Patterico's Pontifications

7/30/2010

Bleak Economic News

Filed under: Economics — DRJ @ 3:54 pm

[Guest post by DRJ]

Bloomberg News posts two reports that together paint a bleak picture of the American economy:

  • U.S. economy grew 2.4% in Second Quarter, Below Forecast
  • U.S. Michigan Consumer Sentiment Index Fell to 67.8
  • A third report seems reassuring but if we look deeper, is also troubling:

  • Most U.S. Stocks Rise as Confidence Overshadows GDP
  • Stocks grew because the Dow corporations have been able to keep earnings high, but revenues continue to fall below expectations. In other words, businesses have been able to maximize productivity from workers but they can’t increase revenues as more and more consumers spend less and less.

    And that is not good news.

    — DRJ

    28 Responses to “Bleak Economic News”

    1. This may sound like a whine but it would be nice if you will consider it a personal, astute observation on the state of the economy. :)

      I’ve noticed that grocery stores around me in the past few months tend, at times, to run out of stock on certain items, especially perishables such as fresh fruits and veggies. This seems more noticeable than at any time I can remember in my adult life. One could assume that the buyers and managers are ordering less stock because of the recession’s impact on peoples’ wallets and buying habits, and to minimize inevitable waste and spoilage that affects their bottom line–but are miscalculating their JIT inventory.

      I just returned from grocery shopping for the weekend. The store, a national chain in a large metropolitan area was out of asparagus. Asparagus! With a trunk full of cold and frozen items, and an early evening event, it was not feasible to drive a few additional miles to stop at another store to see if they might have any asparagus. So we will (grumpily) get along without. And, I am increasingly going to be leery of this store’s customer service which may more frequently prompt me to choose somewhere else to do my shopping. Again, this is not to criticize this particular store as much it is to point out how retail is struggling mightily in this economy. And it’s getting worse instead of better. Recovery summer. Ha!

      Have others noted similar lack of product in other retail areas sometimes, not necessarily just groceries?

      elissa (d824dd)

    2. elissa,

      I haven’t noticed, however I don’t shop at the national chains but rather a locally run establishment. It’s half the size of the national chains and while the prices are a tad higher, I prefer supporting a locally owned business. Ironically, the produce is excellent and always in abundance! I can’t remember it ever running low (except for the cherry rush at peak season). They also carry locally grown produce (toms, apples, cherries, avocados, melons) which is further incentive to shop there. Just this summer they also began to have bins in front of the market offering local school garden produce as well.

      I don’t know what this means in relationship to your astute observation on the economy but this observation comes from a left coast suburb.

      Dana (8ba2fb)

    3. elissa,

      The Consumer Confidence article includes this excerpt that I think supports your point:

      Americans have become more frugal as the labor market struggles to gain strength and limit incomes.

      SuperValu Inc., the operator of the Albertson’s grocery- store chain, said this week that fiscal first-quarter food sales fell compared with a year earlier and consumers purchased fewer items per basket.

      “We see huge increases in coupon usage across our enterprise,” Chief Executive Officer Craig Herkert said on a conference call July 27. “We continue to see as you all know, massive unemployment but also underemployment and particularly in some of the big markets where we are, it’s certainly more challenged than in the country as a whole.”

      Asparagus probably isn’t considered a staple and can’t be purchased using coupons, so a produce manager might be more likely to limit orders on products like asparagus.

      DRJ (d43dcd)

    4. “Asparagus probably isn’t considered a staple”

      Maybe not in Texas.

      daleyrocks (940075)

    5. Heh. I’m sure some Texans eat asparagus, although not in my household because I ruined the asparagus we were going to have aren’t having for dinner tonight. Tonight I posted instead of cooked and the asparagus paid the price.

      DRJ (d43dcd)

    6. “U.S. economy grew 2.4% in Second Quarter, Below Forecast”

      On a positive note, nondefense federal spending increased 13.0% during the quarter!

      daleyrocks (940075)

    7. DRJ – We usually buy a few big bags of fresh asparagus right off the farm in Michigan every year. They grow a lot there. Nothing better.

      daleyrocks (940075)

    8. How is that “Recovery Summer” ?

      SPQR (26be8b)

    9. DRJ — Ha. I wasn’t going to name names, but coincidently the chain at which I had my
      asparagus experience this afternoon is the very same one mentioned in the Consumer Confidence article and in the excerpt which you posted.

      The troubling aspect of it all in terms of our economic recovery is that if the stores must scale back somewhat on their stock and assortments because overall sales are down–but then when someone is willing to open his/her wallet for a desired product and it is not available–the downward sales trend sort of self-perpetuates.

      elissa (d824dd)

    10. I have noticed a distinct drop off in the amount of fresh seafood, especially Ahi Tuna. My local store used to always have several cuts, several pounds of high quality sashimi grade. Now, rarely ever is there anything better than farm-raised Thai tuna.

