U.S. Retail Sales Resume Falling After January Uptick

After showing an uptick in January, retail sales dropped in both February and March from year-ago levels, dashing hopes that the recession in the US was bottoming out. Consumer spending accounts for 70% of US economic activity, so it is widely watched as a harbinger of things to come in the broader economy. With joblessness hitting record highs, consumer uncertainty rising, and admonitions that individuals as well as banks were over-leveraged, it's hard to imagine consumer spending roaring back any time soon.

U.S. Retail Sales Activity: March 2008 - March 2009

Source: WSJ

Retail sales fell 1.1% in March, according to the Commerce Department. Auto sales fell by 2.3% in March from the prior month; furniture sales fell 1.7% while electronics and appliances fell 5.9% in March from the previous month. Restaurants showed a decline of 1.4% as con

sumers cut back on eating out.

Also on Wednesday (4/15/09) the Labor Depratment reported that in March the consumer-price index (CPI) fell 0.4% below its year-earlier level, the first decline in over 50 years. Although the Fed continues to print money to refloat credit markets, inflation remains not only in check but the risk of deflation is in the air as consumers cut back on spending, increase savings, and manufacturers and retailers cut prices to entice them back into stores.

Consumer Price Index (CPI) Year-Over-Year Change 2000-2009

Source: WSJ

Existing Home Sales Drop 5.3% in January 2009 from December 2008

National Association of Realtors Report

Existing Home Sales Drop -5.3% in January 2009 from December 2008

Existing home sales:
December 2008: 4.74 million annual pace

January 2009: 4.49 million annual pace
-5.3%


45% of total sales involve distressed property, including foreclosures

Home sales price:
January 2008 median price: $199,800
January 2009 median price: $170,00
-14.8%


Average 30 year mortgage (According to Freddie Mac):
December 2008: 5.29%
January 2009: 5.05%
-4.54%


Home prices are down 27% from their 2006 high, according to the Standard & Poor's/Case-Shiller data released on Feb. 24th. The massive overhang in the supply of housing was down to 9.3 months in December from 11.2 months in November, the l
argest drop since the NAR started keeping records in 1999. However, the supply of housing is still over twice its long-term average of 3.5 months, insuring that the plentiful supply of houses on the market will continue to depress prices.

Supply of Pre-Owned Homes on the Market Measured in Months

The Fed's Forecast on Unemployment, Inflation, and GDP

Fed data released Tuesday (2/24/09):

Delinquency rates on home mortgages in 4th quarter 2008: Almost 7% of outstanding mortgages

Unemployment rate in 4th quarter 2008: 7.6%, expected to rise to 8.8% this year

The Consumer Board's Consumer Confidence Index: 25, lowest level since data were first collected in 1967

February 2009 views on the job market:

"Jobs are hard to get": 48% of people surveyed, highest since Feruary 1992

"Expect jobs to decrease in the months ahead": 47%, highest percentage since December 1973

The Fed's Economic Forecast for the Next Few Years:

Unemployment, Inflation, GDP

The Depression-Recession: How We Got Here

In a negative feedback loop, job loses and falling corporate profits are creating new loan defaults, hurting banks beyond the original damage caused by the home mortgage crisis. The banks' falling stock prices together with the loan defaults make it harder for them to raise capital and more reluctant to lend. All of this saps spending by consumers (which makes up 70% of the US economy) and business which results in more job cuts, more loan and mortgage defaults, ... and so the negative feedback loop spirals down. The government keeps threatening to step in to save the failing banks, which raises the specter of nationalization which would wipe-out bank stock holders, who become even more reluctant to buy bank stocks and makes it harder again for the banks to raise capital for loans... And so it goes.

How Bad Are the Times? Photographer Annie Leibowitz Hocks Her Entire Life's Work to Pay the Mortgage

Iconic photographer Annie Leibowitz has hocked her entire ouevre for 10 million pounds to help pay the mortgages on the homes she inherited from lover Susan Sontag. Leibowitz is famous for her photographs of iconic figures such as John Lennon and Yoko Ono, Demi Moore pregnant, Michelle Obama (for the March 2009 cover of Vogue Magazine) and Queen Elizabeth. And they say the recession will end by 2010? Do 'ya think?

Obama Hopes to Boost Number of Health Care Professionals Using Electronic Medical Records

Both former President George W. Bush and President Obama have endorsed the goal of having electronic health records in wide-spread use by 2014, just five years from now. But previous efforts to introduce electronic patient records into the health care system have not gone far.

According to a report released by the New England Journal of Medicine in 2008, 83% of physicians polled had no electronic patient records whatsoever and 13% had a very basic system. Only 4% had fully functional systems.

Percentage of Physicians Using Electronic Patient Health Records

From a survey of 2,758 U.S. physicians conducted Sept. 2007 - March 2008

In addition to the problem of providing physicians with point of care terminals and devices that can be used to enter patient data and information, there is the further problem of inter-connecting multiple electronic patient records from different health care centers as well as physician offices. Recent health care privacy legilation in the form of HIPAA privacy requirements also complicate the intoduction of electronic patient records.

I remember sponsoring research into this area while at Digital Equipment Corp. in the early '90s. There was alot of enthusiasm for this in many quarters then, but not much progress has been made in the the 18 years since. Two weeks ago House Democrats introduced a fiscal-stimulus bill that includes $20 billion for health-care information technology. While a good start, given the long time that electronic health care records have taken to make this minor a penetration into the market, and given the ultimate cost of having full-fledged, inter-connected electronic patient records, it seems that greater sums and a longer time frame than 5 years will be required to generate the desired results.

Update (2/25/09): Although little formal research has been done into the effects of medical information technology on patient outcomes, a study just published in the "Archives of Internal Medecine" points to improved outcomes for patients where medical decision support systems are used. The study, led by Dr. Ruben Amarasingham, found that "hospitals with automated notes and records, order entry, and clinical decision support had fewer complications, lower mortality rates, and lower costs."

"For all medical conditions studied, a 10-point increase in the automation of notes and records was associated with a 15% decrease in the adjusted odds of fatal hospitalizations (0.85; 95% confidence interval, 0.74-0.97). Higher scores in order entry were associated with 9% and 55% decreases in the adjusted odds of death for myocardial infarction and coronary artery bypass graft procedures, respectively. For all causes of hospitalization, higher scores in decision support were associated with a 16% decrease in the adjusted odds of complications (0.84; 95% confidence interval, 0.79-0.90). Higher scores on test results, order entry, and decision support were associated with lower costs for all hospital admissions (–$110, –$132, and –$538, respectively; P < .05)."

In an editorial in this same issue of Archives of Internal Medicine, Dr. David Bates cites studies which show a potential $88 billion in savings over ten years were health information technology (HIT) to be adopted broadly.