Recession is over!!

v bottoms are rare

U.S. Consumer Prices Rose Less Than Forecast in May (Update1)
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By Courtney Schlisserman

June 17 (Bloomberg) -- The cost of living in the U.S. rose less than forecast in May, culminating in the biggest 12-month drop in prices in almost 60 years.

The consumer price index increased 0.1 percent after no change a month earlier, the Labor Department said today in Washington. In the 12 months ended in May, costs dropped 1.3 percent, the biggest decline since 1950.

Higher commodity prices, including gasoline, will probably restrain Americans’ discretionary spending at a time when the economy is showing signs of stabilizing. The lack of sustained gains in sales is one reason companies are finding it difficult to pass increasing costs on to customers.

“Any energy price increase is going to act as a tax on households in particular because their incomes are shrinking,” Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York, said before the report. “It’s difficult to raise prices.”

Economists forecast consumer prices rose 0.3 percent, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from a 0.1 percent decrease to a gain of 0.6 percent.

Excluding food and fuel, costs also climbed 0.1 percent, matching the median forecast. Compared with a year earlier, the so-called core rate increased 1.8 percent, down from a 1.9 percent 12-month gain in April.

Energy

Energy costs increased 0.2 percent in May, as a 3.1 percent rise in the cost of gasoline was partly offset by declines in fuel oil and natural gas.

A separate Commerce Department report showed the U.S. current-account deficit narrowed in the first quarter to $101.5 billion, the least since 2001, reflecting a smaller shortfall in trade of goods.

These prices may continue to rise in coming months. The average price of a gallon of regular gasoline at the pump is up 65 percent this year, reaching an almost eight-month high of $2.68 yesterday, according to data from AAA.

Should retail gasoline prices peak at $2.75 a gallon, the increase since the start of the year will deduct $50 billion at an annual rate from household cash flows, according to a forecast by Richard Berner, co-head of global economics at Morgan Stanley in New York. The loss would offset almost all the benefit of the tax cuts from the Obama administration’s stimulus plan, he said in a June 8 report.

Food

Food prices, which account for about a seventh of the CPI, decreased 0.2 percent in April, reflecting lower costs for all major categories including fruits and vegetables, meats and dairy products.

The core index was constrained by falling prices for public transportation, apparel and tobacco. Rents which, make up almost 40 percent of the core CPI, were also subdued. A category designed to track rental prices rose 0.1 percent.

New vehicle prices climbed 0.5 percent. Car costs may decline in coming months as automobile makers slash prices or increase incentives to revive demand and lighten bloated inventories.

Chrysler, seeking to restructure under bankruptcy, began offering five-year, no-interest loans on some models this month. The financing, announced June 3, runs through July 1 and is an alternative to rebates of as much as $6,000 for consumers who buy through certain credit unions and already own a Chrysler vehicle. The cash option was put in place last month.

Retailers

Macy’s Inc. was among retailers cutting prices to clear stockpiles. Aeropostale Inc. earlier this month was offering 20 percent off women’s dresses. American Eagle Outfitters Inc. was giving 50 percent off the purchase of a second graphic t-shirt.

The CPI is the broadest of the three monthly price gauges from Labor because it includes goods and services. The cost of goods imported into the U.S. rose 1.3 percent in May, the government reported last week. Wholesale prices increased a smaller-than-anticipated 0.2 percent, the department said yesterday.

Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

Richard Fisher, president of the Federal Reserve Bank of Dallas, this week dismissed concern that the central bank’s record purchases of assets will cause inflation to soar. Fisher, who describes himself as among the most aggressive inflation fighters on the Federal Open Market Committee, said it’s inappropriate to be overly concerned on price pressures now because of the amount of “slack” in the economy.

Fed policy makers meet to discuss the direction of interest rates next week. Concern over the amount of money the Fed has pumped into financial markets and the size of upcoming government securities auctions to pay for stimulus efforts has caused interest rates on Treasuries to shoot higher in recent weeks.

To contact the reporter on this story: Courtney Schlisserman in Washington cshlisserma@bloomberg.net

Last Updated: June 17, 2009 08:40 EDT

FedEx Falls After Profit Forecast Trails Estimates (Update1)
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By Mary Jane Credeur

June 17 (Bloomberg) -- FedEx Corp. fell in early New York trading after the second-largest U.S. package-shipping company forecast a first-quarter profit that lagged behind analysts’ estimates.

Profit will be 30 to 45 cents a share, FedEx said today in a statement. That would be lower than the 70-cent average estimate of 11 analysts surveyed by Bloomberg. FedEx dropped 92 cents, or 1.8 percent, to $50.50 at 7:57 a.m. in New York.

