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Cited: Reuters/The Economist

On August 9, San Francisco Federal Reserve Bank researchers said there is a good chance that the economy will slip back into a recession sometime in the next 2 years, but it is unlikely to happen in the next few months. That means that over the next 8 teen-24 months the probability of another recession is higher than that of expansion according to the researchers in the latest issue of the regional Fed banks Economic Letter.

Concern has risen in recent months that the United States might be headed for a ‘double-dip’ recession as measures of consumer spending and confidence have dropped and private company hiring has fallen short of expectations.

The soft economic data will be top of mind tomorrow when members of the Fed’s monetary policy-setting committee meet. Recent comments from Fed officials signal strong disagreement over whether the Fed — the U.S. central bank — should move to offer further support to the economy than it already has.

The researchers — Travis Berge, a graduate student at the University of California, Davis, and Oscar Jorda, a professor there as well as a visiting scholar at the San Francisco Fed — used leading economic indicators to try to predict the possibility of a renewed economic downturn.

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The experiment yielded vastly different results, depending on which indicators were used. But overall, they said, the numbers “indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer.”

“Of course, economic policy can strongly influence the outcome,” the researchers said. “The policies that are adopted today could play a decisive role in shaping the pace of growth.”

Any forecast 24 months into the future is very uncertain. At two years out, the odds of recession vary from almost three times more likely than expansion, to expansion being almost five times more likely than recession, depending on which LEI components are used. Nevertheless, LEI forecast trends indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer, even if the data suggest that a renewed recession is unlikely over the next several months. Of course, economic policy can strongly influence the outcome. The policies that are adopted today could play a decisive role in shaping the pace of growth.

This is the “animal spirits” aspect of business activity. An economy is the product of billions of aggregated decisions, and all those decisions are made based on beliefs about what everyone else is going to do. And the recursive nature of this process means that multiple equilibria are possible. And the goal of policy is to keep the economy out of bad equilibrium. And what much of that comes down to is expectations management.

The double-dip question is do we believe policymakers can manage expectations in a way to keep the likelihood of a recession return and low level? If you have a sick feeling in your stomach when you hear this question, you are not alone.

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My Take: I would like to know who said we were out of recession! There are still too many people without jobs, too many people losing their homes to foreclosure and prices are still going sky-high. The ones who can tell this the most are the smokers. Thanks to so much legislation and taxes people who smoke really can’t afford it anymore. Some still manage to purchase their cigarettes and pay their bills. Others find it difficult and resort to other methods. That other method is the electronic cigarette. Electronic cigarettes are not only cheaper, they are better for your health because they don’t have any of the carcinogens.

Of course, the FDA has reserved their opinion until further testing can be done. In the meantime, smokers breathe easier, in more ways than one, because of the E-Cig or e cigarette, as it is sometimes called. It would be nice if there were alternatives for other things that people need that were cheaper.

It is really bad when you’ve noticed that parents are unable to get the formal dresses for their daughter’s prom date for the tuxedos for their son’s prom date. It’s even worse when a father can afford to buy his daughter’s bridesmaid’s dresses. Things are better start changing quick printers might be another revolution in this country.

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Cited: AP

On November 22, Wall Street got a boost from improved retail sales, but there is little hope for an enthusiastic holiday shopping season that could actually improve the economic recovery. The room by a surge in car sales, the October figures did exceed economists extra patience. However, because many consumers have a lot of debt and the rising unemployment, economists do not for see significant spending until well after the end of the year. Even optimists predict scant improvement over last year’s holiday season.

Consumer spending accounts for about 70% of total economic activity, so wary shoppers are a worrisome sign for retailers entering the crucial holiday season.

“U.S. consumers are no longer panicked, but they remain cautious,” said Mark Zandi, chief economist at Moody’s Economy.com. “They are spending just enough to keep the economy out of recession, but not enough to fuel a self-sustained expansion.”

Retail sales rose 1.4% last month, the Commerce Department said. But excluding a big rebound in auto sales, the gain was just 0.2%. Strength at general merchandise stores like Wal-Mart and Target was offset by sales declines at furniture stores, appliance stores and hardware stores.

