View From a Height
Commentary from the Mile High City
Wednesday, August 18, 2004

Good Economic News That Nobody Noticed 

I know there's only one economic number that matters, and it comes out every Thursday, but this week has actually been pretty heavy with economic news, and while it doesn't show Chinese-like growth, there's a lot to be happy about.

Empire State Index

This is a report on the state of New York's manufactuing economy. While the overall number was down, a lot, it stayed positive, which shows continuing growth. The employment index, and the price index both showed improvement, too, indicating little price pressure and increasing hiring.

Treasury International Capital

This measures how much foreign money is coming into the country. For the last few months, it has far, far exceeded the amount needed to pay for our current accounts deficit, meaning that companies have money to invest (good), and the government doesn't have to raise interest rates to attract foreign capital (very good). It suggests that the dollar won't be weakening any more, either.

Industrial Production & CPI

Both good news. We all know the CPI didn't show any pressure. But with industrial production up, and factory utilization still at about 77% of capacity, there's no price pressure there, either.

Look, it's not all good news. No matter what the Consumer Confidence numbers say, consumers are spending less, suggesting that they see a chance to save. I'm not sure where the money's going, so we can hope that maybe people are paying down credit cards. (Never believe Consumer Confidence numbers, by the way. People tell pollsters what they think they want to hear.) Pay attention to consumer spending, which does seem to be softening a little.

Again, we've had whole quarters where that number went down, in the middle of strong economic growth, so it's not fatal. But if we're counting on exports, we may be disappointed. Other countries are more dependent on oil than we are (we continue to import more oil, but it's the basis of less and less of our economy), so they may not have money left over for our consumer goods.

I'm not Alan Greenspan, a fact for while all should be grateful, but I don't see any reason for the Fed to be raising interest rates at this point. They may anyway, but I think it would be a mistake.

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