Economic Notes: Kids on a Seesaw
6/12/2009
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Like kids on a seesaw: One goes up, the other down.
The Federal Reserve’s Beige Book summarizes regional conditions based on interviews with key business and economic experts. The most recent (links below) reports that conditions remained generally weak through May, but five of twelve districts noted that “the downward trend is showing signs of moderating.” Those with improved expectations don’t “see a substantial increase in economic activity through the end of the year.”
Its teeter-totter pattern is confirmed by the most recent retail sales data, even if car sales are excluded. Sales were down for two months before rising (+0.5%) in May. They have seesawed during the first five months of 2009, but with May’s gain were 1.1% above December’s bottom. It is noteworthy, however, that gas stations accounted for almost two-thirds of the m/m gain in retail sales. Gasoline prices are up 60% from December’s low.
Not all of May’s increase was due to higher pump prices, however. There are growing indications that consumers are becoming somewhat more confident – or at least less insecure. They’re straddling the seesaw’s center.
The most recent Reuters/University of Michigan (RUM) survey has consumer sentiment up for the fourth consecutive month and higher than May 2008. Confidence is up, but remains at “relatively low levels.” According to RUM, consumers “want to continue to increase their savings and reduce their debts.” Up and down.
For the next few months, the data will continue to behave like kids on a seesaw.
Beige Book Links:
National Summary:
http://www.federalreserve.gov/fomc/beigebook/2009/20090610/default.htm
Boston (New England)
http://www.federalreserve.gov/fomc/beigebook/2009/20090610/1.htm
New York (New York and New Jersey)
http://www.federalreserve.gov/fomc/beigebook/2009/20090610/2.htm
Philadelphia (New Jersey and Pennsylvania)
http://www.federalreserve.gov/fomc/beigebook/2009/20090610/3.htm
San Francisco (California)
http://www.federalreserve.gov/fomc/beigebook/2009/20090610/12.htm
***
The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.