Economic Indicators / Analysis

Using raw monthly data, I have total US business sales up by 11% yr/yr through July in current $
and +7.4% in constant $. Over this period, inventory accumulation has stayed in good balance
with sales growth. Moreover, data on store and auto sales for August were relatively strong. The big drag on the economy has continued to be construction spending which is very depressed still but in
a moderating downtrend (and is included in the total business sales figures).

However, there are some troubling signs. The breadth of new orders reported by business hit
a strong early cycle peak in January of this year and has eroded rapidly to only a nominally
positive level for August. The weekly leading economic indicators (excluding volatile price series)
has started to retreat sharply since the end of July, and, the weekly coincident indicator is showing
signs of flattening out here in August.

The payroll tax cut surely did aid employee take home pay, but deterioration in the growth of the
basic wage rate plus the acceleration of inflation over the Half 1 2011 has undermined basic
purchasing power with the real wage (tax cut included) up but 0.2% yr / yr as we headed into
September. To top off a lousy consumer picture, total civilian employment growth is up but 0.2%
yr / yr, leaving consumers to borrow more and reduce savings to maintain  aggregate spending.

Potential bright spots ahead appear modest. Inflation pressures will be moderating and this will
give some lift to the real wage. Obama and the gang have crafted a jobs program and are looking
at ways to ease the homeowner's burden. The Fed awaits the Obama programs unveiling and does
have some further easing tools to deploy if pressured. However, barring a major surprise from
Obama, nothing grand seems in store, which with the poor labor market, leaves the economy
vulnerable. And, last but far from least, the GOP appears committed to sabotaging the economy
further if needs be to oust Obama. As much as I would like to see more positive leadership and
statesmanship from the White House, I have to say if a political street fight looms ahead, Obama
should drop the velvet gloves and come out swinging.