Retail sales were thoroughly disappointing in June. Whereas other accounts such as imports or durable goods had at least delivered a split decision between adjusted and unadjusted versions, for retail sales both views of them were ugly. Seasonally-adjusted first, spending last month was down for the second straight time. Worse than that, estimated sales were just barely more than in January. The economy in 2017 is not following up on even the meek promise of late 2016…..Unadjusted, retail sales in June 2017 were only 3.24% above retail sales in June 2016.
Near the center of the current furor over Donald Trump Jr.’s meeting with a Russian lawyer in June 2016 is a documentary that almost no one in the West has been allowed to see, a film that flips the script on the story of the late Sergei Magnitsky and his employer, hedge-fund operator William Browder…..However, the project took an unexpected turn when Nekrasov’s research kept turning up contradictions to Browder’s storyline, which began to look more and more like a corporate cover story. Nekrasov discovered that a woman working in Browder’s company was the actual whistleblower and that Magnitsky – rather than a crusading lawyer – was an accountant who was implicated in the scheme…
The result is an essentially religious hysteria, like the witch frenzies of Medieval Europe that were sometimes provoked by ergot poisoning — a fungus with toxic psychotropic properties that grew on the harvested rye, inducing frightful hallucinations in the villagers, who then lashed out at their perceived supernatural antagonists. Trump in our time is the ergot on the bread of our politics. And Russia is the witch.
We’re seeing weak consumer spending numbers in both auto and housing, which are big drivers of the economy. With unemployment so low and the expansion where it is, these figures should be better than they are. There are portents of even worse things when you look at state and federal tax receipts, which are down, and other leading indicators. It could all just be a soft spot in an ongoing expansion — time will tell. But the narrative we were told is that animal spirits would take us to the next level of economic activity. That clearly is not happening in mid-2017. We’re 8 years into an economic expansion, and economists say that the modern U.S. economy has never gone more than 10 years without a recession. So as recoveries go we are well into it.
So, is the Fed “tightening into a slowdown?” The question, while not irrelevant, misses the point. The central bank’s problem is that although it has an economic mandate, its policies have vastly more impact on financial markets. Interest rates this low for this long are far less important for economic growth than they are for corporate profits, asset prices and carry trades. And while the trajectory of its policy rate is higher, the Fed’s careful guidance amounts to a promise that the pace of change will remain both modest and predictable.
The current “perfect” world of an eighth year of rising stock prices, a steady economy and unusual investor complacency provides an ideal time for investors to sell their shares before an unexpected shock spurs a major decline or a move to a bear market, according to the Wall Street Journal. Even as the major U.S. market indexes, most notably the S&P 500 (SPX), the Dow Jones Industrial Average (DJIA) and the Nasdaq Composite (IXIC), continue to soar into record territory, the exceptionally calm CBOE Volatility Index (VIX) points to an unhealthy level of investor confidence amid a rising number of warning signs.
Oh, it was glorious fun, yielding the kind of satisfaction that us anti-interventionists rarely get to enjoy: not one but two prominent neoconservatives who have been wrong about everything for the past decade – yet never held accountable – getting taken down on national television. Tucker Carlson, whose show is a shining light of reason in a fast-darkening world, has performed a public service by demolishing both Ralph Peters and Max Boot on successive shows. But these two encounters with evil weren’t just fun to watch, they’re also highly instructive for what they tell us about the essential weakness of the War Party and its failing strategy for winning over the American people.
Auto sales in Houston, whose economy had been battered by the oil bust, should be turning around from their Financial-Crisis-type levels, but they just got worse: New vehicle sales plummeted 26% in June from a year ago, with car sales getting totally crushed and even trucks sales plunging. For the 12-month period through June, auto dealers sold 284,085 new vehicles, down 16.8% from the same period last year, and down 25% from the levels in late 2015 and early 2016, before the oil bust began clobbering consumers and their desire to buy a new car or truck. Sales are now back to the same level as in January 2009….
As 10-year JGB yields rose above 0.10% last week, the BOJ announced that it was prepared to buy an unlimited amount of bonds to keep yields close to zero percent. As you can imagine, buying an unlimited amount of 10-year JGBs involves printing a theoretically unlimited amount of yen, so the yen weakened significantly on the news. It still remains about ten percent stronger than it was in 2015.
Any additional economic expansion will have to come from productivity growth. Over the past decade, productivity growth has declined from a post-war average of 2% to a growth rate of just 1.2% annually, with growth of just 0.6% annually over the past 5 years. Accordingly, barring any increase in the unemployment rate, a continuation of existing productivity trends would produce real U.S. GDP growth over the coming 7-year period ranging between 0.9% and 1.5% annually. Less likely, though not impossible, would be a full reversal of the slowing productivity trend of recent decades, restoring pre-2000 averages. This would push the prospects for real GDP growth as high as 2.3% annually.