Photograph by Victor J. Blue/Bloomberg

Customers shop at a Macy’s Inc. store in New York.

That’s the Bloomberg Consumer Comfort Index for the week ended May 12.

The index, which is based on Americans’ opinions about the economy, the buying climate and their own finances, fell from minus 29.5 in the prior week. It can range from plus 100 to minus 100.

In a separate monthly gauge of economic expectations, 32 percent said the economy is getting worse and 31 percent said it’s getting better. The minus 1 reading was the best in five months and rose from minus 4 in April.

“Rising home values and stock prices gains may be underpinning expectations and bolstering consumer spending, which accounts for about 70 percent of the economy,” Bloomberg’s Jeanne Smialek reported yesterday. “Nonetheless, the lagged effect of higher payroll taxes are crimping the discretionary budgets of low- to middle-wage earners, preventing total demand from accelerating.”

Original post is Bloomberg by the Numbers: -30.2 by Political Capital.

Photograph by David Paul Morris/Bloomberg

Construction crews work on new homes being built in San Ramon, California, on April 12, 2013.

Applications to build homes climbed in April to the highest level since June 2008, helping alleviate concern that a slump the same month in construction starts on new houses would mean less support for the economy in the second half of the year.

Building permits surged 14.3 percent to a 1.02 million annualized rate, while housing starts plummeted 16.5 percent to an 853,000 pace, Commerce Department data released today showed. The annualized rate of permit applications filed by builders exceeded the pace of actual ground-breaking by the most since March 2005.

When permits outpace the rate at which foundation crews are preparing home sites with backhoes and bulldozers, it’s a signal that builders will likely stay busy in the ensuing months. And demand shows few signs of stumbling as Americans take advantage of near record-low mortgage rates.

Details of today’s report show that building permits for apartments and other multifamily homes, which are volatile month to month, surged to the highest level since June 2008. The difference between April’s annualized rates of permits and multifamily starts was also the biggest since that time.

The increase in multifamily permitting is a sign that builders have enough faith in the market to take on bigger construction projects.

Permits for single-family dwellings exceeded starts for the first time since July. While the difference is less than that of multifamily units, economists at Credit Suisse point out that some builders may be limiting construction of single-family homes in order to maximize price. Builders are after all paying plenty more for construction materials than a year ago.

Original post is Building Permits Dwarf Ground-Breaking by Political Capital.

Photograph by Andrew Harrer/Bloomberg

House Speaker John Boehner, a Republican from Ohio, talks prior to an interview at the Capitol in Washington, D.C., on May 7, 2013.

“We’ve had four years of slow and anemic job growth — and frankly, it’s unacceptable,” House Speaker John Boehner said today.

The Ohio Republican attempted to turn the latest unemployment rate against the White House — 7.5 percent reported for April representing the lowest rate in four years — as something short of what President Barack Obama promised with his economic stimulus.
“Slow growth cannot be the new normal,” he said today at his weekly news conference in the Capitol — as Obama traveled to Texas to tout the potential for economic growth.

“We can’t cut our way to prosperity — we need real economic growth,” Boehner said, suggesting that “real tax reform” will contribute to that. House Ways and Means Chairman Dave Camp is promising a tax bill this year — though Republicans and Democrats are divided over whether that should result on added tax revenue or come out “revenue neutral.”

Obama is traveling to Texas to promote technology-based education, training and jobs as he seeks support in Congress for economic initiatives he proposed earlier this year.

Stops today around Austin, including at Manor New Tech High School and at an Applied Materials Inc. factory, as well as
meetings with students, workers and entrepreneurs, are intended to give Obama a platform to promote proposals from his State of the Union speech in February. Those include raising the minimum hourly wage to $9 and promoting spending on education, manufacturing-innovation centers, worker training and research.

   Bloomberg’s Margaret Talev, reporting from Texas today, contributed.

Original post is Boehner: Slow Growth Can’t be ‘New Normal’ by Political Capital.

Photograph by Matt York/AP Photo

Allen Harding, of Armasight, demonstrates his products on March 12, 2013 at the Border Security Expo in Phoenix. More than 180 companies are exhibiting their security products despite automatic spending cuts that are affecting every federal government agency due to the government sequestration.

Most economists project the second quarter will take the biggest hit from the mandated cuts in federal government spending, or sequestration. Economists at Goldman Sachs Group think the worst is yet to come.

The topic of how much the economy will be restrained by the cutbacks is on everyone’s radar after unexpected reductions hurt gross domestic product in both the fourth quarter of 2012 and the first quarter of this year, even before sequestration took effect. Government expenditures at the federal level fell at a 14.8 percent annualized rate from October through December, cutting 1.2 percentage points from GDP. That was one reason the economy just about stalled, growing at just a 0.4 percent pace.

Last quarter, federal outlays dropped at an 8.4 percent pace and subtracted 0.65 percentage point from growth, which came in at a less-than-forecast 2.5 percent.

The world’s largest economy is forecast to grow at a 1.5 percent annualized rate from April through June, according to the median forecast of economists surveyed by Bloomberg in early April. Much of the expected deceleration was pegged to the drop in federal outlays resulting from the automatic across-the-board reductions that were triggered on March 1.

