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IMF World Economic Outlook available

October 9, 2009 by Charlie

For those who may not know, the International Monetary Fund (IMF) is an organization of 186 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The World Economic Outlook presents analysis and projections concerning economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF’s global surveillance activities.

Click here for the executive summary and here for the full document.

Filed Under: News Tagged With: economic forecasts

Light at the end of a long tunnel

February 5, 2009 by Charlie

If you noticed, I started a new poll that will last during the spring season. It appears on the right side of this page and asks about monthly sales compared to this time last year. Feel free to participate each month so that we can gauge how we are progressing through the season. Vote once, but not often!

Also, the latest from Bill Conerly…see below.

Filed Under: News Tagged With: economic forecasts

White Christmas

December 25, 2008 by Charlie

Merry Christmas to all and best wishes for a prosperous 2009! Enjoy this rendition of one of our classic Christmas ballads!

[youtube=http://www.youtube.com/watch?v=Ooc5eJc5SHA]

Filed Under: News Tagged With: economic forecasts

Graphically speaking…

December 14, 2008 by Charlie

The latest from Bill Conerly (click on each graph below to enlarge):

Filed Under: News Tagged With: economic forecasts, financial markets

A good overview of economic policy

November 29, 2008 by Charlie

As usual, Mankiw hits the nail on the head (in his latest NYT column):

IF you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront.

According to Keynes, the root cause of economic downturns is insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.

The situation reverses, Keynesian theory says, only when some event or policy increases aggregate demand. The problem right now is that it is hard to see where that demand might come from.

The economy’s output of goods and services is traditionally divided into four components: consumption, investment, net exports and government purchases. Any expansion in demand has to come from one of these four. But in each case, strong forces are working to keep spending down.

CONSUMPTION The Conference Board reports that consumer confidence is near its record low. It is easy to understand why consumers are so scared. House values have declined, 401(k) balances have shrunk and unemployment is up. For many people, the sense of economic uncertainty is greater than they’ve ever experienced. When it comes to discretionary purchases, like a new home, a car, or a washing machine, wait-and-see is the most rational course.

A bit more saving is not entirely unwelcome. Many economists have long lamented the United States saving rate, which is low by international and historical standards.For the overall economy, however, a recession is not the best time for households to start saving. Keynesian theory suggests a “paradox of thrift.” If all households try to save more, a short-run result could be lower aggregate demand and thus lower national income. Reduced incomes, in turn, could prevent households from reaching their new saving goals.

INVESTMENT In normal times, a fall in consumption could be met by an increase in investment, which includes spending by businesses on plant and equipment and by households on new homes. But several factors are keeping investment spending at bay.

The most obvious is the state of the housing market. Over the past three years, residential investment has fallen 42 percent. With house prices continuing to decline, increased building of new homes is not likely to be a source of robust demand over the next few years.

Business investment has lately been stronger than residential investment, but it is unlikely to pick up the slack in the near future. With the stock market down, interest rates on corporate bonds up and the banking system teetering on the edge, financing new business projects will not be easy.

NET EXPORTS Not long ago, it looked as if the rest of the world would save the United States economy from a deep downturn. From March 2004 to March 2008, the dollar fell 19 percent against an average of other major currencies. By increasing the price of foreign goods in the United States and reducing the price of American goods abroad, this depreciation discouraged imports and bolstered exports. Over the last three years, real net exports have increased by about $250 billion.

In the coming months, however, the situation may well go into reverse. As the United States financial crisis has spread to the rest of the world, fast-moving international capital has been looking for a safe haven. Ironically, that haven is the United States. Since March, the dollar has appreciated 19 percent, a move that will put a crimp in the export boom.

GOVERNMENT PURCHASES That leaves the government as the demander of last resort. Calls for increased infrastructure spending fit well with Keynesian theory. In principle, every dollar spent by the government could cause national income to increase by more than a dollar if it leads to a more vibrant economy and stimulates spending by consumers and companies. By all reports, that is precisely the plan that the incoming Obama administration has in mind.

The fly in the ointment — or perhaps it is more an elephant — is the long-term fiscal picture. Increased government spending may be a good short-run fix, but it would add to the budget deficit. The baby boomers are now starting to retire and claim Social Security and Medicare benefits. Any increase in the national debt will make fulfilling those unfunded promises harder in coming years.

Keynesian economists often dismiss these long-run concerns when the economy has short-run problems. “In the long run we are all dead,” Keynes famously quipped.

The longer-term problem we now face, however, may be more serious than any that Keynes ever envisioned. Passing a larger national debt to the next generation may look attractive to those without children. (Keynes himself was childless.) But the rest of us cannot feel much comfort knowing that, in the long run, when we are dead, our children and grandchildren will be dealing with our fiscal legacy.

So what is to be done? Many economists still hope the Federal Reserve will save the day. In normal times, the Fed can bolster aggregate demand by reducing interest rates. Lower interest rates encourage households and companies to borrow and spend. They also bolster equity values and, by encouraging international capital to look elsewhere, reduce the value of the dollar in foreign-exchange markets. Spending on consumption, investment and net exports all increase.

