• The Conference Board’s sentiment index climbed to 39.2, the highest level since November, from 26.9 in March, the New York- based research group said today. The gain was the biggest since November 2005.
• Home prices stabilize: A report from S&P/Case-Shiller today showed that the slide in home prices in 20 U.S. markets slowed in February for the first time since January 2007. Prices fell 18.6 percent in February from the same month last year after dropping 19 percent the previous month.

These are welcome developments in a financial and economic world beset with bad news. These data emphasize that the dragon of recession can be slain. The programs put in place in the U.S. are beginning to take effect.

Further analysis of the Conference Board sentiment index is also illuminating. The Conference Board’s measure of present conditions rose to 23.7 from 21.9 the prior month. The gauge of expectations for the next six months surged to 49.5, the highest level since the collapse of Lehman Brothers Holdings Inc. in September of last year.

This jump in optimism is encouraging, because if and when the economic recovery begins, it must be supported by strong consumer spending. But, if consumers are pessimistic about the future, their wallets are likely to remain closed. The hunker-down syndrome is strong when the outlook is sour.

As for housing prices, recent reports show government efforts to support housing and revive lending may be starting to work. Combined purchases of new and existing houses have hovered around a 5 million annual pace since November, and sales at retailers improved in the first two months of the year.

Add to these new developments the fact that the American and many foreign equity markets are on a fairly sustained up-trend, and you get more signals that the worst may be over, and that investors and consumers are loosening their retrenchment. It looks good for an actual recovery some time this year.

The fall in exports has continued in China over the last six months, as the world wide recession extends its reach. The report did not foresee a significant recovery for China until the world economy recovers, and most economists do not see this occurring until the last quarter of 2009 or even later.

Although Mr. Wen Jiabao, China’s Premier, said only last week that China would reach its 8 percent goal for growth this year, he is almost the only one who is holding to that outlook. Most private economists see a more dismal picture for China for the rest of this year, with their estimates ranging from 5 percent on the low end to 8 percent of Mr. Wen.

The World Bank did not factor into their estimate that Mr. Wen has stated that if their 8 percent target for growth begins to looks uncertain, he is prepared to increase stimulus spending enough to bring it up to target.  It is likely that this possibility will be discussed at the G-20 meeting in London on April 2nd, as many of the members have endorsed a coordinated effort of stimulus spending in order to increase world trade.

The Chinese stock market has reflected the gloomier outlook for their economy. The chart below shows the exchange traded fund, FXI, which is Barclays’ Capital ETF that follows the FTSE/Xinhua China 25 index. This index has dropped 50 percent over the last year.

The index does appear to have stabilized in the $20 to $30 range since last November, however. It closed at $27.48 on Tuesday.

But is the slight up-tick for the last week a telling indicator?  Probably not, since it could just as easily turn down next week.  One week does not make a trend.

Another stock market measure is the price/earning ratio of the market.  The market index value divided by the aggregate earnings of all the components is an important indicator of the value of equity holdings.  The chart below shows a long, historical trend of this measure:

P/E Ratios for U.S. Equities

The P/E ratio in earlier recessions was lower than it is now, but this indicates that the bottom may at least be near.  The current level of 13 is below the long term average of around 15, but it was below 10 in both the 1982 and 1930s recession.

One of the reasons business earnings (half of the P/E ratio) are so low is the inability of businesses to raise prices.  We are currently in a period of deflation, which is not promising for a strong business environment.  However, there are a couple of up-indicators for a return of rising prices: the prices of copper, corporate bonds and inflation-protected Treasury securities are higher today than they were in November.

For an Associated Press Report on the possibility of bottoming, follow the link:http://news.yahoo.com/s/ap/20090314/ap_on_bi_ge/wall_street_finding_the_bottom

The prices of homes is another indicator that many consider important to a recovery.  The graph below shows the trend in this important variable:

Prices of Homes

Home prices have come down considerably from their previous high, but they still have a way to go before reaching the long term average.  Also, home prices vary considerably within different markets.  Some of the hardest-hit regions (Las Vegas, Phoenix, Miami) have already lost about 50% of their previous high.

The one variable yet to be considered is the broken banking system that afflicts most of the developed and emerging markets world.  And on this front, there is not much encouraging news.  It is impossible to foresee an economic recovery without a healthy banking system, and that is not present just now.  The meeting of finance ministers in London over the weekend indicates they want to do something about it, but the language they chose in their press release was to “do everything possible” to correct the problem.  This is not language that instills confidence in the investing community.  It will be up to the heads of state, who meet on April 2nd to address this issue more fully.

