November 14, 2003

More Neutral Economic News

A couple of pieces of news that I thought would be good turn out to be a little bit worse than I was expecting:

Rapid City Journal: Serving Rapid City South Dakota: America's shoppers tightened their belts for the second straight month in October, and prices at the wholesale level shot up by 0.8 percent -- the largest increase in seven months, the government reported Friday. The back-to-back declines in retail sales -- they fell by 0.3 percent last month and 0.4 percent in September -- came after consumers went on a shopping spree during the summer, the Commerce Department reported. Economists had predicted the hot pace could not be sustained.... The rise in wholesale prices was much larger than the 0.2 percent rise that economists were forecasting. October's jump...reflected sharply higher prices for food, especially for beef and veal, as well as car and truck prices as generous incentives were scaled back.

And, the Federal Reserve reported that industrial production rose by 0.2 percent in October, down from a 0.5 percent gain in September. October's increase was half the size of the 0.4 percent increase that economists were calling for...

Posted by DeLong at November 14, 2003 10:21 AM | TrackBack

Comments

The 3-month annualized rise of non-auto, non-gasoline retail (core) sales was 9.4% in October. The problem is not that demand fell off a bit. The problem is the one noted earlier in the Wal-Mart story. Are consumers pulling back because they have no choice? If so, ofr how long are they constrained?

Posted by: K Harris on November 14, 2003 10:50 AM

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After realizing that I've told at least three people they were lying in the last few months on this blog, I've decided to scale back my commenting. (Its one of those "if you're not part of the answer..." instances. I really do want to improve our public discourse.)

Nonetheless, I just received a copy of Richard Koo's new book entitled "Balance Sheet Recession" dealing with Japan's decade of economic stagnation. His basic claim is that Japanese firms reacted to the early 90's decline in asset values by shifting from profit maximizers to debt minimizers. I am trying to critize his theory, but I cannot yet find the flaw. It seems to fit my own observations (I claim no novelty of thought) of knowledge constrained (all investing requires a degree of soothsaying about the future) over- and underinvesting being the root of sectoral recessions that create full recessions when lined up. The theorectical application to our current economic problems are interesting. What does the profit maximizing assumption mean for monetarist/Keynsian models?

Posted by: Stan on November 14, 2003 02:41 PM

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