Economic Data Roundup: Is This as Good as It's Going to Get?

A fair amount of economic data today that shows absolutely no clear picture of where the economy might be going. Let’s rip through it quickly.

• Retail sales were up 0.5% in May over April. Most of the increase is attributable to rising gasoline prices. Lots of stimulus money in the form of lower withholding started hitting in April and May. The consumer seems compelled to save not spend. (Census Bureau, WSJ Analysis)
• Initial jobless claims fell 24,000 to 601,000 last week. The four-week moving average dropped 10,500 to 621,750. (MarketWatch)
• The World Bank expects the global economy to shrink by 3% this year. Previously they had forecast a decline of 1.75%. (Reuters)
• Foreclosure filings in May dropped 6% from April but they were still 18% above the level of May 2008. There is simply no improvement in this sector of the economy. Despite a perceived rebound in sales and some very hot markets in lower priced homes, the inventory is most likely not going to be brought down in any appreciable amount once the new wave of foreclosures works its way through the pipeline. (Reuters)

One of the few guys I trust, Paul Volcker, had these thoughts: (From the WSJ)

Paul Volcker, Chairman of U.S. President Barack Obama’s Economic Recovery Advisory Board, said Thursday it is reasonable to expect that economic growth will resume in the U.S. late this year, but warned that a strong recovery is unlikely.

Addressing a financial forum in Beijing, the former Chairman of the U.S. Federal Reserve said that the U.S. faces “a long slog, with continuing high levels of unemployment.”

Volcker, known for successfully bringing inflation under control during his term at the Federal Reserve, said that the current economic situation “is not an environment in which inflationary pressures are at all likely for some time to come.”

In his prepared remarks, Volcker said that, although there will be no alternative to the U.S. dollar in the foreseeable future, “the ultimate logic of a globalized financial system is a world currency.”

“The theoretical premise that a system of floating exchange rates would promote swift and efficient adjustment has not been borne out in practice,” he said.

In the absence of a global currency, the dollar has provided a “workable, pragmatic approach,” he said.

Maintaining the purchasing power of the U.S. dollar is “the central responsibility of the United States,” Volcker said, adding that it is in the country’s own interests to do so.

As I was writing this, I had a strange thought. What if this is about as good as it’s going to get for some time? Are we in for a protracted period of just bouncing along this bottom? I’ve been something of an optimist about growth later this year but I am beginning to wonder. I just don’t see the consumer ready to get back into a spending mode anytime soon, and without that, we aren’t going anywhere.

Comments

[xxxx:]

expect volker is the only person who actually means what he says regarding the dollar. the fed is going to kill it and bring about inflation in order to restore the banks. There is a reason he has been marginalized by the current administration. it's because he is honest and can't be bought.

Jun 11 02:59 PM

[User 357705:]

well, YEAH!

Jun 11 03:00 PM

[Dave Wrixon:]

Is somebody smelling the coffee?

Jun 11 03:03 PM

[Larry House:]

I think the market has little upside not only because of current data but also because of data to come.

Jun 11 03:05 PM

[j_remington:]

The PR pump the market press is ON until the motor burns out.

Jun 11 03:44 PM

[BigJake:]

don't swim against the current lest you drown!

Jun 11 03:50 PM

[conceptwizard:]

Volcker said that, although there will be no alternative to the U.S. dollar in the foreseeable future, “the ultimate logic of a globalized financial system is a world currency.”

You will start hearing this more and more as the PR mental conditioning machine works its way until we finally hear it so much that we expect it. The foreseeable future is next week in this environment. Four times has Ben B miscalled the ecomomic conditions, stating the foreseeable future, only to change it in 30 days.
The BRIC are meeting over 5 day period next week to disuss a move out of US currency in the SDR of the IMF via bond purchases. Its alread starting, some countries already use the IMF to value their currency on.
The move from dollars has already started, it will end with the demise of the US dollars global dominance, in as much time as it takes for countries to accomplish it without sacrificing their own economy.

Jun 11 05:14 PM

[James Quinn:]

Yes.

theburningplatform.com...

Jun 11 08:27 PM

[Fighting Yoda:]

Lower first time claims is no good news -plenty of first time claimers and plenty of total claimers, and plenty of exhausted claimers. No green shoots anywhere.

Jun 11 11:27 PM

[Mitul Kotecha:]

If you think this is as good as it gets for the US then take a look at Europe where the recovery is likely to be even slower.

mitulsstakeonit.wordpr.../

Jun 11 11:40 PM

[billddrummer:]

Those nonnsensical names appear to be spammers.

Jun 12 01:13 AM

[Dan in mpls:]

(Rolling my eyes) Lets see, the article says that Volcker, who is an OBAMA advisor and supporter, goes to China and tells our sugar daddy that we wont inflate the US currency. It is possible that we wont have inflation but only if the entire thing collapses soon. Can anyone in their right mind think that we are going to exit this thing in any respect for the next 4 years, (after the election of a new President) or probably 10, after the damage is undone??

Jun 12 04:37 AM

[rick12345:]

Inflation will start to kick in early 2010 and keep climbing. All of this dead talk about there being no fast recovery is rubbish ; the fed want you to believe this as it will affect the pace of rising inflation and the dollar from going into a free fall.

Jun 12 07:11 AM

[sheople:]

The economy in a nutshell. The U.S. let it's manufacturing go overseas. Now we have to try to make a living selling each other Chinese products, no matter how our masters try to spin it. Live with it.

Jun 12 07:46 AM

[Northstar10000:]

The whole thing will come unglued. there are 245 trillion in toxic assets siting in world wide financial institution or should I say hiding.
As Iceland goes so goes the planet.

Jun 13 12:38 AM

[untrusting ...:]

Larry, logic would dictate that you are correct. However logic and fundamentals would also dictate that the market would not have rallied as much as it has either. Some bounce yes, but this degree and consistency .... no way.

However as Tyler Durnan has pointed out on many occassions, the "unusual activity' being late day trading spikes have kept this market from correcting down many times already.

How do you fight the Fed and the powers that be such as Goldman and JPM? Answer you can't. Thus when they will allow this market to begin trading on normal market conditions is anybody's guess. Just wish we did know, but one can only suspect that when it does, it may well go down even faster than it went up. Guess when we see some hugh down days like before, we will then know Goldman, JPM, etc have pulled support and probably are going short.

Time will tell, but being short this market in this environment seems risky and foolish to me. Buying long also seems pretty risky and foolish as well. That leaves selling covered calls on any longs you have, or selling puts on much lower prices as the only safe options. If your a great daytrader, maybe one can make money, but that seems pretty risky as well, and you had better be pretty good to do that.

On Jun 11 03:05 PM Larry House wrote:

> I think the market has little upside not only because of current
> data but also because of data to come.

Jun 13 10:28 PM

[rick12345:]

When the wall street heavies become bored with trading they'll chew you up and spit you out. Be extremely cautious with resistance above 9000; The market has not yet consolidated (supposedly) and this is the bottom of the upper band. Upper level is as high as 10000. Who knows???

Jun 14 05:31 AM