The only encouraging statement coming out of the meeting of the finance ministers came from U.S. Treasury Secretary, Timothy Geithner, who indicated he would flesh out his proposal to strengthen American banks, “soon.”

Two other items relevant to a recovery are consumer spending, which is still falling, and the huge amount of money market and cash holdings by investors and banks.  Consumer spending needed to fall from its near 100% level just a few month ago.  An economy needs to have savers, and this country lost theirs, at least in the aggregate, for many of the last few years.  There is a recovery of savings underway, but it has a bit further to fall before stabilizing at the long-term average of 93%,

Cash holdings of investors in money market funds and banks are exceptionally high, which indicates to me that there is plenty of money poised to re-enter the equities market, once confidence is restored.  We can only hope it is soon.  Probably by the middle of April, we should see some signs of recovery of consumer confidence.  The G-20 meeting will have concluded, with some expected gains from an agreement to strengthen the IMF lending to emerging markets, better international banking regulation and some coordination of stimulus spending plans.

Plus, there are other signs that the rate of getting worse is slowing down. Unemployment figures for March will help clarify this issue, and they should be out in early April.  If we get some encouraging signs by the end of April, then we might expect a bottoming by the summer or fall quarter.

UPdate 3/16:  Chairman of the Federal Reserve, Ben Bernanke, sees end of recession in 2009.

From NYT: “We’ll see the recession coming to an end probably this year.”

With those words, Federal Reserve Chairman Ben S. Bernanke staked a marker on what he believes will be the end of the malaise that has descended upon the United States economy. And, he said on a “60 Minutes” interview that ran Sunday evening, the country will begin to recover next year — “and it will pick up steam over time.”

To watch a video of the interview on 60 minutes, follow the links below.

• 
  The Chairman Part 1 (13:23)
• 
  The Chairman Part 2 (13:13)
• 
  Behind The Scenes #1 (0:57)

To read the complete transcript of Mr. Bernanke’s inverview Follow this link to the CBS site.

In recent past statements, Mr. Obama had downplayed America’s role  in working on international bank regulations.  His Secretary of the Treasury, Mr. Timothy Geithner, has stated that America would not have a fully fleshed-out regulatory package in time for the London meeting.  It is not clear from the statement whether the new statement of the President means that this problem has been overcome.  But, it is reassuring that he is not backing away from this important agenda item.

There is not a unanimity among world leaders about the most important items on the G-20 agenda.  Angela Merkel, Germany’s Chancellor, has not agreed that a major stimulus program is necessary for the Euroland economies.  Her current proposal of about $63 billion in stimulus spending is dwarfed by the U.S. efforts of almost $800 billion recently passed by Congress and by China’s $500 billion that is already being spent.  Japan is more in the German camp, having committed to stimulus spending, but not being willing to take on much more debt to bring it off.  The U.K. is more in the American and Chinese camps.

Recent downturns in German exports, however, may move the German Chancellor off the dime, but so far, she thinks the major focus of the G-20 meeting should be bank regulation rather than deficit spending.  Japan holds a similar position.

The International Monetary Fund has called on the trading nations of the world to commit to stimulus spending of 2% of GDP for 2009 and 2010, far above the current German efforts.  Mr. Geithner, in a press conference later in the day, endorsed this goal, and he endorsed the IMF goal of funding an additional $500 billion in funding for their efforts to stabilize the weaker currencies of Asian and Central European economies.

In an earlier meeting between Mr. Obama with British Prime Minister, Mr. Gordon Brown, the Prime Minister emphasized an agenda for the G-20 that would completely restructure the original Bretton Woods agreement.  This would mean a new structure for the IMF, the World Bank and internationalizing banking regulation.  Mr. Obama did not specifically endorse these proposals at the meeting, but he may have come along some since that time.

The banks of the world are not enthusiastic about these new regulatory proposals.  Their trade association has already met and drafted their own version of what would pass muster for them.  You can guess as to the nature of their proposal.

Others think that Mr. Brown has set too ambitious an agenda for the meeting.  He, it is said, needs to be seen as a heroic figure at the meeting, given his shaky status in his own country.