U.S. air shipments tumbled for the 14th straight quarter as businesses curbed spending amid the worst unemployment rate since 1983. Analysts watch Memphis, Tennessee-based FedEx as an economic bellwether because it moves goods ranging from mortgage documents to auto parts to clothing.

The operating environment this quarter and next will be “extremely difficult,” Chief Financial Officer Alan Graf said in the statement.

Profit was 64 cents a share for the quarter ended in May, excluding writedowns to trim the value of buying Kinko’s Inc. and Watkins Motor Line, FedEx said. On that basis, the results exceeded the 51-cent average estimate of 13 analysts surveyed by Bloomberg.

When those costs and expenses for employee severance and reducing the value of aircraft are included, FedEx had a net loss of $876 million, or $2.82 a share. It had a net loss of $241 million, or 78 cents a share, a year earlier.

FedEx bought Kinko’s, now known as FedEx Office, in February 2004 for $2.4 billion and purchased Watkins in September 2006 for $780 million. The writedowns are for goodwill, which is the difference between what FedEx paid and the fair market value of the assets acquired.

Fourth-quarter revenue slid 20 percent to $7.85 billion, FedEx said.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

Last Updated: June 17, 2009 08:08 EDT

i wouldnt be surprised if NBER declares recession to be over around this time. So that would mean a 17-18 month recession. Of course, people just think that means its all smooth sailing from here and another bull market, and clearly that is not going to be the case

More FEDEX news...

"DETROIT (Reuters) - FedEx Corp on Wednesday reported a larger fourth-quarter loss, due to charges at two units that have been hit by the recession, but gave a low outlook for the current quarter, citing the continued downturn and rising fuel prices.

The package delivery company said that it expects earnings per share in the current quarter in a range between 30 cents to 45 cents. Analysts had predicted earnings per share for the quarter of 70 cents.

FedEx predicted the next two quarters will be "extremely difficult," but said the worst of the downturn appears to be over."

I guess the key statement is..."the worst of the downturn appears to be over."

There's a lot of talk about the financial companies are hiring again in NYC. I read that somewhere. Interesting how things turned while no one saw it on these boards. Maybe a full nutty bulls...

InFamous, it's not that we can't see it.

http://blog.andyharless.com/2009/06/long-way-to-inflation.html

What worries me particularly is that about 70% of the costs of production go to labor, and the forces of deflation work very slowly in the labor market. The data that are coming out today are only the tip of the iceberg. We’re already seeing evidence of the loss of upward inertia in compensation. Wage growth is decelerating, and, based on all historical experience, the deceleration is likely to continue – in this case, to continue to the point where it becomes deflationary.

I’m not talking about what will happen in the next 6 months; I’m talking about what will happen over the next 5 years. “Green shoots” – however green they may be – do not presage an imminent end to deflationary wage pressure. And they certainly don’t presage the beginning of inflationary wage pressure. Consider everything that has to happen before the wage pressure reverses and becomes inflationary:

Output must stabilize.

Output must start growing.

Output must grow faster than trend productivity.

Firms must slow layoffs to the normal rate.

Firms must remobilize slack full-time employees (workers who are still on the full-time payroll but aren’t being asked to produce much, because businesses have been trying to reduce inventories).

Firms must bring part-time employees back to full time. (This recession in particular has been characterized by the tendency to reduce hours rather than laying off employees.)

Hiring (which has been falling rapidly) must stabilize.

Hiring must rise to the point where it equals the normal rate of layoffs, to get total employment to start rising.

Hiring must become rapid enough that employment starts to grow faster than the population.

Hiring must become rapid enough that employment growth is faster than the sum of the population growth & labor force re-entry. In other words, net hiring has to be fast enough to absorb all the workers who will start looking for jobs again once there are more jobs around to look for.

The unemployment rate must start declining.

The unemployment rate must decline by 4 or more percentage points, which, by historical experience, will take a matter of years.

Firms must start competing for labor.

Firms must start raising wages.

Firms must raise wages faster than trend productivity growth.

Maybe – just maybe – we have already reached step 1. Step 2 may be just around the corner. There is no evidence thus far that we are approaching step 3. As for steps 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, and 15......that show may come to town eventually, but...I don’t see much need to start reserving tickets in advance.

"InFamous, it's not that we can't see it."

You've been one of the most vocal bears on these boards, so it's obvious you don't believe we are out of this recession.

In all, I think you missed the point about what Sonders said. I don't agree with her about us coming out of a recession, but she does have a point that "by the time you see all these things turning together and things are looking fine, we are closer to the next recession."

InFamous, some banks are making select hires, but there are far more layoffs than hires still. Barclays and DB just did rounds, MS employees are expecting more layoffs. Media companies are laying off now too. ESPN, CBS, MSNBC.

