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John Williams - Early Stages of Economic Decline
John Williams had some interesting things to say about the economy, GDP figures, new home sales and foreclosures. It is an ugly picture going forward and John breaks down a few key elements to keep an eye on as we head into this next leg down in the economy.
July 28, 2010
The big picture: With a weakening labor market, softer consumer confidence, softening housing activity and retail sales, and an intensifying trade deficit, the early stages of a renewed economic decline — what likely will be popularized as a "double-dip" recession — have begun to unfold. Accordingly, most business reporting in the months ahead will tend to show patterns of accelerating contraction.
Regarding GDP figures: There appears to be an effort to show more of a recovery, beginning in the second-half of 2009, but any relative gains that appear there likely will disappear in the next round of annual revisions in 2011.
Regarding new home sales: The monthly new home sales data simply cannot be taken at face value. The numbers are of such poor quality and of such minimal statistical significance that one has to wonder why the Census Bureau even bothers to report them. Census might consider holding back the data six months, or so, until the regular and volatile revisions stabilize. The only value for the June new home sales numbers was in the realm of Wall Street hypesters trying to support irrationally high stock prices for a couple of hours.
Regarding foreclosures: Purportedly, foreclosure activity is on the rise, and some in the construction trade have difficulty competing with the pricing of foreclosed properties. Until the foreclosure problem works itself out, monthly changes in these home sales numbers cannot be taken as meaningful indicators of trends in underlying activity in homeowner real estate, as it relates to general economic activity.
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