Economics Update

Housing Starts, Courtesy Calculated Risk

I guess that it's time to rejoice, because the IMF's chief economist is saying that the global recession is over...Seeing as how they handled things like the Asian Financial Crisis of the 1990s, I'm inclined to believe that they are not a reliable source.

I would also note that he has a huge caveat in this, "we may not go back to the old growth path ... potential output may be lower than it was before the crisis," which to my mind sounds like a permanent decline in economic activity, and thus the recession might be over because normalcy is being redefined.

That being said, we are seeing signs of either a recovery, or a pause in the path downward, with credit card defaults moderating somewhat, so, for example, BoA's charge-off rate dropped to 13.81% last month, down 0.05% from the level in June.

Basically, the numbers are still pretty horrible, but they aren't getting any worse...yet.

We also have a stronger consumer confidence level in August, with the Investor's Business Daily and TechnoMetrica Market Intelligence (IBD/TIPP) Economic Optimism Index rising to 50.3 in August from 46.3 last month, and this is a real positive number as 50 is the dividing line between optimism and pessimism.

In inflation, producer prices fell by -0.9% from the previous month, and the year over year price decline was -6.8%, beating the predictions of -0.3% and -5.9% respectively.

Meanwhile, in the UK, consumer inflation remained steady at 1.8%, but it had been predicted to drop to 1.5%.

Real estate is confusing, or at least the reporting of it is.

The data came out today, and the coverage is interesting, with Bloomberg noting that single-family housing starts rose for the 5^th straight month, but CNN noting that housing starts and building permits declined with only single family housing starts showing an improvement, and that the year over year numbers are way down.

I'd go with CNN here, because:

• We know that more than a third of single family home sales are distressed.
• As an aside, we know that people are coming out of the woodwork looking for distressed sales, and prices are still falling, driven by foreclosures and short sales, as evidenced by the latest data out of California.
• The month to month numbers are seasonally adjusted, but I think that the current market is so out of whack that the seasonal adjustments do not serve their intended purpose.
• The drop in multi-residential buildings indicates that fewer people are moving into condos/townhouses, from which they would trade up to single family structures.

Then again, YMMV, and I always see the economic glass as half empty.

Oil was briefly back above $70/bbl before settling at $69.19, largely on a report that US crude inventories have dropped, and the dollar and Yen both fell against the Euro, largely on more optimistic business sentiment in Germany.