Contact

A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

News

 

Premature to Assert Recovery


LOU DOBBS: Well, turning to the economy now, my next guest says that today's weak retail sales figures, and they're certainly that, weak, in fact a record decline in retail sales for the month of November. Those figures simply reinforce his view that it's premature to say that recovery is just around the corner.
We welcome back economist, regular MONEYLINE guest, Lakshman Achuthan. Good to have you back.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Hi, Lou.

DOBBS: Obviously, terrible news on retail sales for the month of November. Surprising in that, to me at least, were the sharp declines in automobile sales.

ACHUTHAN: Well, people bought a lot of cars the month before. Sales are a coincident indicator of the economy. So they're telling us we remain in recession, we haven't bottomed yet, things have continued to deteriorate. The leading indicators, not sales, the leading indicators of the economy have been edging up over the last...

DOBBS: The weekly indicator?

ACHUTHAN: The weekly leading index, in particular, that comes out every Friday in the mid-day. And that index has been edging up for a little over a month now.

DOBBS: So how do you square that with what apparently happened in November?

ACHUTHAN: Well, I think that because the weekly leading index, which leads sales, went down very sharply in advance of the recession. And now, we're looking to the weekly leading index to give us a sign of recovery in some time in the future.

DOBBS: Better news on jobless claims.

ACHUTHAN: That helps.

DOBBS: (UNINTELLIGIBLE) 84,000. We're back below 400,000. What does that suggest?

ACHUTHAN: It's a week. So we can't read too much into it, but it's a movement in the right direction. If we can get an extension of this one month uptick in the weekly leading indicators, extend it for another month or so, then we're looking at a recovery, some sort of recovery, in the early part of 2002. The next question will be what kind of recovery.

DOBBS: And as we look further, I want to go back to those November sales.

ACHUTHAN: Sure.

DOBBS: Without the automobile sales decline, which the month in which they were strong marketing, 0 percent financing, if you take automobile sales out of it, the decline would have only been half of 1 percent. That would have been pretty good?

ACHUTHAN: Pretty good. You know, the consumer has been surprising us during this entire recession. This recession has been business led. Businesses have been on hold. And the consumer, with the help with the Fed, has been surprising us with continued consumption.

DOBBS: And also with the help of the United States military, which is doing very well with the war against terrorism?

ACHUTHAN: Anything to help us with our confidence is a good thing. If we can stem the job losses, that's a better thing.

DOBBS: OK. Lakshman, I'm going to take that as an optimistic outlook on the economy.

ACHUTHAN: I'm hopeful. I'm hopeful.

DOBBS: I'll take that every time.

ACHUTHAN: OK.

DOBBS: Thanks.

ACHUTHAN: Thank you.
VIEW THIS ARTICLE ON CNN