I didn't read it somewhere, I spoke to employees first hand. Job losses are not over.

Lessons and causes of this past recession: GDP was overinflated due to those who purchased homes on easy credit(not manhattan-coop boards prevented this). Banks stock prices were artificially inflated due to phantom earnings. So bank stocks had to correct. Anyhow, it's another learning experience to be used for the future.

You did call it Noah. Why don't you post that "recession imminent" comment you made to Doug Heddings @ truegotham. It s/b highlighted. Just as Noriel Robini and the other doom and gloomers s/b made accountable for their "stunningly wrong predictions".

just because i'm bearish doesn't mean that i'm unaware of what is happening within the financial community. i have many friends there. makes for interesting dinner conversations.

and it's not just job losses, it's wage deflation.

You still think Manhattan prices (20-40% more) will still crash if this economy does turn around and stabilize over the next few years.

steveF - which comment, and when? when stimulus runs out, and debts remain, and unintended consequences sink in, we will highly likely have another, shorter, less severe recession. Perhaps 2011-2012. It will likely coincide with WAVE 2 of this banking crisis, especially when FASB switches back the BS acct rule change that allowed banks to keep toxic assets off balance sheet in complex conduits and such. That rule changes in 2010 and 19 largest banks had 5trln in off balance sheet 'stuff' as of end of 2008. people tend to just want to ignore this type of stuff as if its not in view, it cant hurt me. Similar to mentality in late 2007 when this mess started and everyone said it was contained.

Noah-remember when Doug H was looking to purchase a new place for him and his family and you warned him about the incoming recession. It will take some time for me to find. I thought it would be easier for you to find. I remember thinking that this was the first time I had read where someone did an in-your- face call for an incoming recession. Most of the economist at the time were dancing around the subject. I think all past "expert" predictions should be looked at. See who got it right/wrong.

Ha!
So was i 'right' or 'wrong' for saying that there were signs of a recovery and stabilization in this economy 6 weeks ago?

Oh boy...here we go again.

It's amazing to me how the economic "experts" out there can have such completely different opinions. How are we expected to elevate individuals who's opinions differ on their field of expertise, economics. You would think the opinions/advice would all be at least somewhat close. But it's not! One from Yale yells, recession! the other from Harvard yells, prosperity! it's all BS.

ahh yes, I think that was Spring 2008. He was going to buy a Classic 7 or something I think and there were multiple bids.

Infamous: Nobody on this board could be unaware of any good news in the economic world since you and a handful of others insist on posting every bit of it, no matter how tangential or unrelated it may be to NY real estate.

Also, there is a big difference between stabilizing and turning around. In either case most people here would make the bet that NYC real estate will lag behind.

"v bottoms are rare"

You're wrong. The last stock market bottom (2001-2003) was formed the same way. We got a spike low that was quickly reversed. The top was made the same way. A failed breakout that got reversed.

My firm is having a banner year. We've been buying every high yield bond that we can get our hands on since that March bottom. And 'trust me', we're not the only one that saw this turn.

http://finance.yahoo.com/echarts?s=SHIAX#chart2:symbol=shiax;range=2y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

"It's amazing to me how the economic "experts" out there can have such completely different opinions. How are we expected to elevate individuals who's opinions differ on their field of expertise, economics. You would think the opinions/advice would all be at least somewhat close. But it's not! One from Yale yells, recession! the other from Harvard yells, prosperity! it's all BS."

SteveF,
Your absolutely right. No one knows until after the fact.
All we can do is follow the money (prices). There are abundance of indicators out there, some choose to ignore them and instead they rely on 'mainstream' media news.

"All we can do is follow the money (prices)."

No. Actually some of us can analyze where the prices are going beyond today and what the fundamentals are. But good luck with being a follower.

when the president of the united states says unemployment is going over 10%, that means we have another year of the same environment. in which time you will see RE collapse

steveF, not sure if you work in the financial industry. i do and am responsible for "market commentary". i don't come up with it, but pull it together and edit what our "experts" have to say. they are all over the place. the one thing they agree on is the current situation is unique. they are all intelligent, well trained, experienced and educated people but history only tells us so much. no one has a crystal ball ... if they did they would own the world. Liz Ann is perfectly nice and smart, but basically a talking head paid to make their clients feel better.

hurting...Liz Ann is more of a shrink? makes sense. Thx.

hurting..I wasn't being sarcastic(above) thx for your feedback. it helps.

"v bottoms are rare"

"You're wrong."

The stock market is not the economy. V bottoms in recessions are rare.

"The stock market is not the economy."

Maybe not entirely, but it's the best measure out there.