What happened to all of the doom and gloom economic threads?

Feb. 16 (Bloomberg) -- Wholesale costs in the U.S. increased for a seventh consecutive month in January, led by higher prices for fuel.

The producer price index rose 0.8 percent, Labor Department figures showed today in Washington. The figure matched the median forecast in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy costs, rose 0.5 percent, the biggest rise since October 2008.

Growing economies in Asia and Latin America are boosting global demand for oil and other imported commodities, raising input costs for American factories. As the manufacturing industry rebounds, U.S. companies find it easier to pass along higher costs to corporate clients than to consumers, a sign the recovery is still broadening out.

“The big increase in energy and food prices is starting to feed through down the inflation pipeline, but the effects of higher prices are diminished as you go through the supply chain,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto. “Even if manufacturers manage to push prices up, I can’t see retailers doing it at all.”

Futures on the Standard & Poor’s 500 Index expiring next month rose 0.3 percent to 1,330.80 at 8:32 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, was little changed from late yesterday at 3.61 percent.

Food, Energy
Estimates for January producer prices in the Bloomberg survey ranged from 0.3 percent to 1.4 percent. Prices excluding volatile food and energy costs were forecast to rise 0.2 percent for a second consecutive month.

The cost of food rose 0.3 percent in January from a month earlier, spurred by a 14 percent gain in vegetables. Energy prices rose 1.8 percent, led by higher diesel fuel and gasoline.

The cost of passenger cars fell 0.1 percent last month and were down 2 percent for the prior 12 months.

Prices for some finished consumer goods such as pharmaceutical preparations, tires and toys also boosted the headline number in January.

Prices of capital goods rose 0.3 percent last month after a 0.1 percent gain in December.

Expenses for intermediate goods rose 1.1 percent from the prior month and were up 6 percent from a year earlier, today’s report showed.

Prices of crude goods increased 3.3 percent in January from the previous month, and surged 10 percent for the 12-month period.

Even with soaring commodity costs, the Fed remains concerned that consumer inflation is below its annual target of 1.6 percent to 2 percent.

Commodity Prices
“Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward, the Fed said Jan. 26 after its latest policy meeting. “Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.”

An unemployment rate that’s held at or above 9 percent since May 2009 is also restraining labor costs. The threat of deflation, or a prolonged decline in prices that’s harmful to the economy, prompted Fed policy makers November 3 to announce the central bank’s purchase of $600 billion in additional Treasury securities by the end of June.

Producers are having varying degrees of success in raising prices for wholesalers.

PepsiCo Inc.
PepsiCo Inc., the world’s largest snack-food maker, last week posted a drop in fourth-quarter profit and projected full- year earnings growth that trailed analysts’ estimates as commodity costs increase.

PepsiCo Chief Executive Officer Indra Nooyi said the forecast reflects “extraordinary” costs for raw materials, and that raising prices likely will be difficult.

PepsiCo’s commodity costs may rise by $1.4 billion to $1.6 billion this year, Chief Financial Officer Hugh Johnston said on a conference call. The company, which plans to make up for some of that by raising prices, probably won’t be able to recover the full expense.

Illinois Tool Works, a Glenview, Illinois-based diversified manufacturer of engineered products and specialty systems, is one company that has been able to pass on higher costs to customers.

“Costs have continued to rise, even in the first quarter, for things like steel,” Ronald D. Kropp, chief financial officer, said in a conference call on Jan. 31. “We have put price increases in place. Our goal is to recover not just the cost, but also the margin.”

Goods Imported
Producer prices are one of three monthly inflation gauges reported by the Labor Department. Prices of goods imported into the U.S., released yesterday, rose 1.5 percent in January from the prior month, more than the Bloomberg survey median.

Consumer prices, the broadest of the three measures, probably climbed 0.3 percent in January from the prior month, according to the Bloomberg survey. The figures, due tomorrow, may also show the cost of living excluding fuel and food rose 0.1 percent for a third month.

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trysail said:

Well, let's see: 0.8% × 12 = 9.6% annual rate.