Alec Phillips, a Washington-based economist for Goldman, researched how much government spending would need to drop taking into account not only sequestration, but other cutbacks, including the spending caps resulting from the Budget Control Act of 2011 and the military drawdowns in Afghanistan and Iraq.

After dropping at a projected 5 percent pace this quarter, the cuts as scheduled mean federal outlays will need to decline at a 10 percent rate in the third quarter and at around 5 percent for several quarters thereafter, Phillips said.

In addition, figures from the Treasury Department show spending is dropping at about the same pace so far this quarter as in the first three months of the year, which means the 5 percent drop Goldman has penciled may be too small.

The employment outlook may also dim even as sequestration so far seems to be having little impact on hiring, said Phillips. Data on state payrolls and hiring by industry so far show very little correlation between gains in employment and the areas and industries most dependent on government spending.

That may be because those most affected by government cuts took a wait-and-see approach before reacting to any reductions, said Phillips.

“Affected companies are likely to start making more significant adjustments over the next few months, once there is recognition that sequestration and related spending cuts are probably here to stay,” Phillips said in a note today.

Original post is Biggest Sequestration Hit: Next Qtr by Political Capital.

Photograph by David Paul Morris/Bloomberg

Workers assemble American Giant sweatshirts inside the SFO Apparel Co. in Brisbane, California, on May 1, 2013.

If you were only looking at productivity data, you’d assume the U.S. was still in an economic slump.

Employee output per hour grew at an average 0.7 percent annual rate over the past 12 quarters, which economists at JPMorgan Chase & Co. say is a pace so slow it’s rarely seen outside of recessions. Gains since the recovery began in June 2009 have averaged 1.5 percent, the weakest of the nine postwar expansions that lasted as long, according to IHS Global Insight.

One reason is that companies have been slow to boost spending on more sophisticated machinery and time-saving devices such as faster computers — a driver of the late 1990s boom in productivity.

When the U.S. economy slumped during the last recession, business investment in equipment and software plunged even more, causing its share of gross domestic product to shrink to 6.4 percent by mid-2009, almost a four-decade low. At 7.5 percent in this year’s first quarter, the share is still below both its pre-recession level and the record 9.6 percent reached in mid-2000, during the previous productivity boom.

Erik Johnson, a senior U.S. economist for IHS Global Insight in Lexington, Massachusetts, projects productivity will increase 0.5 percent this year. He forecasts it will “slowly drift up” to an average 1.6 percent increase in the next 10 years.

That is still well short of recent history. From 1996 through 2004, worker output per hour rose 3.1 percent a year on average, according to figures from the Labor Department.

The slowdown in productivity need not be all bad. As companies reach the limit of how much they can wring from current employees and orders improve, they’ll need to add workers, according to economists such as Michael Feroli, chief U.S. economist at JPMorgan Chase in New York.

Nonetheless, without a new driver of efficiency akin to the high-tech boom, the 0.7 percent rate over the past three years means it will take 93 or 94 years for worker productivity to double, said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut.

In the first period of increased productivity growth since World War II, from 1947 through 1972, worker efficiency grew at a 2.8 percent annualized rate. That meant worker efficiency could double every 20-25 years, said Berger. Those gains would be reflected in better pay and a higher standard of living.

U.S. entrepreneurs will need to find “the next big thing” to spur a rebound in efficiency, he said.

Original post is Productivity Cooling as U.S. Awaits Next Big Thing by Political Capital.

Photograph by Nicholas Kamm/AFP via Getty Images

Federal Reserve chairman Ben Bernanke arrives for a family photo of finance ministers and central bank governors following the G20 meeting at the 2013 World Bank/IMF Spring meetings in Washington on April 19, 2013.

The Federal Reserve made it clear in describing the U.S. economy today that any fault for this year’s sluggish expansion lies outside the central bank.

“Fiscal policy is restraining economic growth,” the Federal Open Market Committee said, with a more direct message than in March when tax and spending policy was described as “somewhat more restrictive.”

Fed Chairman Ben S. Bernanke has repeatedly said that, while Congress needs to make fiscal policy sustainable over the long run, too much tightening right away is harmful. “There is a sense in which monetary and fiscal policy are working at cross-purposes,” Bernanke said in congressional testimony in February.

The FOMC’s bluntness is “very unusual,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, and former chief economist for the Senate Banking Committee. That message “reflects disappointment from Bernanke’s point of view, that there’s a lack of a coherent fiscal policy.”

“The characterization of fiscal policy has gone up one alert level,” agreed Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., in a report today.

Automatic federal spending cuts known as sequestration took effect on March 1. If no action is taken by Congress, spending will be reduced by $85 billion this year and $1.2 trillion over nine years. Consumers are also contending with a 2 percentage point increase in the payroll tax that took effect in January.

Federal Open Market Committee statement: go.usa.gov/Tmb5 #FOMC

— Federal Reserve (@federalreserve) May 1, 2013

Original post is Fed on U.S. Growth: Don’t Blame Us by Political Capital.

