U.S. Auto Sales Reach 4.5 Year High in August

As predicted several weeks ago by J.D. Power based on the first 16 selling days of August, U.S. new car sales did reach a four and-a-half year high last month.  Slightly more than 14.5 million units were sold in August (at an annual rate, seasonally adjusted), which was an increase of 20% from a year earlier (exactly as predicted by J.D Power), and the highest sales month since March 2008.  By individual auto company, Honda had the largest annual increase of 59.5% in August, followed by Volkswagen at 48.2%, and Toyota at 45.6%.  Chrysler led the Big Three with a 14.1% increase, followed by Ford's 12.6% gain and GM's 10.1% increase.  On a year-to-date basis, U.S. auto sales are 14.7% above last year.  

Auto sales in August marked the third time this year that monthly sales exceeded the artificially high sales during the "cash-for-clunkers" taxpayer-funded stimulus in August 2009, and August sales were the highest since the very early days of the recession.  Based on actual new vehicle purchases by consumers, in contrast to how they might respond to national surveys, consumer confidence is at the highest level since early 2008, and there is nothing here in today's report to suggest a serious slowdown or recession.

Time Cover Story: Deja Vu All Over Again, Part II

From the Time Magazine article titled "Why We're So Gloomy" (full article is behind paid firewall):

Well, why are Americans so gloomy, fearful and even panicked about the current economic slump? U.S. consumers seem suddenly disillusioned with the American Dream of rising prosperity. Hard times are forcing some people to turn their back on the American Dream. 

"Whining" hardly captures the extent of the gloom Americans feel as the current downturn. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost million of jobs during the slump, U.S. consumers have fallen into their deepest funk in years. 

While some economists have described the current slump as a near depression, that phrase overstates the case if it is taken as a comparison with the period 1929-33, when the U.S. economy contracted by nearly a third. The D word becomes more valid, especially with a small d, when it is used to compare the growth rate of the 1930s, which averaged 0.5% a year, with the expected sluggishness of the next decade, which some economists predict will see an average growth rate of 2%. 

"I'm worried if my kids can earn a decent living and buy a house," says Tony Lentini, vice president of Mitchell Energy in Houston. "I wonder if this will be the first generation that didn't do better than their parents. There's a genuine feeling that the country has gotten way off track, and neither political party has any answers. Americans don't see any solutions." 

The deeper tremors emanate from the kind of change that occurs only once every few decades. America is going through a historic transition from a heedless borrow-and-spend society to one that stresses savings and investment. When this recession is over, America will not simply go back to business as usual. 

The underlying change in the way American consumers and business leaders think about saving and spending will make the recovery one of the slowest in history and the next decade one of lowered expectations. Many economists agree that the U.S. will face at least several years of very modest growth as consumers and companies work off the vast debt they assumed in the last decade. 

"Never in my adult life have I heard more deep-seated feelings of concern," says Howard Allen, retired chairman of Southern California Edison. "Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble." 

Says University of Michigan economist Paul McCracken: "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."

MP: Note that this article appeared in Time Magazine's January 13, 1992 issue, although it could have just as easily been written at any time during the last several years.  The article was written almost a year after the July 1990-March 1991 recession had officially ended, and in the first year of a 10-year expansion that ended up being the longest and strongest economic expansion in the history of the country (from March 1991 to March 2001).

The Year of the Housing Recovery: CoreLogic Home Price Index Up 3.8% in July, Largest Gain in 6 Years

CoreLogic Home Price Index, Percentage Change Year-Over-Year, January 2002 to June 2012

CoreLogic released its July Home Price Index (HPI) report today, here are some highlights:

1. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 3.8% in July 2012. This was the biggest year-over-year increase since August 2006. 

2. On a month-over-month basis, including distressed sales, home prices increased by 1.3% in July 2012. The July 2012 figures mark the fifth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.
 
3. Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 4.3% in July 2012. On a month-over-month basis excluding distressed sales, home prices increased 1.7% in July 2012, also the fifth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.

5. The CoreLogic Pending HPI indicates that August home prices, including distressed sales, will rise by 4.6%. 

6. Excluding distressed sales, August house prices are also poised to rise 6.0% year-over-year. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices.