There is little doubt that the world needs a new Bretton Woods arrangement.  Too much has changed since the 1944 agreement that reestablish mechanisms that promoted world trade.  Before WWI, the British pound sterling had been used as the major trading currency in the world, but WWI and WWII saw the end of the preeminence of the pound, and Bretton Woods replaced it with the U.S. dollar.

A new agreement would not likely replace the dollar in its role as the major reserve currency in the world.  There are simply no suitable currencies that have the heft to take its place.  But the IMF and World Bank, just to name two, need to be restructured, allowing greater participation by China, India and Brazil, who are becoming important players in world trade.  And, some mechanism needs to be reinforced to come to the rescue of the battered currencies of Europe’s emerging markets.  Adding a complete restructuring of the regulatory environment for the world’s banks and coordinating stimulus spending to the agenda is a long reach.

This is a hugely important meeting, and its success or failure to rise to the occasion is still up in the air. My hope is that on areas where there is still disagreement, they will agree to meet again, perhaps later in the year, to reach a final settlement.  Mr. Obama has not been if office long enough to be fully prepared for this giant a task.

Update 03/14/09

A report from the Wall Street Journal on Saturday concluded that there will not be a unified agreement from G-20 members to call for more stimulus spending.  (Click here for full article.)  Germany and France argued that their unemployment benefits and other social safety net made stimulus spending less necessary.  There was agreement to increase funding for the IMF, but the amount will be left to a later decision, and there was agreement on licensing credit rating agencies.  There will still be an emphasis by the U.S. to coordinate stimulus spending, however.

For Bloomberg’s Saturday update click here.  Their emphasis is on solving the banking asset problem–the difficulties of reaching an agreement and the difficulty of the problem itself.

Two significant signs of the worsening global slowdown come from China and Germany–two of the world’s largest exporting countries.

Consumer prices in China fell 1.6 percent lower last month than the same month in 2008. This was the first decline since December 2002. February’s result represented a fast drop from an inflation rate of 8.7 percent in February of last year, when rising prices were a top priority for the Chinese government.

Producer prices are falling even faster. Oil and commodity prices contributed to the drop, but also by a glut of factory capacity and falling of demand from both exporters and Chinese consumers. Producer prices were 4.5 percent lower last month than a year earlier, after having shown annual increases of as much as 10 percent as recently as last summer.

Hong Kong business leaders also warned that their mainland factories are not running full capacity, but only a few have actually closed down. “They may be operating at one-third or half of production” capacity, said Clement Chen, the chairman of the Federation of Hong Kong Industries, while adding that, “We haven’t seen a large number of closures.”

China’s problems, while not nearly as bad as America or Europe, are beginning to take a toll. China’s growth rate has already been declared to be about 6%, substantially below the near 10 percent rate of the last decade.

On the positive side, the stimulus spending package is already showing up in investment totals, as China is pumping about $500 billion into its economy. No one, at least yet, has predicted their economy will turn negative for 2009.

These developments in China, and reports that Germany is now facing a worsening economy, will probably contribute to the sense in the upcoming G-20 meeting in London that there needs to be a world-wide coordination of stimulus spending.  Mr. Obama has already put this at the top of his agenda, and Chinese officials have voiced similar sentiments.

Only Chancellor Angela Merkle of Germany has not seen the need for a large stimulus plan.  Perhaps the 38 percent plunge in January export orders,  the biggest drop since data for a reunified Germany started in 1991, will get her attention. “The annual slump is absolutely catastrophic,” said Alexander Koch, an economist at UniCredit MIB in Munich. “The extent of declines is terrifying.”

From Bloomberg, “Export factory orders for Germany sank 11.4 percent in January from December, according to today’s report, with orders from outside the 16-nation euro region dropping 18.2 percent. Domestic demand dropped 4.3 percent in the month.

Pan-European Slump

Production is slumping across Europe. In the U.K., factory output dropped 6.4 percent in the three months through January, the most in at least four decades. French industrial production declined 3.1 percent in the month, five times the pace predicted by economists.

The German economy, Europe’s largest, will shrink 2.5 percent this year, the International Monetary Fund said on Jan. 22, three times as much as previously forecast. The European Central Bank expects the euro-region economy to contract about 2.7 percent in 2009.”

If we line up the current levels of American unemployment, GDP, budget deficits and the current account deficit, the dollar can be made to look like a pig.   The problem, though, is that a currency’s value is never a matter of absolute value.  It’s always about relative value.