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http://noir.bloomberg.com/apps/news?pid=20601110&sid=aysG2UXlVnNw


Wholesale Prices in U.S. Increase 0.8%, Led by Fuel
By Bob Willis

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koalabear said:

Could Orange Juice Become A Luxury?


http://blogs.forbes.com/benzingainsights/2011/02/02/could-orange-juice-become-a-luxury/

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trysail said:

I'll tell you one thing— I'm getting goddamned sick and tired of the government stealing from savers ( a/k/a the liquid and the prudent ). What appears below is a graph of the difference between the CPI and short term interest rates. For most of this decade, first Greenspan and now Bernanke, the Federal Reserve has kept short term rates below inflation— and the way they've done it is by PRINTING MONEY. That is nothing short of theft. The piper will be paid; there will be a day of reckoning and it's not going to be pretty. When the Fed STOPS PRINTING MONEY, there are a couple of possibilities: (1) interest rates fly up and (2) inflation roars ahead.

TANSTAAFL​

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mercury14 said:

I watch Bloomburg where they talk about this all the time. Not once have I seen an analyst say these things about the Fed's recent actions. Their moves were too small to have this kind of effect.

Lit's Doom & Gloom right wingers say otherwise. But who should I believe - Lit's right wing or actual analysts?

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You never know who you might run into around here.

By the way, today's CPI report ... Well, I suppose you have enough of a command of arithmetic to annualize that figure.

I can predict for you the motion of heavenly bodies but not the madness of crowds.

-Isaac Newton​

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mercury14 said:

I watch Bloomburg where they talk about this all the time. Not once have I seen an analyst say these things about the Fed's recent actions. Their moves were too small to have this kind of effect.

Lit's Doom & Gloom right wingers say otherwise. But who should I believe - Lit's right wing or actual analysts?

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Five days before his inauguration, President-elect Barack Obama told the Washington Post that entitlement reform could no longer be kicked down the road. He then spent the next two years kicking — racking up $3 trillion in new debt along the way — on the grounds that massive temporary deficit spending was necessary to prevent another Great Depression.

To prove his bona fides, he later appointed a deficit-reduction commission. It made its report last December, when the economy was well past recession, solemnly declaring that “the era of debt denial is over.”

That lasted all of two months. The president’s first post-commission budget, submitted Monday, marks a return to obliviousness. Even Erskine Bowles, Obama’s Democratic debt-commission co-chair, says it goes “nowhere near where they will have to go to resolve our fiscal nightmare.”

The budget touts a deficit reduction of $1.1 trillion over the next decade.

Where to begin? Even if you buy this number, Obama’s budget adds $7.2 trillion in new debt over that same decade.

But there’s a catch. The administration assumes economic-growth levels higher than private economists and the Congressional Budget Office predict. Without this rosy scenario — using CBO growth estimates — $1.7 trillion of revenue disappears and U.S. debt increases $9 trillion over the next decade. This is almost $1 trillion every year.

Assume you buy the rosy scenario. Of what does this $1.1 trillion in deficit reduction consist? Painful cuts? Think again. It consists of $1.6 trillion in tax hikes, plus an odd $328 billion of some mysterious bipartisan funding for a transportation trust fund (gas taxes, one supposes) — for a grand total of nearly $2 trillion in new taxes.

Classic Obama debt reduction: Add $2 trillion in new taxes, then add another $1 trillion in new spending and, presto, you’ve got $1 trillion of debt reduction. It’s the same kind of mad deficit accounting in Obamacare: It reduces debt by adding $540 billion in new spending, then adding $770 billion in new taxes. Presto: $230 billion of “debt reduction.” Bialystock & Bloom accounting.

And what of those “painful cuts” Obama is making to programs he really cares about? The catch is that these “cuts” are from a hugely inflated new baseline created by the orgy of spending in Obama’s first two years. These were supposedly catastrophe-averting, anti-Depression emergency measures. But post-recession they remain in place. As a result, discretionary non-defense budget levels today are 24 percent higher than before Obama — 84 percent higher if you add in the stimulus money.

