Dow Jones Economic Sentiment Indicator Up Only Slightly to 38.7; Suggests Recovery Could Be Losing Momentum

/PRNewswire/ -- The media's coverage of mixed economic news led to a marginal rise in the Dow Jones Economic Sentiment Indicator (ESI) in December. The ESI rose to 38.7, up only minimally from 38.3 in November. This slight rise is the ESI's third weakest performance in a year and much less convincing than increases in October and November.

While the ESI ends the year significantly higher than the 22.4 level it registered in January at the start of the year, December's weaker performance means the indicator failed to break back above the level it held before the collapse of Lehman Brothers in September 2008.

The Dow Jones Economic Sentiment Indicator aims to predict the health of the U.S. economy by analyzing the broad coverage of 15 major daily newspapers in the U.S. During December, media coverage that included references to better-than-feared holiday retail sales was outweighed by articles referencing mixed or negative economic news including continuing double-digit unemployment and slower economic growth.

"The ESI's significantly slower rate of improvement in December suggests the U.S.'s economic rebound could be starting to level off and that non-farm payrolls neither advanced nor declined by much during the month," Dow Jones Newswires 'Money Talks' columnist Alen Mattich said.

The ESI represents one of the most comprehensive and far-reaching examinations of media coverage as an economic indicator. The ESI's back-testing to 1990 shows that the ESI clearly highlighted the risk that the U.S. economy was sliding into recession in 2001 and 2008 and suggests the indicator can help predict economic turning points as much as seven months in advance of other indicators.

Unlike some other indicators where 50 is a clear break-point between recession and recovery, the ESI needs to be read with reference to longer trends. Based on the ESI's performance since 1990, previous recoveries have been marked by substantial month-to-month gains, with a jump of three points seeming to be a sign of significant improvement. A drop below 50 marks the point at which there is a clear risk of a slowdown.

The Dow Jones Economic Sentiment Indicator is calculated using a proprietary algorithm through Dow Jones Insight, a media tracking and analysis tool. More information about the Economic Sentiment Indicator and its development is available at http://dowjones.com/esi .

Dow Jones Insight uses innovative text mining and analytic technologies to help organizations keep informed about relevant issues, news, conversations and trends emerging in mainstream, Web and social media. Dow Jones Insight's global content collection includes more than 25,000 news and information sources as well as blogs, message boards, and posts from YouTube and Twitter.

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Experts Who Predicted US Economy Crisis See Recovery in 2010

/PRNewswire/ -- International Institute of Management (IIM), today announced that its President, Med Yones, was recognized by World Finance Magazine as "One of the few who predicted the current US economic crisis before it happened. IIM challenged the US President's State of the Union Address in January 2007, the Federal Reserve Chairman and the popular opinion of US economists and media analysts at the time. IIM published a policy white paper outlining US economic risks and strategies for the next decade." The paper can be found at

http://www.iim-edu.org/u.s.economyrisks/

Following the publication of the policy paper, Med Yones was quoted in worldwide media including Reuters, Fox News, Financial Post Canada, Handelsblatt Germany, Le Point France, China Times, Malaysia Sun, and New Zealand Herald.

According to Fortune Magazine, the list of prominent experts and business leaders who missed the signs of the crisis includes Alan Greenspan, former Federal Reserve Chairman; Ben Bernanke, the current Federal Reserve Chairman; Hank Paulson, Treasury Secretary; the financial industry analysts of Moody's, Fitch, Standard & Poor's; Wall Street CEOs including Stan O'Neal, the CEO of Merrill Lynch; James Cayne, CEO of Bear Stearns; Chuck Prince, CEO of Citigroup; Zoe Cruz, CEO of Morgan Stanley; and Angelo Mozilo, CEO of Countrywide Financial.

According to Med Yones, "We warned most of them about 2 years ago, yet no one was willing to listen until the markets took their first big hit in early 2007. Since that time, the policy paper was viewed more than 250,000 times by researchers, media analysts, and investors. The 3 most common questions are: (1) How did we get here? (2) Why did our top experts miss it? (3) When do you think the economy will recover? The short answers are: (1) Spending on credit without enough production to pay it back (2) Groupthink mindset, and (3) We'll experience more volatility in 2009 on the way to the bottom of the correction cycle. A modest recovery will start in 2010/2011. The more detailed answers can be found at: http://www.iim-edu.org/news/topexpertswhopredicteduseconomiccrisis.htm .

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Recession-Induced Child Poverty to Cost U.S. $1.7 Trillion in Economic Loss

/PRNewswire-USNewswire/ -- A new report has found that the United States will suffer a future economic loss of over $1.7 trillion if the current recession drives an additional 3 million children into poverty, as has been predicted. That amounts to a yearly loss of about $35 billion dollars per year over the lifetime these children.

