is traveling doesn't need to mean a full dollar less in profit for the firm providing travel services.

Bottom up forecasters have been predicting record levels of overall corporate profits next year, and we concur from a top down approach. Bottom line, the rise in stocks is not based on fantasy, but the fact that profits and low interest rates continue to reflect undervalued equity prices for most industries

DougMacG

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Re: Webury: Profits poised for growth
« Reply #78 on: October 12, 2020, 01:58:57 PM »
Also someone needs to point out that profits going up is a good thing. It's what makes employment and greater investment possible.

Crafty_Dog

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Re: The Great American Reopening , , , inflation?
« Reply #79 on: October 14, 2020, 01:47:36 AM »
The Consumer Price Index Rose 0.2% in September To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/13/2020

The Consumer Price Index (CPI) rose 0.2% in September, matching consensus expectations. The CPI is up 1.4% from a year ago.

Energy prices rose 0.8% in September, while food prices were unchanged. The "core" CPI, which excludes food and energy, rose 0.2% in September, also matching consensus expectations. Core prices are up 1.7% versus a year ago.

Real average hourly earnings – the cash earnings of all workers, adjusted for inflation – declined 0.1% in September but are up 3.3% in the past year. Real average weekly earnings are up 4.1% in the past year.

Implications: Inflation was on the rise in the third quarter, as the consumer price index rose at one of the fastest 3-month paces since before the last recession. Over the past three months, consumer prices are up at a 4.7% annualized rate, well above the Federal Reserve's inflation target of around 2%. However, don't expect this to change the Fed's plan to keep short-term rates near zero for the foreseeable future. Given the drop in prices earlier this year during the worst of the pandemic and related shutdowns, consumer prices are up a tepid 1.4% versus a year ago. Still, the recent burst of inflation hints at the impact the massive 23.6% increase in the M2 money supply can have as supply chains continue to recover. The typically volatile energy category rose 0.8% in September, led higher by a 4.2% increase in natural gas prices, while food prices were unchanged on the month. Strip out the impacts from the food and energy sectors, and "core" prices increased 0.2% in September. Coming off historically large increases in July and August, "core" inflation has been rising at the fastest pace since the early 1990s, although this follows declines in March through May and core prices are up a pedestrian 1.7% in the past year. One of the biggest drivers of "core" prices in September was used cars and trucks, where prices rose 6.7%, as dealers had lower inventory levels due to fewer trade-ins during the pandemic while they also experienced a surge in buyer demand. Some other contributors in July were hospital services (0.6%), new vehicles (0.3%), and housing (0.2%). We expect inflation will continue to rise in the months ahead toward the 2% - 3% annual pace of inflation that was in effect before the Coronavirus wreaked havoc on global economies. However, underlying fundamentals point to a higher risk of rising inflation than after the 2008 recession. The Coronavirus pandemic is the first recession on record where personal income has increased, due to government stimulus checks and boosted unemployment insurance payments that replaced greater than 100% of wages for many workers. Meanwhile, measures like industrial production and the unemployment rate demonstrate that the actual production of goods and services remains depressed relative to pre-pandemic levels. That mismatch between supply and demand will eventually mean too many dollars chasing too few goods, especially if further stimulus measures continue to lean on the same policies. That said, it's clear that the economic recovery is under way, the worst economic quarter in the post-World War II era is behind us, and the question now shifts to how quickly we recover.