Which is why the supposedly painful cuts yield spending still at stratospheric levels. After all the cuts, Department of Education funding for 2012 remains 35 percent higher than in the last pre-emergency pre-Obama year, 2008. Environmental Protection Agency: 18 percent higher. Department of Energy: 22 percent higher. Consider even the biggest “painful cut” headline of all, the 50 percent cut in fuel subsidies for the poor. Barbaric, is it not? Except for the fact that the subsidies had been doubled from 2008 levels. The draconian cut is nothing but a return to normal pre-recession levels.

Yet all this is penny-ante stuff. The real money is in entitlements. And the real scandal of this budget is that Obama doesn’t touch them. Not Social Security. Not Medicaid. Not Medicare.

What about tax reform, the other major recommendation of the deficit commission? Nothing.

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mercury14 said:

I watch Bloomburg where they talk about this all the time. Not once have I seen an analyst say these things about the Fed's recent actions. Their moves were too small to have this kind of effect.

Lit's Doom & Gloom right wingers say otherwise. But who should I believe - Lit's right wing or actual analysts?

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trysail said:

If you watch it, one could reasonably hope that you'd have learned how to spell it.

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trysail said:

If you watch it, one could reasonably hope that you'd have learned how to spell it.

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mercury14 said:

I watch Bloomburg where they talk about this all the time. Not once have I seen an analyst say these things about the Fed's recent actions. Their moves were too small to have this kind of effect.

Lit's Doom & Gloom right wingers say otherwise. But who should I believe - Lit's right wing or actual analysts?

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The government in Washington D.C. seems to be going out of its way to obfuscate and confuse the American citizens as to various economic factors and what the reality is of the situation the people find themselves in. Instinctively the people know matters are worse than what they are being told and with the most incompetent and unscrupulous resident of the White House in the country's history in charge there is great unease that their government is not being honest with its citizens. More than ever the American people deserve to be told the truth.

Among the most confusing of statistics is the unemployment rate. The government adjusts for "seasonal factors", those who have supposedly dropped out of the labor force and some who are collecting or not collecting unemployment benefits. The result of these adjustments is a number no one accepts as reality.

There is one simple way to look at the job situation that, while not 100% scientifically accurate, does reflect the real employment situation.

In 2000 the population of the United States was, per the US Census, 281,421,906. In that same year the US Payroll Employment: Total Non-Agricultural was 130,781,000 or 46.6% of the population. The Bureau of Labor Statistics showed an unemployment rate then of 4.0%. Thus full employment in 2000 would have been 136,000.000 people or 48.3% of the population.

The most recent national census completed in April 2010 revealed the population of the country had increased to 309,745,538. In the same month of 2010 the US Payroll Employment: Total Non-Agricultural was 129,750,000 or 41.5% of the population. Per the full employment factor of 48.3% in 2000 there should be a full employment labor force of 149,607.000 in 2010.

Therefore using the actual payroll employment of 129,750,000 in 2010 versus the theoretical full employment of 150,226,000 the employment rate is 86.4%. Thus the unemployment rate is 13.6% as compared to the factors extant in 2000, the year of the last national census.

Essentially the unemployment rate is a statistical variable based on input and can be manipulated; however the bottom line is: over the past decade payroll employment has dropped by 1,031,000 while the total population has increased by 28,323,000. Had the country maintained the same employment level as in 2000 there should have been 13,310,000 more people employed instead 14,331,000 jobs were lost or not created.

The US Census Bureau estimates that by 2020 the population of the United States will be 342,000,000, an increase of 33 million versus 2010. Therefore to achieve the employment level established in 2000 by 2020 another 15,500,000 jobs will need to be created on top of the 14,331,000 lost in the previous decade. Therefore nearly 30 million jobs or 3 million per year over the next 10 years must be established to achieve the levels experienced in 2000.

The bottom line and the only meaningful job statistic the American people should pay attention to: if the monthly job creation number is not at least 250,000 every month then the United States is going backwards regardless of any games played by the various government agencies and their data.

Another area of obfuscation is the true cost of living and the rising cost of commodities and industrial raw materials.

The worldwide commodities markets are in a turmoil brought about by the lower yields for food staples, the upheavals in the Middle-East, the beginning of an economic recovery in the rest of the world and the inflationary impact of the Federal Reserve quantative easing programs. Some commodities such as cotton are up 140% over a year ago.

