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Economic Outlook

Consumer Credit Trouble Looms

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Posted by Jon Markman - Commodities, Stocks, Technical Analysis

on Tuesday, 28 April 2015 06:24

The slowdown in retail sales growth has been a big surprise this spring, as lower gasoline pump prices were expected to boost spending. What’s going on?

Analysts at TIS Group have a fascinating if scary answer: The consumer credit cycle is breaking down as families sense the economy is slipping a gear and don’t want to over-leverage themselves. This is happening even as corporate credit continues to boom.

It’s the old story, right? If you don’t need credit, you can get it — and if you do need it, you can’t.

This distinction is important because the world is not on a typical boom-and-bust business cycle. With central banks driving much of the action, the world is instead on a credit cycle, which according to TIS means that everything depends on the availability and price of credit.

With the Fed threatening to raise rates despite a disinflationary environment, credit conditions are changing in the United States as well as in other developed countries.

chart-1pre

The chart above, provided by TIS, shows that according to Federal Reserve data, Consumer Credit Revolving fell



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Economic Outlook

This Trend is NOT Your Friend

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Posted by Mike Burnick - Money & Markets

on Thursday, 23 April 2015 07:34

Two months ago in Money and Markets, I alerted you to a troubling trend when U.S. economic reports started taking a turn for the worse, with more negative than positive surprises in the data.

Fast forward eight weeks and the downtrend in our economic data has deteriorated even further, telling me an inflection point for the stock market may be close at hand. Let me explain …

The graph below plots the Bloomberg Economic Surprise Index (ESI: blue line, middle panel), which measures the degree to which recent data has been beating economic forecasts (positive surprises), or falling short (negative). Citigroup produces a similar indicator, which I highlighted in my February article, but both tell the same sad story about the U.S. economy; it’s quickly losing momentum.

chart-pre

Just to recap; the line rises when economic reports are exceeding forecasts, like yesterday’s housing data — a rare positive



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Economic Outlook

Extraordinary Open Letter from Ayatollah Khamenei’s Nephew to Obama: Stop Nuclear Deal

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Posted by Dr.Mahmoud Moradkhani

on Wednesday, 22 April 2015 23:46

a-obamairan-386x217An open letter to President Obama was posted on an Iranian website (khodnevis.org) today from Dr. Mahmoud Moradkhani — the nephew of Iranian Supreme Leader Ayatollah Ali Khamenei.  This letter is explosive and tells Obama, in essence, that the ayatollah, his uncle, is lying in negotiations, practicing the Shia doctrine of taqiyya in which it is permissible for Muslims to lie to the infidel for the advancement of Islam.   He advises the president not to pursue his nuclear deal with Iran and to focus on the atrocious human rights record of that country.  But allow the doctor to speak for himself.

Dear Mr. President

I am presenting this open letter as one of the serious opponents of the Islamic republic of Iran on behalf of the like-minded opposition groups and myself. Because of my knowledge of this regime, especially of Ali Khamenei who is my



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Economic Outlook

The U.S. Recovery: True or False?

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Posted by Arkadiusz Sieron

on Saturday, 11 April 2015 08:32

The stronger than expected February’s job market report fueled expectations that the Fed will increase interest rates sooner rather than later. We believed that market reaction was a bit exaggerated, and suggested in the Gold News Monitor not taking the hike for granted. The U.S. recovery is not as strong as it is commonly believed (as it was confirmed by the downgraded Fed’s economic projections) and there are many downside risks, such as Greece’s crisis, stubbornly low inflation, sluggish wage growth, the Chinese and global slowdown and too strong a greenback, which may stall the Fed’s hike.

For sure, there are many positive indicators for the American economy: solid GDP growth in 2014, and low unemployment and inflation rates. Consequently, the real disposable personal incomes as standards of living are rising. Indeed, the U.S. economy looks definitely brighter than a few years ago. It also performs better than many other developed countries, thanks mostly to a freer economy and a much more flexible job market.

On the other hand, if you scratch beneath the surface, the outlook for the U.S. economy is grimmer. We have already written in past editions of Gold Monitor News about rising inventories to sales ratio, decreasing new orders for durable goods, falling U.S. retail sales for three months in a row (in February) and the unemployment rate drop in February was mostly because people gave up looking for jobs. Some economists also question the accuracy of the data published by the Labor Department, and rightly so. February was another month with a huge discrepancy between the Labor Department’s job survey and the Census Bureau’s American Household Survey. According to the latter, the U.S. economy added only 96.000 new jobs in February, much below the 215.000 expected and the 295.000 reported by the Labor Department.

