Monday, May 24, 2010

Hee Haw Economics

With respect to the late, great, Archie Campbell (video clip at the bottom)...

Q1 GDP increased at a rate of 3.2%

That’s good. The economy continues to grow and is growing at a rate slightly above average.

No, that’s bad. The economy usually snaps back much stronger when recovering from a deep recession.

Unemployment increased to 9.9% in April.

That’s bad. There are over 15 million people unemployed and the rate is approaching the psychologically depressing 10% mark.

No, that’s good. The unemployment rate increased despite the fact there was job growth of 290,000. This means the job market is improving and many “discouraged workers” have started looking for jobs again.

The housing market is showing signs of life

That’s good. Sales of new and existing houses are very strong and builder confidence is improving.

No, that’s bad. The housing market was being propped up by the tax credit that ended in April and action by the FED to support lower mortgage rates. There was a steep drop in building permits in March and inventories of new houses remains very high. This means future demand may not be as strong.

Gas prices are going down.

That’s good. Lower gas prices provide people with more disposable income which supports higher consumer spending.

No, that’s bad. Gas prices are an indicator of economic health. Prices are going down while crude is still spewing in the gulf. Something isn’t right.

Wal-Mart sales are up 6%

That’s good. Sales are recovering for many major retailers, indicating consumer spending is growing.

No, that’s bad. Wal-Mart’s U.S. sales are actually down 1.4%. Wal-Mart claims that many of its customers are so strapped for cash that they are making fewer shopping trips (due to gas expense) and using more food stamps.

Business inventories are increasing.

That’s good. Businesses are restocking in response to the severe inventory draw down and stronger consumer spending. The inventory build-up has boosted manufacturing activity and has been a strong contributor to GDP growth.

No, that’s bad. Inventories are approaching levels that are adequate for current spending amounts. This means the boost provided by inventory restocking is ending.

The government monetary and fiscal stimulus is working.

That’s good. The government’s efforts have stabilized the economy and have bought time for the economy to begin growing on its own.

No, that’s bad. The stimulus can only take us so far. As the stimulus begins to wear off, expect the economy to slow later in the year. The latest Leading Economic Index was negative for the first time in over a year.

The stock market went down over 300 points in one day last week.

That’s bad. The stock market rally has been the most positive economic news of the last year. The Greek freaks and slower economic growth could stop the rally.

No, that’s good. Several market analysts are predicting an ugly stock market crash. If the market is headed down, better that it happens in tolerable chunks instead of a frightening decent. Even if the stock market suffers a significant drop, it is critically important that consumer panic does not return.

A woman I saw at the supermarket was buying over 20 packages of frozen peas.

That’s good. If you have that much money to stock up on frozen peas, things can’t be that bad.

No, that’s just plain weird. I just hope her family is not surviving on only pea soup.

Check out the Archie Campbell clip: That's Good

No comments:

Post a Comment