Zandi said one telling statistic about household finances was that the number of bank credit cards in circulation has fallen 18% since the year began. That’s happened as banks facing soaring loan losses have tightened credit standards.

Consumer credit has now fallen for a record 8 straight months through September and households are struggling to manage their debt levels after the most severe recession since the 1930s.

Federal Reserve Chairman Ben Bernanke warned Monday of “important headwinds,” such as the weak job market and tight credit conditions. These forces “likely will prevent the expansion from being as robust as we would hope,” he told the Economic Club of New York.

On Wall Street, major stock indexes rose more than 1 percent to new 13-month highs after the retail sales figures were released. The Dow Jones industrial average jumped 136 points to 10,406 and the Standard & Poor’s 500 index closed above the 1,100 mark for the first time in more than a year.

The overall economy, as measured by the gross domestic product, resumed growing in the July-September quarter at what the government estimated was an annual rate of 3.5%. That was a sharp rebound after a record four straight declines in GDP.

Those who do not want to think about the bad and want to think about good health . . . Good health begins at home. Too many people are obese in this country and to many people smoke. The two biggest health hazards our society faces. If you absolutely insist on smoking try an electronic cigarette. You can get all the nicotine you want and none of the bad stuff! Of course, you should get the Njoy starter kit when you’re ready. This means you could quit smoking and lose weight with HCG drops. Many people worry about gaining weight when they quit smoking. No worries here because you still get the nicotine and with the weight loss drops, you will still lose weight.

Analysts noted that the retail sales report Monday included a sharp downward revision to sales in September. The government also reported last week that the nation’s trade deficit rose in September by the largest percentage in a decade. As a result, third-quarter GDP is expected to drop to a more modest 2.8% growth rate when the government releases a revised estimate next week.

Growth for the current quarter is expected to be around 3%. But, analysts said, growth in the first half of next year could slow to around half that pace as consumer spending falters and government stimulus programs begin to wane.

Growth at such a weak rate would raise the threat of a possible double-dip recession. That’s especially true with unemployment, now at a 26-year high of 10.2% and expected to keep rising into next year.

“It seems unlikely that households will be able to spend more freely anytime soon,” said Paul Dales, U.S. economist at Capital Economics.

Retailers last week gave muted holiday outlooks as they reported third-quarter earnings. Wal-Mart Stores Inc. and Kohl’s Corp. both said they plan to discount aggressively. J.C. Penney said it expects sales for the quarter that includes the holidays to fall.

According to a Gallup poll released Monday, Americans expect to spend $638 on Christmas gifts, equal to record-lows from November and December of 2008.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, expects overall holiday sales will rise about 1% from last year, a historically weak performance.

The big swing in overall retail sales activity reflected a recent roller coaster ride for auto sales. New-car sales surged in August as shoppers rushed to take advantage of the government’s Cash for Clunkers sales incentives, which expired at the end of August. Sales then plunged in September.

For October, auto sales jumped 7.4%, recouping about half of the 14.3% drop in September. The 0.2% increase in retail sales, excluding autos, was down from a 0.4% rise in September. It was the weakest showing since July.

Bernanke stated that banks dealing with the wreckage of the recession and bad real estate loans could slow progress in an effort to get credit flowing more freely when commenting on the economic outlook. The fact is that credit difficulties will hinder businesses who wish to expand and hire.

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My Take: I have been reading many articles about the recession. Most of those articles are very depressing. Whatever happened to hope? Why don’t some people write articles about increasing sales even if their miniscule. Inspiring people to look to the future with hope just might help the recession along a little bit more. Otherwise, were going to see something like what happened when the Great Depression started. People jumping out of skyscrapers because they cannot face what is happening.

That means that people will be spending money on funeral services and urns instead of buying Christmas presents. It is bad enough to have to buy pet urns when you lose a pet, but it is even worse when you have to buy one or family member. I, for one, do not want to think of how bad the economy is, I would rather think about how good it is getting!

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