Certainly the absolute picture of the American economy is gloomy.  But, then, so is almost everybody else on the world stage.  In Europe, both the developed and developing nations are worse.  Their banking crisis is similar to ours, and their exports are falling fast, as the recession strikes all parts of

Euro/Dollar–Feb 08 to Present 

the continent.  A look at the euro/dollar chart above doesn’t inspire confidence in that currency as a replacement for the dollar.  The euro has fallen about 20% since July of 2008.  For economies that are dependent on exports, their currencies are vulnerable to world demand.

Asia is also in a world of hurt.  Only China and India are reporting continuing growth, and even in these engines of growth, the growth rates have slowed dramatically.  China has had tens of thousands of export-oriented plants close down recently, and is pushing an army of millions of unemployed workers back to their rural villages, seeking to scrape a bare living from tiny farming plots of less than a tenth of an acre in size.

The Japanese Yen is the only major currency that has appreciated with respect to the dollar, as the chart below shows.

Dollar/Yen–04/07 to present

The yen, however, is not rising against almost all currencies because of the strength of the Japanese economy.  Quite the contrary.  Japan is rapidly descending into a major recession.  The reason the yen is strong now is because a decade of being the borrowed side of the carry trade means that those who are exiting the carry trade must now purchase yen to square with their brokers.  The “strong” yen is not helping Japan, it is, in fact, increasing the devastation.  A strong yen means that prices of Toyotas, Sony TVs, and everything else Japan sells to the rest of the world are increasing in price just when they need to be falling.

Since the world wide recession began, the dollar has actually risen in value.  The flight to quality phenomenon is well known, and with economies crashing all over the globe, the greenback has regained its allure as a safe place to be, relative anywhere else.

The flight to quality effect is also seen in the price curve of U.S. Treasuries .  In the chart below, the iShares ETF, IEI, shows how the price of 3-7year Treasuries has risen since the global slowdown began.

Since its low in late June of 2008, this ETF, which holds only Treasury obligations, has risen about 7.5%.  Much of this rise was because of the repatriation of dollars that had flowed to emerging market equities and debt obligations during the boom period.  But, now that the currencies of almost all the emerging markets have tanked (30-50% declines in the last year), those monies have flowed back into U.S. dollars to be used to purchase Treasuries. 

The reserve role of the dollar continues to define its resiliency as a safe haven in a turbulent market.  The dollar is not imperiled.  It is prospering, and will probably continue doing so for a long time to come.

For many years the tradition for a new American President has been to make Canada his first international visit. This underscores the close relationship between the neighboring countries.

President Obama and Ottawa from the American side of the St. Lawrence River

We share a long, un-guarded border with Canada, and we also share a common British heritage that covers a wide swath of commonality in language, legal system, political tradition and general culture. We also trade together. We export more to Canada than any other country, and Canada sells 33% of its GDP to Americans. There is good reason Canada gets the first Presidential visit, and I am glad Mr. Obama has continued the tradition today when Air Force One touches down on Canadian soil. 

Ottawa’s Parliament Buildings

There will be much of the plate for Mr. Obama and Mr. Stephan Harper, Canada’s Prime Minister, to discuss. The traveling companions of Mr. Obama speak volumes about the agenda: Larry Summers, Mr. Obama’s economic coordinator, Ms Carol Browner, the energy and climate coordinator. U.S. National Security Adviser Jim Jones and Deputy Secretary of State James Steinberg.

With the economies of both nations in a terrible state, it is not a surprise that the economy and employment will probably be the highest order on their agenda. Part of this agenda also sloshes over into oil, which Canada has plenty of and more to develop if environmental problems with the mining and refining process of Canadian tar sands can be overcome.

Also, something Mr. Obama will have to overcome is the ”Buy America” provisions that Democrats inserted in the recently passed stimulus bill. This feature also has Europe, China and Japan worried. Taken with some of Mr. Obama’s strong anti-NAFTA campaign rhetoric, Mr. Harper will need some reassurance of America’s commitment to maintaining free trade between the two countries.

These issues have already been at least partially addressed by Mr. Obama in recent public statements and in his insistence with Democrats that the “Buy America” provisions in the stimulus bill be tempered to preclude violating existing treaties. This gets him off the hook in many ways, since trade with Canada and Mexico is subject to NAFTA provisions and World Trade Organization rules. Mr. Obama has also stated recently that it was not in the interest of either Canada or America to reduce trade between the two countries.