The report, entitled "The Cost of Doing Nothing," was released today by First Focus, a bipartisan children's advocacy organization. The report analyzes the costs of childhood poverty, including its effects on lifetime earnings and health outcomes. Research indicates that children who spend more than half of their childhood in poverty earn, on average, 39% less than the median income. Furthermore, a poor child loses approximately a quarter of a million dollars worth of "health quality" over the course of their lifetimes. By aggregating these long-term effects across the millions of poor children who are projected to fall into poverty as a result of this recession, the report produces a baseline estimate of the economic costs of allowing additional children to become poor during a recession.

"If we do not act now, the current economic climate will lead to millions more children living in poverty, which will cause a severe economic loss for our nation's future," said Bruce Lesley, President of First Focus. "When children enter poverty at a young age, their ability to achieve the American dream is diminished. They are 13 times more likely to remain in poverty for several years after the recession ends, leading to adverse effects on lifetime earnings as well health outcomes."

The report looks at the particularly severe ramifications that stem from numerous childhood years spent in poverty. The report finds that more than half of children who fall into poverty during recessions are likely to remain in poverty for at least some time after the recession ends. In fact, about a quarter of children who suffer from recession-induced poverty will spend at least half of their remaining childhood in poverty.

"Our findings show that recession-induced poverty has a lifelong effect on our children. Moreover, we know that poverty during childhood leads to severe, long-term economic costs. Therefore, there is a significant economic benefit to acting now to prevent the child poverty rate from skyrocketing. Indeed, if we can just maintain the current child poverty rate, the US economy will benefit by at least $1.7 trillion over the next several decades," Lesley added.

In August, the U.S. Census Bureau released data showing that the number of children living in poverty in 2007 has already begun to climb, reaching its highest rate in a decade. The Census shows that in 2007, 13.3 million children were living in poverty.

The report can be found at http://www.firstfocus.net/pages/3533.

First Focus is a bipartisan advocacy organization that is committed to making children and their families a priority in federal policy and budget decisions.

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Staying in the Game: Four Things You Can Do to Ensure Your Business Survives, and Thrives, During Tough Times

PRNewswire/ -- While always important, effective execution and a culture of accountability are even more essential when a business is faced with challenging economic conditions. "Our research on top performing companies points to four actions critical for success in the current environment," says Rick Lepsinger, President of OnPoint Consulting (http://www.onpointconsultingllc.com/). Keeping individuals and teams focused and engaged during tough times requires leaders to:

Be optimistic but realistic. It's important to be positive about the future without appearing naive. The key is to set realistic expectations and find the right balance between resources, time, and desired outcomes. "People have confidence they can succeed, even in a difficult economic period, when they feel that objectives are realistic and adequately resourced," says Lepsinger.

Hold everyone accountable for results. Tough times demand that everyone bring their "A" game and pull their own weight. "Therefore," asserts Lepsinger, "it is important that everyone understands what is expected of them and when. Then monitor progress, celebrate successes, and recalibrate or coach people to get back on track when necessary." It is also important to create an environment where people can raise problems and admit mistakes, rather than "covering up" or "pointing fingers," which is more likely during challenging times.

Involve people in decisions. When times are tough you want everyone's best thinking and full commitment. "Now is not the time to close people out of the decision-making process in order to protect them or to 'speed things up,'" says Lepsinger. Involving people in decisions increases decision quality and acceptance, and enhances engagement.

Ensure plans and actions are coordinated across departments and levels. Don't let uncertainty or ambiguity push you into a day-to-day mindset, as this is not the time to "wing it." However, even the best plan will fail if everyone is not pulling in the same direction. "During difficult times," efficiency is critical and coordination is king," says Lepsinger.

Even in a weak economy there are winners and losers. "By consistently applying the four key actions," says Lepsinger, "you increase the likelihood that you and your team will end up in the winner's circle."

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Private Equity Leaders Confident of Full Economic Recovery

/PRNewswire/ -- Over half of private equity leaders are confident that the full recovery of the market is no more than 18 months away, new research commissioned by Celerant Consulting reveals.

A survey of more than 220 senior executives across Europe and the United States, carried out by the Economist Intelligence Unit, reveals that 53% of private equity leaders believe that the market will return to its pre-credit crunch levels within 18 months. The findings showed that US executives are more optimistic about the future than their European counterparts, with 62% of US respondents believing that a turnaround would occur within that time frame. As noted, the global sentiment was a bit more pessimistic, with 36% of UK and 32% of German respondents predicting a full recovery would take longer.

Paul de Janosi, Managing Director of Private Equity, Celerant Consulting, said: "Despite the optimistic viewpoint of a majority of the survey respondents, we feel that it will be a few years before we see pre-credit crunch levels of activity again. We expect the roots of early recovery to begin in the second half of 2009, leading to broader activity by mid-2010. The GP's will not be static though, as there is significant amount of portfolio remediation work and this type of market down-turn typically yields strong buying opportunities."

