by Bill McBride on 5/20/2013 05:47:00 PM

From 6:30 to 8:00 PM ET, the will be a live stream of professors Tony Atkinson and Paul Krugman discussing inequality and growth at CUNY. The dialogue will be moderated by Chrystia Freeland.

As we endure the slow, uneven recovery from the “Great Recession,” there is no more critical or timely question than that of the relationship between economic growth and inequality. Join two preeminent economists as they assess the connection between prosperity for some and poverty for others. Paul Krugman is professor of economics at Princeton University, a Nobel laureate, and a New York Times columnist. He is the author of numerous books, including the recently published End This Depression Now! Sir Tony Atkinson, professor of economics at Oxford's Nuffield College, is one of the world’s foremost scholars of inequality and author or editor of more than thirty books on inequality and related topics. He recently coedited Top Incomes: A Global Perspective, a volume that analyses high-end income inequality around the world.

Chrystia Freeland will be taking questions at #GCinequality

This is a very interesting topic. Intuitively it seems higher inequality should lead to slower growth (I think it would at the extreme!), but I'm not sure the relationship between inequality and growth is clear.

UPDATE: Here is a replay video (starts around 55 minutes into video):

by Bill McBride on 5/20/2013 03:37:00 PM

Weekly Update: One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for March).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 17.7%. This is well above the peak percentage increases for 2011 and 2012 and suggests to me that inventory is near the bottom. It now seems likely - at least by this measure - that inventory bottomed early this year (it could still happen early next year). 

It is important to remember that inventory is still very low, and is down 15.1% from the same week last year according to Housing Tracker.  Once inventory starts to increase (more than seasonal), buyer urgency will wane, and I expect price increases to slow. 

by Bill McBride on 5/20/2013 01:12:00 PM

Just over a month ago I mentioned that lumber prices were nearing the housing bubble highs. Since then prices have declined sharply, with prices off about 20% from the recent highs.

Some of the decline could be related to additional supply coming on the market, and some due to less buying from China (several sources are reporting that China has pulled back significantly on buying North American lumber).

On additional supply, two months ago the WSJ had an article about some producers increasing supply:

Georgia-Pacific, the largest U.S. producer of plywood ... plans to invest about $400 million over the next three years to boost softwood plywood and lumber capacity by 20%.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices (not plywood): 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Lumber prices are now 20% off the recent highs.

by Bill McBride on 5/20/2013 10:37:00 AM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -1.5% (-3.7 billion vehicle miles) for March 2013 as compared with March 2012. Travel for the month is estimated to be 248.8 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways.


Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 64 months - over 5 years - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices were down in March compared to March 2012. In March 2013, gasoline averaged of $3.78 per gallon according to the EIA. In 2012, prices in March averaged $3.91 per gallon. But even with the year-over-year decline in gasoline prices, miles driven decreased.

This is because gasoline prices are just part of the story.  The lack of growth in miles driven over the last 5 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take several more years before we see a new peak in miles driven. 

by Bill McBride on 5/20/2013 08:36:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Economic Activity Slower in April

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.53 in April from –0.23 in March. Three of the four broad categories of indicators that make up the index decreased from March, and none of the categories made a positive contribution to the index in April.

The index’s three-month moving average, CFNAI-MA3, ticked up to –0.04 in April from –0.05 in March. April’s CFNAI-MA3 suggests that growth in national economic activity was very near its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity slowed in April, and growth was near the historical trend (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.