There will be some security issues to discuss. Canada has about 2,800 troops in Afghanistan, and it would be important to Mr. Obama that Canada commit to keeping a presence there during the American troop buildup.

Mr. Obama is popular in Canada, as Mr. Bush was not. I hope this will help him and Prime Minister Harper have a productive meeting and a warm relationship

A general view of the Group of Seven (G7) Finance Ministers and Central Bank Governors meeting in Rome, Saturday, Feb. 14, 2009.

The group shot above show the attendees of the meeting.  The photo below is a close up of U.S. Federal Reserve Chairman Ben Bernanke, left, U.S. Treasury Secretary Timothy Geithner, second from left, and U.S. Deputy Assistant Secretary of Treasury Mark Sobel who accompanied Mr. Geithner to the meeting.

In a joint statement, issued after the final meeting on Saturday, the members said: “The stabilization of the global economy and financial markets remains our highest priority.”

The group also endorsed Mr. Geithner’’s plan to recapitalize banks, leaving questions about nationalizing banks unanswered. Virtually all G7 members are facing a similar problem, as many of the largest banks in the world bought the toxic derivatives whose origins were in America’s largest banks.  As these assets’ true value is exposed, many banks all over the world will find themselves technically bankrupt.  No country can afford to have their largest and most influential banks go under, so they are searching for ways to put public capital in them in order to keep them solvent.  The question as to what the governments get for their money is still up in the air.  Many of the European and Asian countries have no qualms about nationalizing banks.  But this is no considered a desirable solution in America.

All of the G-7 members took a conciliatory view of China, praising the Asian giant for its strong stimulus plan.  They also muted their criticism of China for keeping the yuan relatively weak.  They are now happy if the Chinese monetary authorities keep the yuan appreciating slowly in “relative” terms.  This mean that with European currencies already depreciating relative to the dollar, China can allow the yuan to appreciate to falling currencies. This makes it much easier for China to comply and to keep their growth going.

This deference to China underscores how irrelevant the G-7 has become.   The economies that are expected to grow over this year (China, India, Brazil and South Korea) are all members of the G-20 rather than G-7:   The “old” powers of the G-7 desperately need the growth of China, Brazil and others to at least partially counter the fall in domestic demand they are currently experiencing.  America, of course, need China to continue buying its debt.  

The final verdict of the meeting is that it is a prelude to the G-20 meeting in London on April 2.  The G-20 not only includes among its members the best growing economies, it also includes heads of states as attendees rather than finance ministers.  This give it much more clout in its recommendations. 

The heaver lifting will be at the G-20 meeting.  Greater regulation of the world’s banks, expanding IMF funding and lending, and enhanced membership in the IMF for China and India will be on the table.  Also, all the committee leaders will have many additional issues to resolve.

For example, Australia’s Prime Minister, Kevin Rudd, co-chairing the G-20 working group on IMF reform, believes IMF member states will need to act quickly to reform the Fund’s governance.  This means, among other things, giving China greater membership clout and give Special Drawing Rights (SDR)to new members.  SDRs are an official international reserve asset issued by the IMF to its members, which can exchange them for freely useable currency.  Countries that joined the IMF after 1981 have never received an SDR allocation. SDRs can be used to support their own currency if it comes under attack from speculators.

There are many other issues that will be taken up at the G-20 meeting, and I will have a more detailed description of the agenda in the weeks ahead.  For an update on the agenda of the London G-20 meeting, follow http://seekingalpha.com/article/123178-prelude-to-april-s-g-20-meeting-showdown-at-the-london-corral 

the link above. (2/28/09)

The meeting is important because Mr. Geithner will be forced, to some degree, to put some meat on his proposal to salvage the American banking system. His proposal of a few days ago, as to how to spend the balance of the TARP funds, has not been greeted with any enthusiasm in America.

American banks are in horrid shape, especially our largest ones. Today, the market capitalization of our top banks is below $500 billion. Yet the International Monetary Fund estimates that the write-downs of their loan portfolios will rise to $2.2 trillion once a full accounting is required. When this happens, Mr. Geithner will be forced to step up to the task of rescuing them. But it is hard to imagine a scenario where the American taxpayer will pony up $2 trillion and not want a piece of the action. Yet “nationalization” of our banking system is not something he, or many others, want.

