Headlines and data appearing in The Punch Line came from widely available publications including national and international newspapers, trade journals, economic and industrial bulletins and news websites.

Disruptive Change…

Even though the U.S. economy is gaining traction, and all signs point to somewhat stronger job growth in 2011, recent events in Egypt, in Europe, in commodity and exchange markets, and in several sectors – – point to the likelihood of significant pressure points and an outlook that is far from predictable. Markets love momentum and a semblance of stability. U.S. equity and debt markets have been surging, but the rally seemed rooted in better economic news and earnings but also bolstered by massive liquidity and the reapportionment of international capital flows away from emerging markets that had been shaken recently. If certain economies or countries can be turned upside down in a few days, some rethinking is in order. Imbalances on the inflation front have become more obvious. It appears to be an issue in China, in Brazil and in a host of other countries, especially where food prices play a big role in the economy and asset prices were bolstered by unusually large capital flows. Distortions in the resource sectors, in foreign exchange markets, and perhaps in emerging markets need to be considered. All along, we have also argued that he business models of many businesses need to be rethought. And for many sectors, this is not some gradual evolutionary transition. One example that has been noted
again and again here in these pages is the drastic challenges in the U.S. housing and mortgage markets. And even the recovering auto sector is far off previous running levels. And in the media sector, it’s only taken three years to get the Kindle at a mere $189, with a battery life of a month and a storage capacity of 3500 books….

From the section entitled: Engine Drivers

US businesses are spending, but on capital not labor

Many expect equipment investment to advance roughly 13.0% in 2011 or over four times faster than the 3.0% rise in the overall US economy. Despite this solid recovery in capital spending, the best forecasts have only a mediocre jobs recovery, with the unemployment slightly above 9.0% by year’s end from a current level of roughly 9.5%.

  • Government policy is also playing a role in the capital and labor disconnect. Despite its sound fundamentals, the government has attempted to further stimulate the capital spending sector. In December’s bi-partisan tax deal, legislators included a full deduction for equipment purchases to accelerate tax savings.
  • Also new health care legislation with its uncertainties plus the potential for a rise in the minimum wage across several states, further aggravates the outlook… businesses remain unsure over the cost of labor.

From the section entitled: Credit Matters

Fed Survey… Big jump in demand for business loans… But the demand for residential mortgages fell sharply

Corporate borrowers from banks to brewers are switching up the composition
of their debt sales, throwing more floating-rate notes into the mix to entice
investors who believe interest rates may be about to rise sooner and faster than expected.

From the section entitled: Real Estate and Construction Outlook

Delinquency Rates… Even as banks are restarting the engines of their long-dormant commercial real-estate lending shops, old loans continue to fall into default faster than they can be worked out, with the delinquency rate for commercial mortgage-backed securities reaching a new high last month. The missed-payment rate for all U.S. CMBS hit a record 9.34% in January, according to figures of research firm Trepp LLC.