Flash Update
FLASH UPDATE - Apr. 29, 2007
JOHN WILLIAMS' SHADOW GOVERNMENT STATISTICS
FLASH UPDATE
April 29, 2007
__________
Key Dollar Measure Hits All-Time Low
First-Quarter GDP Growth of 1.26%, GDP Deflator at 3.97%
Business Activity Tumbles as M3 Growth and Inflation Fears Soar
__________
PLEASE NOTE: The April SGS Newsletter is planned for posting next Monday, following the release of the April jobs data, along with final numbers on certain monthly measures, including an early estimate on April M3. The updated SGS Alternate GDP has been posted on the Alternate Data page; the April U.S. dollar measures should be posted on Thursday. -- Best wishes to all, John Williams
Inflationary Recession Can Trigger Massive Dollar
Selling
The trade-weighted U.S. dollar hit a record low last week, as the markets increasingly recognized the downturn in economic activity, in conjunction with rising inflation that the Fed seems to be "fighting" with accelerating broad money growth. The faltering fundamentals for the greenback included the ongoing bottom-bouncing of the President's approval rating. The U.S. currency is at the precipice and shortly could come under massive selling pressure. Dollar dumping would create turmoil in the domestic U.S. markets, pressuring long-term interest rates to the upside and equity prices to the downside. Never before have the U.S. markets faced an economic crisis while being so heavily dependent on foreign capital for liquidity.
U.S. Dollar Measures. The Federal Reserve Board's Major Currency Trade-Weighted Dollar Index (March 1973 = 100) set an all-time daily low of 78.99 on April 25th, 0.3% lower than the prior record low of 79.22 on April 19, 1995. The April monthly average also will set a record monthly low of about 79.9 (or 57.49 reset to January 1985 = 100).
Most dollar measures, however, have not set new lows. The Shadow Government Statistics Financial-Weighted Dollar Index (January 1985 = 100) -- where the key currencies are weighted based on respective currency trading volumes instead of merchandise trade activity -- is still 2.5% above its record monthly low of 48.98 in April 1995. The dollar also is roughly 6% above its all-time low against the Swiss franc. A variety of new downside records for the U.S. currency likely will be broken in the weeks and months ahead.
M3 Growth Soars. With just over two weeks of data available, the annual rate of growth in the monthly average April M3 appears likely to end up in the 12.4% to 12.8% range, up from 11.6% in March. Once again, the growth in the SGS Ongoing M3 Measure is built on the back of surging M2 growth.
Signs of Impaired Business Activity. Last week's economic reports, as highlighted below, were fairly consistent in signaling a slowing economy with rising inflation.
The "advance" estimate of annualized real (inflation-adjusted) growth in first-quarter GDP slowed to 1.26% +/- 3%, down from 2.45% in the fourth quarter, while annual growth eased to 2.06% in the first quarter, down from 3.13% in the fourth. The SGS Alternate GDP annual rates of change were a 2.1% contraction in the first quarter, versus a 1.5% decline in the fourth quarter.
Suggesting inflationary recession issues, official GDP inflation soared, with the first-quarter's implicit price deflator showing annualized inflation of 3.97%, up from 1.67% in the fourth quarter.
New orders for durable goods plunged 2.1% on a year-to-year basis, the first major annual decline in the series since the end of the last recession.
Confirming the ongoing sharp fall-off in housing activity, March existing home sales were down 8.4% month-to-month and 11.3% year-to-year. While March new home sales were reported up by 2.6% +/- 14%, year-to-year sales plummeted by 23.5%.
Related to home sales prospects as well as to job market conditions, both the Conference Board's consumer confidence and the University of Michigan's consumer sentiment measures for April fell on a monthly as well as an annual basis.
Upcoming Jobs Report. Market expectations for Friday's (May 4th) employment/unemployment report appear to be running around 100,000 new jobs, with a slight increase in the unemployment rate. Supporting data are weakening and suggest worse-than-expected results. The supporting series include rising new claims for unemployment insurance, continued declines in March help-wanted advertising, and March's purchasing managers survey employment readings near or below recession levels.
With all this happy news, the Dow Jones Industrial Average continues making new highs. Further details will follow in the newsletter.