But these are not normal times. The Fed has already cut the federal funds rate to 1 percent, close to its lower bound of zero. Some fear that our central bank is almost out of ammunition.

Fortunately, the Fed has a few secret weapons. It can set a target for longer-term interest rates. It can commit itself to keeping interest rates low for a sustained period. Most important, it can try to manage expectations and assure markets that it will do whatever it takes to avoid prolonged deflation. The Fed’s decision last week to start buying mortgage debt shows its willingness to act creatively.

It is hard to say how successful monetary and fiscal policy will be in avoiding a deep downturn. But as events unfold, you can be sure that policymakers in the Fed and Treasury will be looking at them through a Keynesian lens.

In 1936, Keynes wrote, “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slave of some defunct economist.” In 2008, no defunct economist is more prominent than Keynes himself.

N. Gregory Mankiw is a professor of economics at Harvard.

Filed Under: News Tagged With: economic forecasts

Frankel on the recession

November 11, 2008 by Charlie

Professor Jeffrey Frankel of Harvard University’s Kennedy School of Government is also on the Recession Dating Committee at the National Bureau of Economic Research.

Last night, he was on Bloomberg discussing the recession. He has a terrific piece in the cafe on the same subject, titled, NOW Are We In Recession?

Go check em out.

Filed Under: News Tagged With: economic forecasts

In the tunnel

November 7, 2008 by Charlie

The latest from Bill Conerly (click on each graph below to enlarge):

Filed Under: News Tagged With: economic forecasts

The economics underlying politics?

November 3, 2008 by Charlie

One of the things this election will be notable for is how the Press is using digital media and interactive pages to dissect the issues and polls. Barry Rithholtz has gathered a slew of them and posted them in the Digital Media Tab.

Here’s a terrific example: Forget the polls for a moment, and consider instead what might be driving them. The WSJ’s Real Time Economics does just that, looking at a state-by-state polls compared to key economic indicators. These are changes in home prices, employment, and income (click here to go to the original interactive version).>

Source: Phil Izzo, WSJ, November 1, 2008, 1:47 pm

Filed Under: News Tagged With: economic forecasts, trends

The psychology recession

October 20, 2008 by Charlie

From the SAF Floral Trend Tracker newsletter:

It ís too early to show up on the official gauges, but we’re surely in a recession now. The economy was actually holding up through most of the summer, but the news since August has been dreary, and one-sided.

The credit turmoil, the bank failures and restructuring, and the stock market volatility has been bad enough, and the bipartisan drumbeat of “This bailout bill has to be passed now!” has to concern the most financially secure, while increasing the anxiety of the rest of us. The desperation of the nation’s political leaders warning us about being on the edge of financial collapse has exacerbated the problem.

Strong Engines. The economic engine of growth remains strong — productivity growth has been vibrant, and exports have been soaring. That allows businesses to absorb higher prices on their inputs without raising the price on their output and helps maintain profit levels. If productivity growth were limping along, or declining, then firms would find business expansion much more difficult.

Moreover, a broad measure of economic activity known as real (or inflation-adjusted) final sales jumped a very healthy 4.4% during the second quarter, up from just 0.9% during the first quarter. The fact that it was so much higher than real GDP’s 2.8% increase means that households and businesses bought a lot out of business inventories during the quarter (GDP equals final sales plus the change in business inventories). A big drop in inventories, as we just experienced, foretells increased production activity as businesses respond to strong demand and rebuild inventory to desired levels.

Sticky Wheels. But now credit, the oil lubricating the engine, has turned to sludge. That’s meant that lots of companies, large and small, are facing problems financing their regular operations, much less their business expansions. This troubling development will cause and prolong our downturn. Without the credit market problems, the housing market workout and the oil price shock were being handled without driving the economy into a recession. The recently passed financial bailout doesn’t solve the problem, but it will help as it removes many of the toxic mortgage securities off corporate balance sheets.

We are getting a break in oil prices, and the price of gas has dropped by 20% or so since the summer. Sure, that’s after a big run-up, and itís tough to know if the price decline will prove to be a brief respite or a long-lasting correction. But the lower prices are giving household and corporate budgets more breathing room.

The economy will recover when confidence replaces fear in the credit markets, as it will (it always has). We’ll still be reassessing value in many housing markets, and the recovery may be subdued as consumers avoid over-leveraging themselves with the purchase of big-ticket items. But then sticking to a low-debt diet will be a good thing, as we’ve learned.

Author Robert Barr is an economist in Northern Virginia

Filed Under: News Tagged With: economic forecasts, trends

Regional economic contractions vs growth

October 6, 2008 by Charlie

Nice depiction of where the pain is being felt most:
click for ginormous version

Marsh850x1381

This is obviously having a political effect:
click for ginormous version

05maps950

Sources:

For Most Cities, Recession Has Arrived
BILL MARSH
NYT, October 4, 2008
http://www.nytimes.com/2008/10/05/weekinreview/05marsh.html

Economic Unrest Shifts Electoral Battlegrounds
ADAM NAGOURNEY and JEFF ZELENY
NYT, October 4, 2008
http://www.nytimes.com/2008/10/05/us/politics/05map.html

Filed Under: News Tagged With: economic forecasts, trends

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