Time for Contingency Plan for Economy Upturn

The newspapers are featuring dreadful stories about economic hardships. Keep in mind when you read the news that at any time it's possible to find people in hardship. To know whether you are seeing a trend or just an unfortunate anecdote, you have to look at the data. Today's data is 1) bad but expected, 2) bad but not as bad as expected, and 3) so-so.

Let's start with bad but expected:

New housing construction continues to fade. Bad news, but a necessary correction in a land with significant excess supply of housing (note: if you hit that link, the first chart's Y-axis is mislabeled).

Now for the not as bad as expected:

The inflation rate outside of food and energy is not as bad as I expected. I'm very worried that we'll see inflation rising not just in food and energy, but generally across the economy. This isn't happening right now. (Reminder: we look at inflation excluding food and energy because those two categories have a lot of transitory changes. I'm not saying they are unimportant. Please don't rant on the subject.)

Finally, let's get to the so-so news:

Manufacturing production is basically unchanged in recent months. That's not good, not bad, but consider this: Any news that isn't bad these days, is good.

The economy is NOT collapsing, despite all the doom and gloom in the press. The economy is certainly not booming, and some folks are in distress, but overall things are not so bad. Yesterday about four million people in the United States went to McDonald's to eat. That wasn't news, because most days there are about four million people going to McDonald's. It's not an economic boom, but neither is it a bust.

Business planning implications: don't hunker down too much. In fact, it's time to do your economic contingency planning for an upturn in the economy.

Comments

[User 143167]

This CPI number is fool's gold. Don't expect another month with -1.3 apparel and NSA CPI is 0.9, not promising to say the least. NSA CPI MoM at or above 0.9 only showed up twice during the last decade.

[karchad]

I like and hate this article. I like it because it's 100% accurate. I hate it because, the only way I can make good money is to perpetuate all the gloom and doom (thank you CNN), so I can invest good money at cheap prices. So, let's see less articles like this, and more "35 reasons the market will never go up" articles.

[gordon]

Many increases in costs, like healthcare, for instance, happen in Jan. And autos not going up as a component is rediculous, as is computers going down, citizens don't buy these items every year. And housing rent costs are rising, the BLS claims they are falling. All a sham, so Wall St. can maintain it's disconnect from Main St. And the Phili Manuf Index today? What about that falling off a cliff?

[iThinkBig]

Most economists predicted a two quarter recession. My forecasts of this were done in June of 2007. We are in the 1st month of the 2nd quarter of recession. The health of the U.S. economy in 2009 is what really is in question for me, and that is going to depend on what new leadership in Washington does.

[Hoot85]

Things aren't as bad as they could be. I could never agree more. But, (and I know this wasn't the intended proof for the author...I'm still going to point it out anyhow) 4 million people will continue to eat at Mc'Donald's every day because as an American society, we've grown accustomed to having our food right now! Even if the worst of the worst happened, fast food would still keep on track...

Perhaps in hindsight, this just might be the metophorical "calm before the storm". Who knows. One thing is for certain, things aren't as good as they could be, either.