This is what Goldman Sachs Research wrote on the Durable Goods Orders data for June in the US:
Probably the best summary number for recent private-sector manufacturing activity is the three-month annualized rate of core capital goods orders, which currently is running at a sorry -3.1%.
Elsewhere in the durable goods report, shipments rose only 0.1% and inventories 0.3%. Our tracking estimate of Q2 real GDP growth is unchanged at 1.1% following this report.
HSBC Research weighed in too:
BOTTOM LINE: Orders of capital goods are roughly unchanged since late last year. Growth in business investment has waned. Shipments and production are likely to slow in the months ahead unless demand picks up soon.
I have not provided web links because these were delivered to my IN-BOX as emails.
Thanks to HSBC report, I was alerted to the fact that three newspapers – The Wall Street Journal, Financial Times and the New York Times – have carried stories on the Federal Reserve contemplating asset purchases, viz., Mortgage Backed Securities (MBS). The Federal Reserve Open Market Committee meets on July 31 – August 1.
Whether purchases of MBS pushes down mortgage rates or not (I guess they do, invariably), the questions are whether that is the solution to the problem of mortgages under water or people with no jobs or income. Remember the article in Mother Jones on temporary employment?
In his latest weekly missive, John Hussman poses the valid question:
The more troubling issue is that Fed papers on the effectiveness of QE focus almost singularly on the effect of QE on interest rates and risk premiums in the financial markets, with the notable absence of any analysis of the resulting effect on the real economy. This is like showing that squirting gas into an engine will make the engine run faster, without any concern for the fact that there is no transmission that connects the engine to the wheels. In a nutshell, the problem with QE is the lack of any material transmission mechanism from monetary interventions to real economic activity. This is a problem that the Fed should have recognized years ago, because there is strong and consistent historical evidence that real economic activity has very weak “elasticity” with respect to financial market fluctuations, particularly in equity values.
Of course, the easy counter-argument is that this time around the Federal Reserve is contemplating the purchase of MBS and not trying to boost stock prices.
The Ritholtz blog has this story on the recent ‘recovery’ in US housing market. The report referred to therein is available only at a price of USD100.00.
A key sentence from the post:
Hanson notes there is no real difference between the YoY “resetting” of rates lower and introducing increased leverage to keep people paying “more” for houses, despite the same income and monthly payment.
With drought (USDA drought monitor as of July 24th 2012) threatening agricultural crops and likely to add moderately to food price inflation in the US and with employers adding more part-time workers than full-time workers, it is unclear if a monetary quickfix would work and is all that America needs now. Perhaps, recovery from such huge pile-up in private sector and public sector debt needs a lot longer than our impatience allows for. In the process, we risk doing serious damage with our fixes.