Photograph by Natalie Behring/Bloomberg

A worker paints a refrigerated railcar in Portland, Oregon.

The most respected early read on the state of U.S. manufacturing in April came out today and showed factory activity cooled last month. The details of the data suggested the worst may already be over.

The Institute for Supply Management, a Tempe, Arizona-based group of purchasing and procurement managers, said its factory gauge slipped to 50.7 from 51.3 in March. A level of 50 is the dividing line between growth and contraction.

Orders, the most forward-looking component, actually rose, as did production. Order backlogs, which don’t figure into the headline reading, climbed to the second-highest level since early 2011.

The culprits behind the decline in the ISM index were inventories and employment. Less stockpiling combined with rising demand is a powerful mix that will probably generate bigger gains in production down the road.

That prompted economist Millan Mulraine at TD Securities USA Inc. in New York to say: “The bottom in manufacturing-sector activity may have fallen in place in April, with the outlook for the sector beginning to brighten.”

The drop in stockpiling was probably “strategic,” Bradley Holcomb, chairman of the ISM’s factory survey, said  today on a conference call. Declining commodity prices are prompting companies to wait before buying raw materials in hopes of getting them even cheaper, he said.

“Inventories are in a fine position, albeit low, and ready for a build-up,” said Holcomb.

The decline in the ISM’s employment index is more troubling, especially in conjunction with another report today from the Roseland, New Jersey-based ADP Research Institute that showed factories cut 10,000 workers from payrolls last month.

The ISM hiring index came in at the second-lowest level since September 2009, when factories were still trimming staff as the economy was just emerging from the recession.

Even here, though, there may be other issues at work. The data are adjusted for seasonal changes to allow comparisons between months, and there’s the rub.

Jonathan Basile, an economist at Credit Suisse in New York, pointed out that the employment index last month faced the biggest hurdle for any April in the 66-year history of the ISM index — matching that from April 1962.

Because April is typically a strong month for factory hiring, the seasonal-adjustment process projected the employment index would jump 4.5 points. In reality, the unadjusted reading climbed just 0.5 point, which, after taking out the expected gain, left the index down 4 points.

“Despite the downshift in the headline index, we do not see imbalances between supply and demand that would bring the current industrial expansion to a halt,” Basile wrote.

Original post is Data: Manufacturing Slump Less Than Meets the Eye by Political Capital.

Photograph by Nati Harnik/AP Photo

Employees load a washer and dryer into customer’s car at the loading docks of Nebraska Furniture Mart in Omaha, Neb.

That’s the annualized rate at which the U.S. economy grew in the first quarter, according to an estimate by the Commerce Department’s Bureau of Economic Analysis.

The figure refers to the rise in the gross domestic product — the value of goods and services produced. It’s a major gauge of the health of the economy.

GDP grew by 0.4 percent in the fourth quarter of 2012 and by 3.1 percent in that year’s third quarter.

“Consumer spending, accounting for about 70 percent of the economy, climbed at a 3.2 percent pace in the first quarter, the most since the fourth quarter of 2010,” Bloomberg’s Shobhana Chandra reported.

A drop in defense spending hampered growth. Defense spending fell at an 11.5 percent annualized rate in the fourth quarter.

Original post is Bloomberg by the Numbers: 2.5% by Political Capital.

Photograph by Victor J. Blue/Bloomberg

Customers try out mattresses in the showroom of an Ikea store in the Brooklyn borough of New York.

That’s the Bloomberg Consumer Comfort Index in the week ended April 14, the highest since January 2008.

The index, which asks U.S. consumers for their views on the economy, buying climate and personal finances, rose 4.8 points from minus 34 in the previous week.

Rising consumer sentiment was “led by upper-middle income earners, deepening a rally already underway among higher-income adults,” Langer Research Associates, which produces the index for Bloomberg News, said in a written analysis.

The Bloomberg Consumer Comfort Index can range from 100 to minus 100. Consumers view their personal finances more favorably than the national economy and the buying climate.

Bloomberg’s Alex Kowalski has more here about the index.

Original post is Bloomberg by the Numbers: -29.2 by Political Capital.

Ask a shoe saleswoman.

Worse than flat. Heel-busted.

Shoes were off — sales that is — at the end of February by 5.1 percent year over year, according to Census Bureau data.

(Who knew the head-counters are on their toes on this one?)

A year ago, shoe sales were kicking, up 10 percent over the previous year.

Now, the current slump (rhymes with pump) pales (or pick another shade) in comparison with the track record in April 2009, when sales were off more than 10 percent, year over year, in the midst of the financial crisis that tripped up the stock market.

These figures have not been massaged — and a trend has clearly jelled.

Dr. Scholl, the sole authority on consumer (arch) comfort, could not be reached for comment. (He was tied up.)

History, however, suggests a bounce-back is likely: Shoe sales had a spring in their step in the spring of 2010, up 7.5 percent year over year. In fact, a reboot is certain.

And before we put  a sock in it, we’ll say: Every good recovery must find an outlet.

(With thanks to Alex Tanzi and Bloomberg data.)

Original post is Economy: There’s No Business Like Shoe Business by Political Capital.