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The economy is set to improve this year — if we want it to

Bloomberg reports that supply chain problems are visibly easing:

Supply strains, while still afflicting many consumers and businesses, are becoming more mundane than menacing like they were six months ago, especially in the U.S. Snarls have eased since their pandemic peaks and some are already adding less inflationary pressure.

....But the gradual end of the pandemic-driven supply crunch might give way to another potential headache: a slump in consumer demand that throws economic growth into reverse and leads to an ugly inventory pileup.

“Pressures in the global goods sectors, which have been a central driver of inflation, may finally be easing,” Citi economists led by Nathan Sheets wrote in a research note this month. “The bad news is that this looks to be occurring on the back of a slowing in the global consumer’s demand for goods, especially discretionary goods, and thus may also signal rising recession risks.”

Here's another bit of evidence:

Let's not ruin this by overreacting to the past, OK?

31 thoughts on “The economy is set to improve this year — if we want it to

  1. golack

    On NPR this morning, reports are that the Fed was considering increasing rates by 1% but may drop it down to 0.75%. They also noted that the federal minimum wage is the lowest it has ever been after adjusting for inflation.

    Considering the lag time between rate increases and full effect on the economy, any big jump now is performative. Russia will play games with the energy market and throw the European economy into turmoil if it can. Though I suppose forcing a recession will moderate fuel price increases....

    1. Spadesofgrey

      NPR is a waste. Russia needs oil sales to fund the war. It's why they are just gonna funnel it through KSA back west. Killing prices in the west. Essentially oil is being moved off the table.

      1. MontyTheClipArtMongoose

        Shooter spitting straight facts this morning.

        Somebody slip adrenochrome in his vodka tonic today?

      2. D_Ohrk_E1

        Hard to slip it through SA. Every oil has a chemical signature, eg light sweet crude sulfur content, etc. Refiners are going to know and they're going to demand a bigger discount on the fact that Urals is low grade.

        They're already selling directly to China, India, etc., no need to funnel through an OPEC member. What has changed is RU now has to insure its own oil as no one is willing to do so on account of the western ban on RU oil sales. It remains to be seen whether Somali (or other) pirates are willing to operate so far north, however. [tongue in cheek]

        What RU is doing is selling (redirecting) natural gas to SA, ostensibly for SA to power up its energy grid. That's a kick in the ass for Biden, having to kow-tow to MBS and his lie about not ordering the kill on Khashoggi.

    1. Salamander

      Yeah, I wonder about the vaste caches of toilet paper, bottled water, and beans that people stockpiled in 2020.

  2. middleoftheroaddem

    Kevin - while I hope you are correct, MANY professional economic prognosticators disagree with your point of view. We will see...

    1. KenSchulz

      Citation needed. Not that it would impress me much; the opinion of a ‘professional economic prognosticator’ is little better than a coin toss, given the state of the science.

    2. galanx

      "And by professional economic prognosticators I mean right-wing MBAs touting gold coins and crypyocurrency on Fox News."

  3. Jasper_in_Boston

    Let's not ruin this by overreacting to the past, OK?

    I don't want us to overreact, either.

    But would it be ok with Kevin if we actually had a couple of months of acceptable inflation before the Fed brings the punch bowl back? I'd like some verification of the trend.

    1. golack

      Lag time. It they keep raising rates until inflation lowers, then they should have stopped raising rates 6+ months earlier and a recession is baked in. The Fed did their "shock and awe" last time. Now a pause or moderate increase would be due--but Larry Summers seems to really want a recession.

      1. KenSchulz

        Agree on all points. Nobody should be listening to Larry Summers, or any other economist who like him is certain of his/her opinion, despite the dismal record of prediction in the dismal science.

        1. middleoftheroaddem

          By definition, the future is uncertain but...

          https://www.conference-board.org/research/us-forecast

          https://www.nytimes.com/2022/06/28/business/recession-probability-us.html

          https://www.swissre.com/institute/research/sigma-research/Economic-Outlook/us-economic-outlook-june-2022.html

          https://www.cnbc.com/2022/06/09/recession-will-hit-in-first-half-2023-the-dow-is-headed-lower-cfos.html
          https://www.economist.com/finance-and-economics/2022/06/01/what-americas-next-recession-will-look-like?utm_medium=cpc.adword.pd&utm_source=google&utm_campaign=a.22brand_pmax&utm_content=conversion.direct-response.anonymous&gclid=EAIaIQobChMIlOvPp_OC-QIVcwp9Ch33iAVFEAMYASAAEgLiyfD_BwE&gclsrc=aw.ds

          etc

          1. KenSchulz

            Umm, yeah, I skimmed the NYT article and it makes my point - predictions are all over the place. That’s where economics is.