Why does such a discrepancy exist? There are many differences between those two reports, but the most important is that the nonfarm payroll survey does not include agricultural workers and the self-employed. It turns out that if we add those categories, the number of jobs actually fell from January to February. Please note that this fact also explains why the Labor Department’s data understate the job losses in the energy sector. The truth is that the U.S. oil and gas industries rely heavily on the use of independent contractors. Therefore, the workers in the energy sector are not counted as part of the nonfarm payroll, so layoffs in this industry are not covered in the establishment of employment statistics.

Another significant difference is that the payroll survey double-counts many workers who change jobs or have few part-time jobs. There are also other problems with the Labor Department’s statistics, such as an inaccurate model of birth and death of companies and seasonal adjustments. It is worth pointing out that the disparity between the payroll and household employment surveys is cyclical and widens during recessions, which may indicate that the U.S. recovery is based on rather fragile foundations. This is perhaps why the Federal Reserve’s labor market condition index, which combines 19 labor market indicators, actually fell from 4.8 in January to 4 in February. Does this look like a strong job market?

Other main macroeconomic indicators also do not look so rosy. First, the revised data show that GDP expanded in the fourth quarter at a 2.2 percent annual pace, down from the estimated 2.6 percent (advance estimates). Even more importantly, the Atlanta Fed’s real-time monitor of the U.S. GDP indicates that the economy has slowed considerably over the first quarter of this year. The FOMC (in its March statement) finally noticed that “economic growth has moderated somewhat.” And ‘somewhat’ means in this case the 0.3 percentage point, since the FOMC’s members downgraded its economic growth median projections for this year from 2.6-3.0 percent in December to 2.3-2.7 percent.

Second, the low inflation may not be transitory as Fed believes, but a sign of a coming recession. We do not consider disinflation or deflation as negative phenomena, but only when they reflect rising productivity. At present, the falling producer prices (see the chart below) signal the economic slowdown in America and globally. How else would you explain the expected fall of all nine key commodity price indices or the decline in new factory orders? No, do not blame the weather.

1 OxhktBU

How does it all affect the gold market? The analysis shows that although the U.S. economy is in much better



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Economic Outlook

Michael Shedlock: Canada in Recession, U.S. to Follow

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Posted by Mike Shedlock - Mish's Global Economic Trend Analysis

on Thursday, 09 April 2015 05:27

Screen Shot 2015-04-09 at 5.50.42 AMMichael “Mish” Shedlock of Global Economic Trend Analysis, explains why Canada, the US’s largest trading partner, is now in recession and how the US is likely to follow as well. He talks about the recent string of poor economic numbers, why he’s been out of the market, and the next trigger for a possible market collapse.



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Economic Outlook

Is The Whole World Slowing Down?

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Posted by John Rubino - DollarCollapse.com

on Monday, 06 April 2015 05:59

That stats just keep getting stranger and, if you're a policymaker or an investor, scarier. According to a (now widely publicized) McKinsey & Co study, instead of deleveraging after the debt-induced crisis of 2008-2009, the world borrowed another $57 trillion. And most of the advanced economies ran their monetary printing presses flat-out. The next couple of charts show what the US and China, for instance, have been up to since 2010:

37204 a

37204 b

Now, conventional economic theory says that double-digit growth in debt and money creation should produce a boom, and that today our biggest problem should be too many people getting big raises at work. Yet that's not the case at all:

Weak Japan business confidence highlights recovery doubts



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Economic Outlook

US Trade Deficit Shrinks; First Quarter GDP Estimate Ticks Up to 0.1%

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Posted by Mike Shedlock - Mish's Global Economic Trend Analysis

on Friday, 03 April 2015 06:09

Trade Deficit Shrinks

Inquiring minds are investigating the Commerce Department report on International Trade in Goods and Services for February 2015, for clues about first quarter GDP.

Highlights

 

  • Exports were $186.2 billion, down $3.0 billion from January.
  • Imports were $221.7 billion, down $10.2 billion from January.
  • Year-to-date, the goods and services deficit decreased $ 2.6 billion, or 3.2 percent, from the same period in 2014.
  • Year-to-date exports decreased $5.3 billion or 1.4 percent.
  • Year-to-date imports decreased $7.9 billion or 1.7 percent.

Balance of Trade

37191 a

GDP Analysis

Recall that exports add to GDP and imports subtract from GDP. Thus my first reaction to the report was that



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