A key factor in the rise of commodity prices has been the decline in the value of the dollar. As points of comparison over the past two years: the Dollar has declined 16% versus the Japanese Yen, the Canadian Dollar by over 21%, and the Swiss Franc by 22%.

The best way to see the overall impact of commodity price increases is to track the various indices which contain a large basket of items within each category. Since February of 2009 all the major indices are up significantly. Despite the protestations of the Federal Reserve and the abandonment of fiscal responsibility of the Obama administration, these charts and the information they reveal will manifest themselves in the U.S. economy particularly coupled with the very real possibility of an oil cut-off form the Middle East.

This chart tracks the Agricultural Raw Material Index (increase 81% since 2009):

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There is simply no way these factors will not impact the inflationary trend here in the United States in the immediate future, killing any chance for a recovery. Rarely have all these indices been on such a sustained rise in such a short period of time, and unless there is another global recession they will continue to do so. Already other countries around the world have taken steps to fight inflation while the Federal Reserve is still contemplating deflation and continuing with its quantatative easing program (essentially printing money) while the Obama administration throws fuel on the fire by proceeding with its profligate spending agenda.

The American people should pay attention to theses indices. As long as these trends continue inflation will hit the shores of the United States regardless of any obfuscation or misreporting by the Government.

It is beyond time for truth telling in Washington D.C. as the economy begins to tip into another downturn that maybe further accelerated by the chaos in the Middle East.

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On my birthday -- the real one in 1956, not the anniversaries of it which I try hard to miscount -- all government spending in this country (and I do mean all of it: federal, state, and local spending down to the meter maids ticketing 3400 lb. Chevy Bel Airs) was 26% of national income, mostly for national defense. Non-defense spending was 12% at all levels.

Importantly, 1956 was no beacon year for the limited role of government. To get one of those liberty-loving, laissez faire kind of years you need to go back to Coolidge or perhaps even earlier, before mush-brained grand planners like Woodrow Wilson had their grip on the throttle of possibilities for good government. 1956 was, however, a year of prosperity, with a growing middle class and some very wealthy people, before the seeds of socialism sown decades earlier had grown into the choking weeds they are now.

Today, in the span of one man's life (mine has already exceeded the expectancy of anyone coming here from the Old World in the 17th century) we've seen nothing grow without restraint as much as Government. Our nation spends an astonishing 43% of its output on government of all forms, only 4.3% of which is for defense--including the high cost of real wars we are now waging. That's a surge to near-serfdom in 5 short decades. Government has become King in America, and we are its subjects. Government isn't finished with us yet, either. The Government has made promises to spend even more of our treasure in future generations, committing us to helpful programs of retirement, medical care, and more that are worth many multiples of our national output.

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If you are not in the happy position of earning at least slightly more than you spend, what portion of your household budget comes from borrowing, or selling the family silver? Is it the seemingly modest 3% that spelt M-I-S-E-R-Y for Charles Dickens' character, who wound up in debtors' prison. Or is it even worse than that? Say, a mind-boggling 43%?

In percentage terms, that is the expected shortfall between U.S. government receipts and expenditures in the 2011 federal budget.

According to revised numbers released last week, the Obama administration expects its annual income (or revenues) for fiscal 2011 to come in at $2.173 trillion, versus annual expenditures of $3.818 trillion. That leaves a deficit of $1.645 trillion. As a result, our government will have to borrow (or find other ways to paper over) 43 cents out of every dollar that it intends to spend.

The Obama administration has more than tripled the national deficit since the last full year of the Bush administration. In doing so, it has achieved a remarkable feat. It has made the gap between federal receipts and outlays even wider than it was at the height of World War II.

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Do the Obama budget excesses live up to Hayek's test of being necessary to long-term national survival? To the contrary, they imperil our future economic well-being.
Federal spending will reach an estimated 25.3% of GDP in fiscal 2011, up almost five percentage points since 2008.

To what end? Far from "kick-starting" the economy, the government's heavy reliance on deficit spending has only served to expand an already bloated public sector and to constrict the private sector. This is indeed the road to serfdom.