  4. RZM

    The wish is father (or mother) to the thought or a man (woman) is more likely to believe what they'd rather were true. So, I sure wish for Kevin to be right about all of this. It is also natural to want to push back against it so I also think the contrarian impulse or impulse to throw cold water on the optimists can be a driver of belief as well. Take Larry Summers. After his overly cautious approach to recovery in 2009-2010 his reputation as a genius economic prognosticator was very much tarnished so it's not hard to imagine that his hyper caution / negativity now is as much "wish" (payback time) as it is analysis.

  5. jte21

    It depends on who's right: people who have said that the current inflation is due largely to labor and supply chain disruptions caused by the pandemic, or people, well idiots on Fox and Republican politicians, who claim it's young bucks still spending their pandemic relief checks on so many supermarket T-bones. And also illegal immigrants somehow. I guess we'll have to wait and see!

    1. Salamander

      I think there's a good chance that all this "concern" over "inflation" will die out right after the November election. Now I understand why old people tend to be so cynical.

  6. Vog46

    VERY very OFF TOPIC

    England issues a code red for extreme heat for London and many other areas?
    Thousands dead in Span and Portugal as a result of extreme heat?

    Lets keep this in perspective.
    London lies along the 51st north parallel. There are no, I repeat NO U.S. cities in the lower 48 that are as far north as London. And they're expecting 100 degrees?

    I know the difference between weather and climate
    But damn thats hot for them
    Even Paris will be 101 degrees F today. Too bad the Drums couldn't have stayed an extra week or two to catch this heat wave !!!!!

    1. Jasper_in_Boston

      I've read one or two people (experts?) claiming the proximate cause of Western Europe's (including UK) increasingly dire heat waves is the Sahara desert. Apparently climate change is increasing the intensity of the desert-fueled heat domes (or whatever they call them) that affect Europe.

      1. DButch

        I read an article in Daily Kos yesterday. There's a big hot zone right across northern Africa, right around into Iran, India, and into China. It's pushing north into Europe to bring threatening levels of heat into Portugal, Spain, France, etc. A lot of hot spots in the US SW and starting to push east too.

        1. DButch

          Not quite that bad north of Seattle and along the coast, where we had moved to in 2019. But we did get up over 100 F in Bellingham (WA), and we had a lot of smoke from fires.

          Fortunately we'd learned the need for a furnace that kept circulating air through an "air scrubber" (powerful ionizer) a few years back in Sammamish. We had horrible fires - sun at noon was deep red. But no smoke smell in the house, and it stayed cool during the day. (We had also invested in a couple of really good attic blankets that repelled heat in the day AND kept it in winter.

          In our latest house, we immediately prioritized a major upgrade to our furnace (which was rattling and wheezing), had a heat pump (not exchanger) that had obviously not been maintained in 12 years, etc. Furnace had only an installation date, and one other inspection date in the prior 12 years.

          We had a lot of money left over from the sale of our old house and the purchase of a smaller house. We put it into a major HVAC upgrade. The highest efficiency furnace we could get, the biggest and most efficient two way heat exchanger we could get, cooling/heating coils driven by the exchanger, etc.

          Worked GREAT last year!.

          But! It helps to have money.

      1. golack

        Edmonton is in line with Dublin and Liverpool.
        Calgary in line with London.
        The 49th parallel (US-Canada border) just north of Paris.

    2. ColBatGuano

      I was in London once when it was >90 degrees. It was not pleasant and there is no easy relief because air conditioning is not readily available.

  7. Vog46

    The forest fires in Spain and southern France are really burning out of control and they are not used to having this many severe fires all at once.
    Asphalt tarmacs at some French airports has softened significantly.
    I hope it turns cooler for them soon.
    Here in the SE U.S. we've gotten some much needed rain of late but like a thunderstorm it comes all at once it seems. Heat is returning this week.
    Gulf of Mexico and coastal Florida waters are really warm.
    Bad news for any Hurricanes that might come along. They will get stronger over these warm waters
    It might be a long summer

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