___________________________________________
April's "Shadow Government Statistics" monthly newsletter should be posted on or about May 7th. An e-mail advice of same will be sent.
FLASH UPDATE
April 29, 2007
__________
Key Dollar Measure Hits All-Time Low
First-Quarter GDP Growth of 1.26%, GDP Deflator at 3.97%
Business Activity Tumbles as M3 Growth and Inflation Fears Soar
__________
PLEASE NOTE: The April SGS Newsletter is planned for posting next Monday, following the release of the April jobs data, along with final numbers on certain monthly measures, including an early estimate on April M3. The updated SGS Alternate GDP has been posted on the Alternate Data page; the April U.S. dollar measures should be posted on Thursday. -- Best wishes to all, John Williams
The trade-weighted U.S. dollar hit a record low last week, as the markets increasingly recognized the downturn in economic activity, in conjunction with rising inflation that the Fed seems to be "fighting" with accelerating broad money growth. The faltering fundamentals for the greenback included the ongoing bottom-bouncing of the President's approval rating. The U.S. currency is at the precipice and shortly could come under massive selling pressure. Dollar dumping would create turmoil in the domestic U.S. markets, pressuring long-term interest rates to the upside and equity prices to the downside. Never before have the U.S. markets faced an economic crisis while being so heavily dependent on foreign capital for liquidity.
U.S. Dollar Measures. The Federal Reserve Board's Major Currency Trade-Weighted Dollar Index (March 1973 = 100) set an all-time daily low of 78.99 on April 25th, 0.3% lower than the prior record low of 79.22 on April 19, 1995. The April monthly average also will set a record monthly low of about 79.9 (or 57.49 reset to January 1985 = 100).
Most dollar measures, however, have not set new lows. The Shadow Government Statistics Financial-Weighted Dollar Index (January 1985 = 100) -- where the key currencies are weighted based on respective currency trading volumes instead of merchandise trade activity -- is still 2.5% above its record monthly low of 48.98 in April 1995. The dollar also is roughly 6% above its all-time low against the Swiss franc. A variety of new downside records for the U.S. currency likely will be broken in the weeks and months ahead.
M3 Growth Soars. With just over two weeks of data available, the annual rate of growth in the monthly average April M3 appears likely to end up in the 12.4% to 12.8% range, up from 11.6% in March. Once again, the growth in the SGS Ongoing M3 Measure is built on the back of surging M2 growth.
Signs of Impaired Business Activity. Last week's economic reports, as highlighted below, were fairly consistent in signaling a slowing economy with rising inflation.
The "advance" estimate of annualized real (inflation-adjusted) growth in first-quarter GDP slowed to 1.26% +/- 3%, down from 2.45% in the fourth quarter, while annual growth eased to 2.06% in the first quarter, down from 3.13% in the fourth. The SGS Alternate GDP annual rates of change were a 2.1% contraction in the first quarter, versus a 1.5% decline in the fourth quarter.
Suggesting inflationary recession issues, official GDP inflation soared, with the first-quarter's implicit price deflator showing annualized inflation of 3.97%, up from 1.67% in the fourth quarter.
New orders for durable goods plunged 2.1% on a year-to-year basis, the first major annual decline in the series since the end of the last recession.
Confirming the ongoing sharp fall-off in housing activity, March existing home sales were down 8.4% month-to-month and 11.3% year-to-year. While March new home sales were reported up by 2.6% +/- 14%, year-to-year sales plummeted by 23.5%.
Related to home sales prospects as well as to job market conditions, both the Conference Board's consumer confidence and the University of Michigan's consumer sentiment measures for April fell on a monthly as well as an annual basis.
Upcoming Jobs Report. Market expectations for Friday's (May 4th) employment/unemployment report appear to be running around 100,000 new jobs, with a slight increase in the unemployment rate. Supporting data are weakening and suggest worse-than-expected results. The supporting series include rising new claims for unemployment insurance, continued declines in March help-wanted advertising, and March's purchasing managers survey employment readings near or below recession levels.
With all this happy news, the Dow Jones Industrial Average continues making new highs. Further details will follow in the newsletter.
April's "Shadow Government Statistics" monthly newsletter should be posted on or about May 7th. An e-mail advice of same will be sent.