The US Economy

The Recent Collapse In Business Confidence Is Stunning

Business Insider,

16 October, 2012

Evidence continues to pour in that the U.S. consumers and the U.S. businesses are experiencing the economy very differently.  Specifically, the consumer has been feeling more confident thanks to emerging bullish trends like the rebound in home prices.  Meanwhile, businesses are becoming increasingly cautious as the fiscal cliff looms.

Morgan Stanley just published its October read on its proprietary Business Conditions Index and it collapsed to 41% from 55% in September.

"Optimism surrounding supportive monetary policy has faded while fiscal cliff and election uncertainty have steadily risen," wrote Morgan Stanley economist Dane Vrabac. "The stronger than expected employment report did little to boost enthusiasm.

"Reports of uncertainty created by the fiscal cliff continue to increase. In October, 51% (versus 49% last month) of analysts responded that companies have downgraded business conditions as a result of cliff-related issues."

Morgan Stanley

The most worrying component of the report was the stunning drop in hiring plans:

Despite the stronger than expected employment report for October, both hiring indices fell to multi-year lows. The hiring index dropped 10 points to 44%, low since December 2009, and the hiring plans index sunk 13 points to 44%, low since August 2009. To put this into perspective, in August 2009 the unemployment rate was at 9.6%, still on its way to maxing out at 10% two months later. By that December, it had only recovered 0.1% to 9.9%. Given the volatility of the component indices, it’s too early to make a strong call, but these indices warrant close attention in the coming months.

Meanwhile, we learned today that the NAHB homebuilder index climbed to a six-year high.  According to Deutsche Bank's Joe LaVorgna, this means housing starts could double within just six months.  This could be bullish for the U.S. Consumer.

Hopefully, Washington will soon address these fiscal cliff issues.  The consumer is coming back.  But as you see above, persistent business uncertainty surrounding the fiscal cliff could eventually hit the consumer through a higher unemployment.

Hours Ahead Of The Presidential Debate, Total US Debt Hits Record $16.19 Trillion

Zero Hedge,

16 October, 2012

While the perfectly coincidental (or maybe not) surge in the stock market on two subsequently thoroughly denied rumors (which did not prevent the S&P to mysteriously close at the day's high) will likely be mentioned at least once or twice in tonight's presidential debate as validation of this administration's economic policies, at least in nominal terms (because while the economy may be Bush's fault, the centrally-planned stock market is entirely Obama's doing or so the logic goes), it unclear if the following number will be brought up. The number in question: $16,190,979,268,766.67, which is the closing number for total US public debt outstanding, which also happens to be a record closing all time high and an increase of $33 billion from yesterday courtesy of the settlement of last week's bond auctions. There is now $242 billion in debt left under the debt ceiling, which at the current recently slowed down pace of debt issuance, which is posed to pick up substantially again, will be exhausted in well under 2 months.

Remember: there is never such a thing as a free lunch. The benefit of this unrepayable debt and ruinous fiscal policy is precisely what the administration is taking benefit for, namely the soaring stock market. The offset, of course, is that as Reinhart and Rogoff never tire of showing, piling up well over 100% in public debt/GDP means that there is only one way out for the host country: either a hard default, or inflating the debt away.

And since neither candidate has any proposal on how to slow down the disastrous trajectory of US indebtedness, don't expect there to be any substantial discussion of the math behind the number highlighted in the table above.

Source: Debt to the penny.