Fellow Shortrunners,

    The abbreviated business week carried with it a string of positive economic news.  It also saw Black Friday (as firms move from losses or red for the year to profitability or black), the Friday after Thanksgiving which is traditionally one of the heaviest shopping days of the year.  Preliminary estimates suggest that last Friday was indeed a good time for retailers.  Black Friday also marks the beginning of the Christmas shopping season, a crucial time for retailers which will likely determine whether a number of US firms can stay out of the red and in the black.

    Just as America's economy finally appears to be recovering, it has launched what appears to be a relatively ambitious plan at liberalizing international trade.  Elucidated by US trade representative Robert Zoellick, the plan calls for the elimination of all tariffs on trade in manufactured goods between WTO nations by the year 2015.  While the plan might hold water with the world's richest nations, whose trade flows are dominated by manufacturing goods, it will certainly be opposed by the world's developing nations.  And for good reason.  They have much to lose from such a plan.

     Choosing to single out manufacturing goods (which already have lower tariffs than agricultural goods) is unfair to the developing world in several ways.  Most importantly, it neglects devoting attention to reducing tariffs on agricultural goods and commodities, the primary exports of the developing world.  While they face resistance to exports, the developed world's manufactures would then have freer access to the developing world's markets.  For the developing world, which already struggles to compete in agricultural production with the developed world because of its strong agricultural subsidies, could experience further damage to what little domestic manufacturing their economy now supports by the freer imports. 

     In a sense, reducing manufacturing barriers for these countries can be seen as their dropping of protectionist tariffs while their already richer trading partners fail to drop theirs.  Not only are the tariffs higher on agricultural goods, but subsidies to farmers in the US and to an even greater extent to farmers in Europe and Japan are higher than developing countries could ever hope to offer.  Just as the EU is struggling to reform its Common Agricultural Policy, the US and its pacific neighbor should face up to their farmers and decide on a plan for reducing subsidies which have a direct cost on consumers around the world and as well as on producers in developing countries.

Economic Releases

The data section provides charts and data for the most important economic indicators. 

Existing Home Sales: 5.77 Million Units
Release Date: 11/25

• A report Monday showed that the housing market continues to be bolstered by the economy's low interest rates.  Expectations of low interest rates going out are helping to keep mortgage rates depressed.  Existing home sales rose over 6% during October, raising the already elevated level to a higher plateau.

New Home Sales: 1.007 Million Units
Release Date: 11/26

• New home sales declined in favor of existing home sales in October.  Dropping over 4%, new home sales are still running at historically high levels and given low mortgage rates, economists expect this trend to continue.

3rd Quarter GDP: 4.0%
Release Date: 11/26

• Revisions to 3rd quarter GDP growth in the United States raised government projections from 3.1% to a healthier 4.0%.  The report also indicated healthy growth in business investment, recently emphasized as a key to economic recovery.    The major factor propelling the upward revision however was strong consumer spending which makes up the bulk of US GDP.

Consumer Confidence: 84.1
Release Date: 11/26

• After absolutely plummeting in October and sustaining 5 months of decline, the Conference Board's consumer confidence measure rose to 84.1 in November.  October's figure dipped as low as 79.6.  Continued financial market gains (though the markets are still deep in the red for the year) will likely bolster consumer spending plans.

Advance Durable Goods: 2.8%
Release Date: 11/27

• Durable goods orders rose 2.8% in October.  The gains were not in the volatile transport component but rather in investment goods such as machinery and computing equipment.  Such increases signal a return of confidence to the business community, a crucial shift.  Nonetheless, this is only one set of figures and investment levels had fallen quite a bit.  Thus I would look for sustained gains in investment as a key stepping stone to recovery.

Personal Income: 0.1%
Release Date: 11/27

• Personal income rose 0.1% in October, a BEA release suggested Wednesday.  Personal consumption expenditures (PCE), a measure of inflationary pressure, rose 0.4% during the same period.  Despite the rise in the PCE, overall signs of inflation are still mute and with rising personal income, prospects for the economy appear to be strengthening.  

Jobless Claims: 364,000
Release Date: 11/27

• Jobless claims dipped further last week, suggesting that the previous week's precipitous fall was not an anomaly.  If this level of jobless claims can be maintained, it portends declines in the overall unemployment rate.

ECRI Weekly Leading Index: 119.3
Release Date: 11/27

• As the ECRI WLI rose to 119.3, economists for the Economic Cycles Research Institute suggested that the economy is in a much healthier state since November and that prospects for a double-dip were slight.

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Issue #129

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