Economic news remains largely awesome

[ZenGum]

Bruce, if that was a reply to me, that was exactly my point.

Maybe I'm reading this wrong but I don't think so.

However, much of the strength came from a big jump in the cost of petroleum and other energy prices, which pumped up orders at oil refineries and chemical plants. The orders figures are not adjusted for changes in prices.

As I read it, the situation was something like this (simplified of course):
In September, people bought 1 million gallons of gas for $1 each = $1,000,000.
In October, people bought 1 million gallons of gas for $1.05 each = $1,050,000.
Thus by value sales were up 5%. By volume they were flat.

It was the change in price that caused the "growth". This was why this passage was introduced with "however" - because it is taking the shine off apparently good news. And also why they mentioned that the figures aren't adjusted for changes in prices.

That's my reading. Anyone?

[ZenGum]

As for the possibility of a recession, the same article contains the following :

... Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn .... noted that the economy is likely to slow considerably in the current quarter under the impact of renewed turbulence in financial markets.

On Capitol Hill, Peter Orszag, director of the Congressional Budget Office, said Wednesday that "the risk of a recession is now elevated" due to troubles in housing, the credit markets and rising oil prices.

.....

While overall economic growth, as measured by the gross domestic product, roared ahead at a 4.9 percent rate in the third quarter, the fastest pace in four years, GDP is expected to slow to a barely discernible 1.5 percent or even less in the current quarter.
[ I presume these are annualized quarterly rates - ZG]

Growth at such a slow pace would increase the risk that the country could dip into a recession, felled by the multiple blows of a prolonged housing slump, a severe credit crunch, rising energy costs and faltering consumer confidence.

So, definitely not in recession yet. There will be a downturn, that is pretty certain, but it might not go into the red. My guess is that it will. The financial crisis and the oil spike are driving it - but the falling dollar is helping to US exports and that might yet save the day.

[lookout123]

ok, again. the definition of a recession is at least two successive quarters of decrease, therefore you can't know if you are in a recession until you are at least 6 months in. I am not saying we are in one right now, i'm just trying to remind people that we could be 2 months into it already but we'd still be saying "when is it going to come? what's going to happen?"

recessions are a necessary and inevitable part of the economic cycle. they are not the result of some mistake on the part of business or government. recessions MUST happen. and the bigger reality is that unless you are one of the unfortunate ones who's job is on the line during a recessionary period, recessions aren't devastating to the average american. it is just one more thing to talk about on the evening news that will get you wound up and give you something to bitch about with your friends.

[xoxoxoBruce]

Originally Posted by ZenGum

.
Thus by value sales were up 5%. By volume they were flat.

I don't think so. Retailers were ordering more stock to hedge against further price increases. They can't make money stockpiling more than they think they will sell unless the price keeps climbing. So if they think it will keep going up, they buy to their storage capacity, betting the increased value of their holdings will make more, than the money would make invested elsewhere.

[ZenGum]

Originally Posted by xoxoxoBruce

I don't think so. Retailers were ordering more stock to hedge against further price increases. They can't make money stockpiling more than they think they will sell unless the price keeps climbing. So if they think it will keep going up, they buy to their storage capacity, betting the increased value of their holdings will make more, than the money would make invested elsewhere.

A plausible interpretation, I acknowledge, but
a. I think my interpretation is more plausible, and,
b. even if your interpretation is correct, I still don't see how it is good news.

a. The sentence we're fussing over is

However, much of the strength came from a big jump in the cost of petroleum and other energy prices, which pumped up orders at oil refineries and chemical plants.

If your account is right, this should read something like "... much of the strength came from anticipation of increases in petroleum prices, which led to retailers building up their inventories". I think what is written supports my take more than yours.
Mind you, we're now getting into fine interpretations of a single sentence and I wouldn't mind guessing that you and I have now spent more time thinking about it than the original writer. It's probably not so carefully written as to strongly support the arguments I'm putting here.

b. Is it good news? Your interpretation is that this strength is caused by retailers bringing forward their orders to defend against probable future price increases. If so - then their future orders will be correspondingly lower. There aren't actually more factory orders - over, say, the whole year. They're just concentrated in October.
One thing that we are agreed upon is that the price of oil has surged and will probably go higher still. It's hard to see how that could ever be good news for anyone except oil producers.