More signs of US slowing

I’ve been arguing for some months that the US economy is slowing. More recently I added the narrative that at the zero bound for monetary policy, where the core price signal ceases to have meaning, it is the expectation of price intentions in the economic leaders themselves that becomes the primary signal. In short, it suddenly matters what policy-makers say as much as what they do. August was a dreadful month for that signal. It was the month in which fiscal policy hit the debt-ceiling debate and monetary policy ran into FOMC dissent, as well as increasingly hysterical political resistance. Overnight we saw more evidence of the fallout.

A few weeks ago, August consumer confidence and several regional production indicators fell off a cliff (the national ISM PMI fell, but showed continuing growth). Overnight we had some more confirming data that the consumption parts of the economy did slow significantly in August. From Calculated Risk:

On a monthly basis, retail sales were flat from July to August (seasonally adjusted, after revisions), and sales were up 7.2% from August 2010. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food servicessales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $389.5 billion, virtually unchanged (±0.5%)* from the previous month and 7.2 percent (±0.7%) above August 2010.Retail sales excluding autos increased 0.1% in August. Sales for and June and July were revised down.

Confirming this slowdown are the patterns in import traffic at Los Angeles ports, which handle 40% of US container freight traffic. Also courtesy of the excellent Calculated Risk, import traffic is down for three months on a year on year basis from June through August:

Some reassurance might be drawn from the ongoing strength in export traffic.

So, back to whether we might see any greater clarity from economic leaders on the path for stimulus, there was one good data point overnight in a fall in the producer prices. From Zero Hedge:

Which may help the FOMC produce something more substantial than the currently mooted Operations Twist and the like. They are going to need to if they’re going to turn the economy and equity market around. It seems there is little help coming from the fiscal side. An overnight Bloomberg poll showed:

A majority of Americans don’t believe President Barack Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re-election.

Though it’s not clear whether the poll is blaming the actual plan or the Congressional nutters that will block it. Anyways, hopes are thin.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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  1. Adam Carr looked at the US data overnight, and saw something completely different…

    In terms of economic data, there was quite a bit and it was good news data.

    Firstly, in the retail space, we found out that consumers are still spending in August and while headline sales were weaker than expected (at 0 per cent versus a 0.2 per cent gain) and core sales were also weaker, at 0.1 per cent versus 0.3 per cent, upward revisions to past core sales data mean that the overall profile is unchanged. Annually, core sales are 5.4 per cent higher and headline sales are 7.2 per cent higher. Good numbers. Similarly, business inventories and sales were robust. Sales rose by 0.7 per cent in July after a 0.5 per cent increase, with inventories then rising 0.4 per cent for the second straight month.

    In terms of US producer prices, they were flat in the month of August to be 6.5 per cent higher annually. Core prices were up 0.1 per cent to be 2.5 per cent higher. Finally for the US, mortgage applications surged 6 per cent with new purchases up 7 per cent and refis up 6 per cent.

  2. As for the LA Ports chart, one encouraging aspect is that exports continue to grow while imports are rolling over. Ultimately, this is what the US needs to do: Consume less and make more, just as China needs to consume more and make less.

    Of course, it would be better if this adjustment could be made without (another) thumping recession.

    • Oh, and Calculated Risk makes the nicest charts. They’re BIG and clear. How about you guys start using whatever charting software CR uses? I’m looking at you Mr Data Sword!

  3. “Though it’s not clear whether the poll is blaming the actual plan or the Congressional nutters that will block it. Anyways, hopes are thin.”

    Last time i checked politicians didnt spur economic growth and ‘create’ jobs..

    why is someone that blocks a Obama plan a nutter? considering history it would be the opposite