Yet to hit rock bottom?

Despite the long-term optimism, many of those questioned still felt that the market has further to fall. The vast majority believe both the volume and value of deals will reduce over the next year (78% and 81% respectively), whilst two thirds (66%) say they intend not to invest at the moment and would instead wait for more attractive deals.

Change is necessary, but how?

The survey also found that private equity leaders from around the globe are united in the belief that the credit crunch and subsequent recession will transform the industry, with 96% agreeing that PE firms will have to change. However, there is no consensus on what the sector will look like when the credit crunch has passed, highlighted by the fact that 16% acknowledge that there will be a need to change but they are not sure how.

One fifth thought that the industry would need to find a completely different financing model -- unsurprising given that the reduced levels of available credit in the marketplace means that the days of massive leveraging are a thing of the past. Almost as many, 19% globally and 29% US, expect the credit crunch to lead to consolidation within the private equity sector itself.

What to do in the meantime?

Nevertheless, despite acknowledging the need for change, only 20% are planning to scale back activity in the next 12 months, and a mere 2% intend to shed jobs. Rather, the optimistic long-term prognosis is illustrated by the fact that 26% of those questioned are prepared to take on new staff.

Paul de Janosi continued: "The credit crunch means that easy refinancing is a thing of the past, yet the private equity industry is still optimistic about the future. In the short term private equity companies have already begun to shift their focus from investment to improvement. They need to concentrate on their existing portfolios to ensure that they are both maximising their operational efficiency for short-term survival, and guaranteeing long-term growth."

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The Conference Board U.S. Leading Economic Index Edges Up Slightly

PRNewswire/ -- The Conference Board reports today that the Composite Index of Leading Economic Indicators edged up 0.3 percent in September, following a 0.9 percent decline in August, and a 0.7 percent decline in July.

Says Ken Goldstein, Labor Economist at The Conference Board: "This summer, before the financial market turmoil intensified, the overall economy was entering a period of decline. The extreme volatility in the financial market, and the near freeze-up of credit, will no doubt weaken the economy further. But latest data suggest that conditions in the non-financial economy are not falling apart. Data on hand reflect a contracting economy, but not one in free fall. More likely, what's going on in the financial market is a stretching of the recovery process - which could take a full year to develop."

The Conference Board reports that the Coincident Index fell by 0.5 percent in September, following no change in August, and a 0.2 percent decrease in July. The Lagging Index fell by 0.2 percent in September, following a 0.2 percent rise in August.

-- The leading index increased in September, the first increase in the
last five months. Real money supply, consumer expectations, the
interest rate spread, and the index of supplier deliveries all made
large positive contributions to the index in September, more than
offsetting the negative contributions from building permits, stock
prices, initial claims for unemployment insurance (inverted) and the
average workweek in manufacturing. From March to September, the
leading index decreased 1.3 percent (a -2.5 percent annual rate),
declining modestly slower than the 1.7 percent decrease (a -3.4
percent annual rate) that prevailed in the previous six months.
However, the weaknesses among the leading indicators have remained
widespread over the past six months.

-- The coincident index decreased sharply in September and it has
declined or held steady since October 2007. Industrial production fell
steeply this month, while employment continued to decline. The
six-month decline in the coincident index has picked up to 0.8 percent
(a -1.7 percent annual rate), from a decrease of 0.3 percent (a -0.6
percent annual rate) in the previous six months, while the weaknesses
among the coincident indicators remained very widespread. In
September, the coincident index decreased more than the lagging index,
and the coincident-to-lagging ratio continued to decline as a result.

-- With consistently widespread weakness among its components, the
leading index has been falling since July 2007. Following the leading
index, the coincident index, a monthly measure of current economic
conditions, has also been decreasing, and its rate of decline has
accelerated in recent months. Meanwhile, real GDP growth slowed to a
1.8 percent average annual rate in the first half of the year, down
from an average annual rate of 2.3 percent in the second half of 2007.
Taken together, the behavior of the composite indexes suggests that
the economy is unlikely to improve in the near term.


LEADING INDICATORS

Six of the ten indicators that make up the leading index increased in September. The positive contributors - beginning with the largest positive contributor - were real money supply*, index of consumer expectations, interest rate spread, index of supplier deliveries (vendor performance), manufacturers' new orders for nondefense capital goods*, and manufacturers' new orders for consumer goods and materials*. The negative contributors - beginning with the largest negative contributor - were building permits, average weekly initial claims for unemployment insurance (inverted), stock prices, and average weekly manufacturing hours.