7. Mark Fleming, chief economist for CoreLogic: “The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August. While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.”

8. Anand Nallathambi, president and CEO of CoreLogic: “It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note. Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

MP: The CoreLogic report today provides more evidence that 2012 will be known as the year of the U.S. housing recovery.  The 3.8% gain in July home prices was the highest annual increase in almost six years, and CoreLogic's pending home price index is predicting an even greater 4.6% gain in August.  

Time Magazine Cover Story: Deja Vu All Over Again

If America's economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

The outward sign of the change is an economy that stubbornly refuses to recover from the recession. The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults represent once-in-a-lifetime dislocations that will take years to work out.

Among them: the job drought, the debt hangover, the banking crisis, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Financial. "There's going to be a lot of trauma before it's over."

~Time Magazine cover story "The Long Haul" (click to see the date of the article, text above was modified slightly from the original).

Markets in Everything: Mobile Showers in Oil Patch

It's true, this teenager didn't really build this business. Somebody else made that happen. His family.

Yahoo! News -- "An armada of food trucks and other roving enterprises is catering to North Dakota oilfield workers.  Eighteen-year-old Evan Jensen (pictured above) believed workers would value a hot shower nearly as much as a hot meal."

"He pitched the idea to his parents back at their farm in eastern South Dakota. His father and other relatives helped him convert a 53-foot semitrailer into a five-stall shower center with an office and laundry facilities.  A 6,000-gallon semi tanker alongside the trailer provides fresh water and collects the greywater."

"The mobile venture is called Better Showers, and a shower costs $10. Towels and washcloths are $1 extra. The water pressure is strong, the soap is free and there is no time limit." 

MP: One more new business and probably several new jobs created in the heart of North Dakota's oil patch, where the jobless rate in July was a jaw-dropping 0.70% in Williams County, and where ten counties have jobless rates below 2%.   

Photo of the Day: Apostrophe Hell

The photo above comes from Wordsmith.org, with the following comments from the website's founder Anu Garg:

If there's an apostrophe hell this has to be it. If you see that fellow with his banner, ask him, "Why do you ♥ the apostrophe so much? Repent and believe in grammar."

My thank's to the reader who sent me that mans photo.

HT: Larry Terry

Israel's Energy Revolution: From Barren Energy Island to a New Bonanza of Nat Gas and Shale Oil

From the August 31 Financial Times article "Field of dreams: Israel’s natural gas":

For decades a barren energy island, forced to import every drop of fuel, Israel today stands on the cusp of an economic revolution, fueled by the vast riches that lie below its waters.

With reserves of almost 10 trillion cubic feet of natural gas, the Tamar field is a hugely valuable asset for the Israeli economy (see map above). Discovered in January 2009, it was the biggest gas find in the world that year, and by far the biggest ever made in Israeli waters. But the record held for barely two years. In December 2010, Tamar was dwarfed by the discovery of the Leviathan gasfield some 20 miles farther east – the largest deepwater gas reservoir found anywhere in the world over the past decade. 

The two fields, together with a string of smaller discoveries, will cover Israel’s domestic demand for gas for at least the next 25 years, and still leave hundreds of billions of cubic feet for sale abroad. The government take from the gasfields alone is forecast to reach at least $140 billion over the next three decades – a staggering sum for a relatively small economy such as Israel’s.

Experts are convinced that Tamar and Leviathan will not be the last big Israeli discoveries. They point to the US Geological Survey, which estimates that the subsea area that runs from Egypt all the way north to Turkey, also known as the Levantine Basin, contains more than 120 trillion cubic feet of natural gas. Israeli waters account for some 40 per cent of the total. Should these estimates be confirmed through discoveries in the years ahead, Israel’s natural gas reserves would count among the 25 largest in the world, on a par with the proven reserves of Libya and ahead of those of India and The Netherlands.

And it's not just natural gas, Israel also might have as much as 250 billion barrels of shale oil in the recently discovered Shfela Basin southwest of Jerusalem (see map below), according to this July 13 article in the Financial Post article titled "Israel's Shale Gale." 

HT: Warren Smith