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The head of one of the US’s biggest industrial groups has launched a scathing attack on Barack Obama’s attempts to repair relations with companies, dubbing him “anti-business”.

Manufacturers could shift production out of the US to Canada or Mexico as a result, warned George Buckley, chief executive and chairman of 3M.
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“We are now exporting science overseas to China, India, Germany, building labs there. There’s a good strategic reason for it, but we also have no choice – if we can’t get the people here and we’re competing with the people there, we have no choice but to do it locally.”

Mr Buckley struck a gloomy note on the US economy. “The macro numbers seem to be improving but when we look at the micro numbers – at what’s going on in housing, automotive, in manufacturing in general – it’s hard to get enthusiastic about it,” he said.

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Over a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That would likely mean less hiring and higher unemployment.

Americans are less prepared to absorb the spike in gasoline prices than they were the last time prices rose this high, in 2008, because unemployment is higher and real estate values are lower, says David Portalatin, an analyst for the market research firm NPD Group.

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...regardless of when the numbers might start to improve, the prospects for the sort of employment growth needed to reduce the unemployment rate meaningfully are not good. As I have been noting, as long as our government policies create the incentive to move production jobs overseas, it will be difficult to get the kind of jobs recovery we saw during previous economic rebounds prior to 2000.

We have exported over 10 million jobs over the last decade or so. It would be nice to point to one magic bullet that could reverse the trend. Our corporate tax rate is one of the very highest in the world. President Obama says he might consider a cut in the nominal rate but only if loopholes are closed that will negate the benefit. That is hardly an endorsement of lower taxes for business. In the wake of a serious recession, government response has been to increase its role as policeman, increasing all sorts of regulations without dismantling others that are obsolete and dysfunctional. Once again, there is talk in Washington of getting rid of a few high profile regs that everyone finds either foolish or overbearing, but there are few signs of a directional shift. The costs of compliance are particularly burdensome to small business.

Today, small to medium sized businesses can no longer go public. The costs of going public are simply too high. Some skirt the issue by going public in London or Hong Kong. There is something obviously illogical about American businesses forced to go overseas to raise equity capital. Industries formerly funded by venture capital, such as pharmaceuticals and medical devices, have to look elsewhere because bureaucracy has lengthened the approval process beyond the life expectancy of most venture funds. Sarbanes-Oxley, an outgrowth of the Enron mess, now clearly provides more costs than benefits. The costs force small companies to return to private status shutting them off from the ability to raise capital efficiently.

Indeed our economy is becoming very bifurcated. Large companies can raise capital cheaply and easily in the public markets, and they can get loans from the major banks. Overbearing regulators still restrict access to banks for many small businesses. Real estate financing remains almost non-existent, other than conforming mortgages running through Fannie Mae and Freddie Mac. ObamaCare and Dodd-Frank add layers of costs, once again burdening small businesses much more than large ones. Few new businesses have exposure to outside start-up capital. Yet, companies like Facebook that require little start-up capital, can grow and flourish. But the IT software and services segment is the exception to the rule, not the rule itself.

The Federal Reserve only adds to the problem with its accommodative monetary policy. The dollar has been depreciating close to 7% annually since the Internet bubble burst. It is the equivalent of a devaluation of more than 50%. Most of us only see this through higher import prices and that hasn’t hurt so much because we have gone through two major recessions in the past decade, leaving a huge employment and capacity gap to offset the inflationary pressures of a weak dollar. But a weak currency always chases capital away. That is both foreign and domestic capital. Capital will always flow in the direction of strong currencies. Hence, manufacturing will go from the United States to China.

The solution, therefore, must be multi-faceted. It must encompass deficit reduction, less regulation, a more favorable tax structure, and tighter monetary policy. None are on the immediate horizon. Hence once again job growth this cycle is going to be muted. That almost certainly means the middle class standard of living will remain under pressure, and unemployment will remain historically high. The good news is that the gaps that remain should keep inflation moderate...

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trysail said:

I didn't write what appears below. I know the person who did. That person would not want credit or to be identified here.

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