      JD (3dc31c)

    11. Meanwhile, bank closures are at a higher rate than last year, which was higher than the year before.

      http://www.msnbc.msn.com/id/38493947

      108 banks closed so far this year, more than the 69 which were closed by this point last year.

      Steven Den Beste (99cfa1)

    12. SDB – I blame Bush.

      JD (3dc31c)

    13. JD–But I thought it was broccoli that the Bush family eschewed–not asparagus.

      elissa (d824dd)

    14. You are right, but that does not absolve the Bush’s for their ongoing destruction of the banking system by their evil deregulations, their exploding deficits, and runaway debts all because of their reichwingnuts tawdry love affair with racism, hate, and economic destruction. But I digress …

      JD (3dc31c)

    15. And Kyoto. Never forget about Kyoto, JD.

      daleyrocks (940075)

    16. Asparagus is a seasonal item and the season is May to July. I wouldn’t be terribly surprised to see us going back more to the 50s as choices shrink due to less demand for expensive produce. I love blueberries. However, I will not pay $5 a pint for them. Right now, they are in season and are $1 a pint.

      A lot of people younger than I am are going to learn what it was like when a great advance was frozen lima beans.

      Mike K (0ef8c3)

    17. Anyone noticed the price of bacon lately?
      Seems to have doubled over the last two years.
      Last time I checked, corn was an important feed stock for pigs, and a lot of corn has been diverted to ethanol production, resulting in less available for pork production, which would naturally result in higher feed prices, resulting in the rancher’s need to get a higher price for pork bellies, causing an increase in the cost of bacon.

      Thank You, ADM/Cargill/etc.

      AD - RtR/OS! (595de0)

    18. “Anyone noticed the price of bacon lately?”

      AD – Now there’s a staple!

      daleyrocks (940075)

    19. “Asparagus is a seasonal item and the season is May to July.”

      Mike K – You can pick up the Chlorophyll deprived white variety or the regular green stuff locally here in the Midwest, as I’m sure you know.

      daleyrocks (940075)

    20. As many others noted last year, Obama has set the table for economic malaise tending toward disaster. He won’t relinquish the power he’s assumed, he won’t get the huge amounts of additional spending and there’s no way his theory of “loans to small business” is anything other than an idiots errand since demand is what drives expansions. Kick in his financial law(s) and such and it only gets worse. If he tries to close the deficit his only card is increasing taxes which simply will not work. Even if “targeted” ones are kept from the W tax cuts it will be clear by Jan 2012 that that, too, is a disaster. Fighting with the GOP in 2011 to spend more will look plain stupid. At best, he’ll be running on a bad economy – at worst he’ll have a disaster to explain.

      cedarhill (c77d79)

    21. Uncertainty. This article from Barron’s tells us how this time in U.S. history is demonstrating how ineffective government is. Investors are sitting on their hands, and on their cash. Nothing seems like a good deal today, and it looks like it will be awhile before that changes.

      TimesDisliker (18b0e3)

    22. TimesDisliker, if we can throw out the Democratic majority in Congress, it may change in 2011 but otherwise, we may need to see if it takes a return to GOP government in 2012.

      SPQR (26be8b)

    23. hear bacon not good
      for you so move to Chicken
      Fat Ripple ice cream

      ColonelHaiku (ac3c3c)

    24. SPQR, I will do my part to make that happen. My fear is the the Republicans don’t have any solution to speed up this unwinding of bad debt. I have been let down enough times to keep from getting my hopes up.;-) It is going to be painful for awhile.

      TimesDisliker (18b0e3)

    25. AD – Bacon should be its own food group.

      Mother-in-law makes this Vietnamese soup with white asparagus and crab meat that I can eat by the gallon.

      JD (3dc31c)

    26. JD, is it true that soup is called “Miso Horny”?

      TimesDisliker (18b0e3)

    27. I hate to just copy links from Glenn Reynolds, but I thought this item is not getting the attention that it deserves.

      There are rumors in the market, that Obama may order Fannie Mae/Freddie Mac to cram down mortgages that are underwater.

      I sincerely hope that these rumors are not true, and that the administration will effectively deny them quickly.

      Because I suspect that the Democrats who favor such radical ideas have no clue just how much damage they have already done to our financial institutions, and how much damage this will do. Destroying value of Fannie Mae’s MBS’ will completely unravel our mortgage markets.

      The recklessness of just allowing this rumor to float about the market is just astonishing. Giving Democrats the power over our government has been almost literally equivalent to giving teenage boys a case of whisky and the keys to the Porsche.

      SPQR (26be8b)

    28. I’ve been away. Glad to see DRJ back.

      I like asparagus. Only buy it when it’s cheap, though.

      ag80 (fad8fc)


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