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Austerity vs. Stimulus: Damned Either Way?
After the last double-dip recession in the early 1980s, one of Jimmy Carter’s economic advisers observed that "it is not the wolf at the door but the termites in the walls that require attention." This time around, both near term relapse and longer-term default represent clear and present dangers to the fledgling global recovery. Additional stimulus will only work if it is strategic and surgical, and austerity only if it includes a credible plan to promote longer-term growth. But neither approach alone can heal the global economy without Stimulators and Austerians collaborating on a sustainable path to prosperity.
(more on the failure to resolve the debate here...
Aug 25, 2010. 12:44 PM
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April Dallas Fed Manufacturing Outlook
Business Activity Index
vs. +7.2 the month before, a sixth straight month of expansion in the index. Mfg. Production Index 18.2, hitting a new two-year high, vs. prior 8.7. Labor index builds on its swing to positive, going to +9.8 from +2.8.
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(from the bottom of the official release)
Comments from Survey Respondents
These comments were selected from respondents' completed surveys and have been edited for publication.
Dairy costs have increased significantly, especially when compared with last year.
Beverage and Tobacco Product Manufacturing
First quarter sales were weak, despite price reductions. Profits trended downward in the first three months of the year, though April is looking better.
The rig count has moved up substantially, increasing the demand for our products from customers in the oilfield industry. We think there is going to be a slight leveling off in the rig count, which in turn will bring our business down.
Nonmetallic Mineral Product Manufacturing
We are seeing a modest increase in business levels due to seasonal influences. We continue to believe that the economic recovery will be slow.
Fabricated Metal Product Manufacturing
After adjusting for seasonal variation, we are generally seeing demand return in markets that have been significantly down over the past 28 months. Positive signs indicate that planning activity is starting to take place for larger projects, such as new commercial construction.
We remain concerned whether this is a lasting increase or a flurry of pent-up activity that will be short-lived.
Our sectors (downstream energy, petrochemicals, power, pipeline, steel) remain very sluggish.
Computer and Electronic Product Manufacturing
We are beginning to see large cost increases for materials due to higher transportation, regulatory compliance and insurance costs. The additional cost pressures will make recovery more difficult since they will preclude additional investment in reducing our costs and improving our competitive position.
Furniture and Related Product Manufacturing
Weak credit has hurt several of our customers and put them in serious financial difficulty. We do not see anything in the next six months that will help this issue.
Apr 26, 2010. 11:52 AM
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What Could Derail Recovery?
Household debt service ratios are benefiting more from artificially low variable interest rates than any meaningful deleveraging...last time ratios were at these levels LIBOR was averaging 6.5% not 0.5%. When the Fed finally switches off the life support and rates quickly converge with longer-term economic fundamentals, household balance sheets (via inflated mortgage payments, auto loans, LOC rates, etc.) are going to be in a world of pain. Those trying to lock in their mortgages may have already missed the boat, with fixed rates climbing in the US/Canada (fixed rates have jumped nearly 1% in Canada over the few weeks alone...)
That said, I agree with the author's thesis: there are certainly many things that could derail the recovery, though the real risk is more behavioral/euphoric than fundamental/technical at this point in the rally...
Apr 14, 2010. 12:59 PM
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