Thursday, September 25, 2014

Economic Signals Remain Mixed

The latest economic signals continue to reflect a mixed bag. While jobless claims were a little better than forecast, durable goods orders plunged to their biggest drop since 1992 as noted in this CNBC article. Below are some quotes from this article and then a few comments.

'The number of Americans filing new claims for unemployment benefits rose less than expected last week, suggesting an acceleration in job growth in September."

"Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 293,000 for the week ended Sept. 20, the Labor Department said on Thursday. Claims for the prior week were revised to show 1,000 more applications received than previously reported. Economists polled by Reuters had forecast claims rising to 300,000 last week."

"The jobless claims report showed the number of people still receiving benefits after an initial week of aid edged up 7,000 to 2.44 million in the week ended Sept. 13."

"Orders for long-lasting U.S. manufactured goods in August posted their biggest drop on record as the prior boost from aircraft unwound, but a rebound in business spending plans pointed to underlying strength in the manufacturing sector."
"The Commerce Department said durable goods orders, items ranging from toasters to aircraft that are meant to last three years or more, dropped 18.2 percent, the largest decline since the series started in 1992. That partially reversed July's aircraft-driven 22.5 percent surge."

" Boeing reported on its website that it had received 107 orders last month, a third of July's outsized gains. Orders for automobiles fell 6.4 percent after rising 10.0 percent the prior month. The underlying trend in new orders, however, is up and further gains are likely in the months ahead."
My added comments: 

The above indicates we are still just kind of wandering along in the economy with no clear future direction showing up yet. We have been in a very slow growth mode for quite awhile now. We have noted in several recent articles that signs of possible deflation are still showing up and are a big concern to financial officials. They are concerned because GDP growth has been too sluggish despite the massive stimulus programs that have been employed to try and move it higher.

All this suggests we are still in waiting mode to see if the next move in the economy is a more robust recovery or downward into a deflationary environment. It's kind of like a giant tug of war with neither side really gaining an advantage, but the deflation side perhaps slightly ahead. This creates the illusion of stability as the two forces keep offsetting each other and the rope doesn't move much.

But we can expect that by early next year one side or the other will start winning more decisively. We are tracking a number of forecasts and predictions here leading into 2015. As time passes, it will become clearer which forecasts are proving correct.

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