Earlier in the week, the price of a barrel of oil dropped from $145 to about $125. The $20 cut in price is less of a relief than the diminished prospect of even higher gas prices. Indeed, gas prices hit a 7-week low. Later in the week, there was a surprisingly strong report on durable goods orders. Finally, the good news was that the first hurricane of the season hit the Gulf of Mexico but did minimal damage to refining capacity, one factor in why crude oil prices came down.
Tuesday, July 29, 2008
10:00am Consumer Confidence (The Conference Board)
Consumer expectations have dropped dramatically, and jobs continue to shrink. Did confidence sink further or rebound a little?
Thursday, July 31, 2008
8:30am Gross Domestic Product (2Q — 2008) (Bureau of Economic Analysis)
Hours worked declined by about 1 percent (annualized). Productivity growth might have turned in another strong performance - perhaps 2 percent. That suggests about a 1 percent rise in GDP for the second quarter. It also reflects the positive impact, at least for one quarter, of rebate checks. Growth in the third quarter, with less impact from rebate checks and perhaps not quite as strong a rise in productivity, will be lower by several tenths. Financial market panic is a bigger issue than even energy prices. Finally, profit estimates won't be available for another month, but the assumption should be that profits declined for the fourth straight quarter, with another decline in the third quarter.
Friday, August 1, 2008
8:30am Employment Situation (Bureau of Labor Statistics)
The declines in jobs in the first half of the year were not large. They could be larger in the second half, starting with a 70,000-to-90,000 loss in July (manufacturing, construction, and a few service sector jobs, which would exclude health and education). If overall growth and profitability are still weak this summer, job losses might start to exceed 100,000 per month, with little change before year's end.
But sustained job weakness is still not enough to allow wage costs to fall below the 3.4 percent mark (year-over-year). Regionally, the Midwest and Northeast have been weak for some time. The South Atlantic region has gone from one of the strongest to one of the weakest. Wisconsin and New Jersey are examples of states where job losses are picking up steam. Colorado is one of the few states with some positive momentum.
The Conference Board Employment Trends Indexes for the regions suggest conditions are months away from turning around. A national turnaround is even further away - perhaps next spring.
Vehicle Sales
Despite low prices and low borrowing rates, vehicle sales remain minimal (about 15 million, annualized). They will not pick up even when the new 2009 models are introduced. Some hybrids are hot sellers. But the SUV and light truck markets have declined sharply, perhaps permanently - because the price of gasoline might approach $5/gallon or even $6/gallon.
Rising energy costs, higher food prices, and financial market disruption continue to take their toll across the globe. Virtually every country's Leading Economic Index shows recent declines. The only good news is the nearly $20 decrease in the price of a barrel of crude oil. Will the price relief prove ephemeral?
Stock prices globally were down between 5 and 10 percent through mid-July (from levels at the start of June). The lower price of crude oil allowed for a modest recovery in the second half of July. Will either (lower crude prices or higher stock prices) be sustained?