The leading index now stands at 100.6 (2004=100). Based on revised data, this index decreased 0.9 percent in August and decreased 0.7 percent in July. During the six-month span through September, the leading index decreased 1.3 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 percent).

COINCIDENT INDICATORS

Two of the four indicators that make up the coincident index increased in September. The positive contributors to the index - beginning with the larger positive contributor - were personal income less transfer payments* and manufacturing and trade sales*. The negative contributors were industrial production and employees on nonagricultural payrolls.

The coincident index now stands at 106 (2004=100). This index remained unchanged in August and decreased 0.2 percent in July. During the six-month period through September, the coincident index decreased 0.8 percent, with one out of four components advancing (diffusion index, six-month span equals 25 percent).

LAGGING INDICATORS

The lagging index stands at 112.2 (2004=100) in September, with two of the seven components advancing. The positive contributors to the index - beginning with the larger positive contributor - were commercial and industrial loans outstanding* and the ratio of manufacturing and trade inventories to sales*. The negative contributors - beginning with the largest negative contributor - were average duration of unemployment (inverted), change in CPI for services, and change in labor cost per unit of output*. The average prime rate charged by banks, and ratio of consumer installment credit to personal income* held steady in September. Based on revised data, the lagging index increased 0.2 percent in August and increased 0.5 percent in July.

DATA AVAILABILITY AND NOTES

The data series used by The Conference Board to compute the three composite indexes and reported in the tables in this release are those available "as of" 12 Noon on October 17, 2008. Some series are estimated as noted below.

* Series in the leading index that are based on The Conference Board estimates are manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods, and the personal consumption expenditure used to deflate the money supply. Series in the coincident index that are based on The Conference Board estimates are personal income less transfer payments and manufacturing and trade sales. Series in the lagging index that are based on The Conference Board estimates are inventories to sales ratio, consumer installment credit to income ratio, change in labor cost per unit of output, the consumer price index, and the personal consumption expenditure used to deflate commercial and industrial loans outstanding.

The procedure used to estimate the current month's personal consumption expenditure deflator (used in the calculation of real money supply and commercial and industrial loans outstanding) now incorporates the current month's consumer price index when it is available before the release of the U.S. Leading Economic Indicators.

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Wall Street Bail Out and the Credit Card Industry

24-7-- It almost sounds like a waste of time to spend my days writing about the Wall Street bailout. With every media outlet in the world zeroed in on our economy and the socio political ramifications that would ensue, should a bailout not occur. Let's be clear, it's a bailout, not a loan or some other disarming term. The credit card industry is already and will be profoundly affected for years to come because of this meltdown; the question to merchants and cardholders is how to keep that facet of the credit industry moving ahead without too much heartache for both parties.

As I'm stroking keys in my office, acquiring banks are contemplating risk as it pertains to their customer's available credit. This type of hard look at your available card balance and if they want to decrease it or take it away from you all together is the front line of the credit crunch that consumers will likely see in the months to come. My intent isn't to alarm anyone, because this may not come to fruition, but if our economy were to enter a credit freeze, the first fat to be trimmed will likely be available card balances. Why? Because it's the easiest way to decrease potential future loss. As banking institutions consolidate, go under and fear becoming under government control; they need to eliminate risk as much as possible. This is really an easy mathematical calculation; multiply the number of cardholders by their available balance and you'll have the sum of their exposure in an economic crisis.

If the government bails out these and other banks on toxic loans and bad debt, it's unlikely that delinquent credit card debt will be a part of the equation. As it appears today, defaulted mortgages, auto loans and business loans will get much of the attention, making the credit card divisions of these lending institutions in the step children of the bailout. As this is a scary concept to credit card holding Americans that often use their cards to float their monthly expenses; this halt to credit affects merchants and the global economy even more. Just as the inability to use a credit card on a daily basis and the need for cash is an inconvenience at best; for businesses, it can cripple them in both the short and long term. Ecommerce merchants that depend on credit cards for roughly 99% of their transactions would be nearly out of business immediately. Again, we're not saying that this will happen; however this is a very real card on the table of banks that can be played at any time.

Shortly after the ecommerce bubble had burst and businesses had found it harder to process customer credit cards at a fair rate, many found it easier and cheaper to process their daily transactions overseas. Non-domestic or offshore credit card processing isn't for illegal and illicit online businesses, like we all used to think. Today, with so many ecommerce merchants selling globally, international merchant accounts are very normal and often offer low rates, better security and services that many US domestic banks may only offer for a fee. While our economy is looking bleak, the global banking industry has proven in the past and may have to prove once again that working together can be better than domination.

Sager G. Loganathan is a freelance Search Engine Optimization writer specializing in the banking and finance industry. Sager Loganathan, a United States Marine Corp Veteran, has a Bachelor of Arts degree in Communications from the State University of New York at Buffalo.

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