Free Markets, Free People
The following statistics were released today on the state of the US economy:
The consumer price index was unchanged for June, and up 1.7% from last year. The core CPI rose 0.2%, and is up 2.2% from last year.
The Housing Market Index jumped the most in 10 years, rising a huge 6 points to 35, its highest level since March 2007. This has analysts hoping that the housing market has turned the corner.
Industrial production rose 0.4% in June, but capacity utilization at the nation’s factories fell slightly to 78.9%. Manufacturing output rose 0.7% for the month.
Net inflow of long-term securities rose $55.0 billion in May, up from April’s revised $27.2 billion. Foreign official institutions were the heaviest buyers of US securities in the month.
In weekly retail sales, Redbook shows a very disappointing 1.7% year-on-year sales increase, one of the lowest since April 2011. ICSC-Goldman Store Sales showed no increase from last week, and the year-on-year increase was 2.6%, which, while still on trend, is moving south.
As I’ve mentioned many times, the engine of America is small business. Those businesses provide jobs to 85% of Americans. And according to the US Chamber of Commerce, they’re not going to be doing much if any hiring in the near future:
Small business owners’ concerns about the future—particularly on health care and taxes-—are impacting their hiring, according to the U.S. Chamber’s fifth quarterly small business survey released today.
Only one in five small businesses (20%) expect to add employees in 2013, according to the poll of 1,225 small business owners, conducted by Harris Interactive. The majority of small businesses say they are likely to keep the same number of employees over the next year – meaning there is likely to be little change in overall unemployment figures.
Concerns about health care and taxes (both brought to you by Barack Obama) are causing caution among small businesses and that’s because they perceive an “unsettled” business climate. Consequently there’s no incentive for them to change the status quo. In fact, they obviously believe there is some safety in the status quo (see the survey to see how they feel about their businesses locally) .
As we’ve mentioned repeatedly, government policy does have an effect on the economy. It can be an enabler that helps create incentives for businesses to expand and hire or it can be a disabler, doing precisely what it is doing now to unsettle the business climate, create disincentives for expansion or hiring and have small businesses go into a defensive posture.
It doesn’t get more defensive than now.
More from the Chamber survey:
- 78% want government to get out of the way.
- 90% are concerned about the impending fiscal cliff and are worried that Congress will fail to take action to prevent it.
- Nearly 60% say that expiration of the 2001 and 2003 tax rates and other business provisions, coupled with sequestration, will directly impact their business’ growth.
As you might imagine the road map to a better business climate is not hard to follow. There’s just no desire by the class warriors to do that.
Instead of doing the hard work of creating a business climate that will provide small business incentives to expand and hire, they’d rather tax them while demonizing them as the evil rich and talking about “fair shares” to 50% of the country that pay’s no – zero- income tax.
If this doesn’t paint the picture of what is wrong with the policies of this administration, I’m not sure what will. This is Econ 101 stuff. And apparently it is like a foreign language to this administration.
The golden goose is on life support, and the administration is about to pull the plug.
But let’s talk about Bain Capital, shall we?
Real bad according to J.P. Morgan:
This morning we lowered our tracking of Q2 GDP growth from 1.7% to 1.4%. For some time now we have noted that our Q3 GDP call — which was already below consensus at 2.0% — had risks that were skewed to the downside.
After the latest round of data we have decided to lower our projection for Q3 to 1.5%. The strength in inventories reported this morning suggests that businesses may have got caught offsides when final demand weakened this past spring. That inventory build should weigh on production growth in the third quarter as already-cautious businesses seek to work down stockpiles. Added to this downside, the weakness in June real consumer spending will make the arithmetic for Q3 consumption a little more challenging.
Finally, the decline in gasoline prices — which had been seen as an important support to the economy — has partly reversed itself in recent weeks, thereby lessening the impetus to growth from that source. For 2012 as a whole, we are now looking for growth of around 1.7% on a Q4/Q4 basis, about the same as last year and 0.2%-point below our tracking last week. On a year-ago basis real GDP has been growing at a below-trend pace since early last year. If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.
Q2 – 1.4% growth.
Q3 – 1.5% growth
Q4 – 1.7% growth
For the year, under 2.0%.
The word “pitiful” doesn’t even begin to connote the severity of this forecast. And note the bottom line of the JP Morgan forecast: “If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.”
And here we are doing the usual – talking about distractions like Bain Capital.