This state of affairs is understandable. America condones nationalization of the postal service, some parks, some forests and national monuments, but banks are a different matter. Our public sector has no experience running giant banks, and there is much resistance to trying it. Yet, we are going to be the capitalists of last resort to the giants that got us into this mess, so there will be a huge outcry to bite the bullet and take them over.

My own preference would be to nationalize them, and then set up an immediate procedure to denationalize them by breaking them up and selling them off in pieces. If they are too big to fail, as they are, then that are simply too big. We can get along without these behemoths. Local banks have served our economy well, and there is still room for large, internationally connected banks in our large trading cities. But we do not have to have banks as large and Bank of America and Citibank have become. At their current size, their mischief becomes a potential catastrophe for the entire world.

At any rate, Mr. Geithner will have his work cut out for himself as he faces his European and Pacific counterparts today and tomorrow. As Morris Goldstein, a policy analyst at the Peterson Institute for International Economics in Washington said: “There is a vacuum to be filled. The United States, as the largest global player, needs to lead the show.”

Most of the other ministers there will not have Mr. Geithner’s resistance to taking over their failed banks. The U.K. is well on its way there, now, and other will probably follow soon, as the shoes continue to fall in the banking crisis of the century.

See update to this chart for late February, below.

The graphic above shows the dramatic drop in annualized GDP quarterly growth for the fourth quarter of last year. Two other points  are well demonstrated in this data:

· The effects of the stimulus rebate last year is clearly seen in the spike in the second quarter of last year. The jump from less than 1% in the first quarter to about 3% in the second is probably attributed to the checks that were sent to taxpayers in the late first quarter. It was effective, but it was simply too small to overcome the momentum that had accumulated to the downside by that time.

· The drop in the 4^th Quarter is actually more dramatic than shown. The drop in consumer spending, which is behind the GDP drop, was so steep that producers could not adapt their production fast enough to counter the fall in sales. As a result, many of the products made during the quarter simply piled up as unsold inventories. But, the production was counted in GDP, so the slowdown in GDP was lessened by this artifact. The unsold inventories, now gathering dust all around the country, is the main reason we see huge layoffs  being announced in January—pointing to an even worse drop if quarterly GDP figures for the first quarter of this year.

There is no mystery about the dramatic slowing of consumer spending. For years prior to 2008, consumer spending had been artificially propped up by home loans. Home prices were going up so fast that home owners could refinance their new-found wealth one or twice a year and spend the proceeds on home improvements, new cars and large television sets. When the housing bubble burst, the prop was pulled from consumer spending, and it fell like a stone.

I expect unemployment to continue going up as millions of workers are being given pink slips every day so far in 2009. Manufacturers have to trim their production not only to make up for the over-production of late 2008, but they must also slow production lines for the lower sales levels anticipated in the future. This spiraling effect is well understood in business and economics. It’s hard to stop, once it gets going, and it is going now with full steam.

The scary part of this scenario is that this exact same process is being repeated in Europe, Asia, Latin America and Africa. No region is immune; no country can escape its effects. The good news is that virtually all the world’s economies are generating counter-cyclical spending plans to help pull out of the nosedive we are in. Simultaneous stimulus spending will help the world’s economies recover faster than otherwise, since there can be no beggar-thy-neighbor polices when everyone is going through the same thing.

Also, keep in mind that unemployment is a lagging indicator of future production. By the time unemployment stops falling, the recovery is likely to already be underway.

UPDATE on 4thQ, 2008 GDP (2/28/09)

The Commerce Department has just revised the 4thQ GDP estimates, and the news is not good.  The top chart shows a 3.8% annualized decline.  The revised figures, show in the chart below, are much worse:

It turns out that a better estimate of the fall was 6.2%, not 3.8%.  Every major component of the economy shrank, except government spending. Economists said all signs point to a similar drop in output in the current quarter.

The revision could be traced primarily to a contraction in inventories of unsold goods, which the government had previously said had grown.  Businesses were able to trim their inventories faster than first estimated.  The good news is that the pile of unsold goods is not as large as first estimated.

But, traditionally inventories in a recessions fall much faster than they have so far.  This suggests that the worst is yet to come as far a cutbacks in production.

The final adjustment will be made next month by the Bureau of Economic Analysis.