On 21 Jul, 2010, I outlined my thoughts on the issue of double dip in an essay entitled "What Double Dip?". Almost 2 months on, I thought it would be appropriate to re-examine the data points used to make the case in the essay.

However, I would like to introduce a new indicator that suggests that things are actually improving. The following chart shows the volume of interbank loans among US commercial banks, which has risen 34.2% since the last week of June 2010. This is a sign that US banks are beginning to trust each other again. It is still well below the $200-250 billion levels prior to the Eurozone crisis and the $400-500 billion ranges prior to the Lehman crisis. Nevertheless, its behaviour in July and August through September suggests healing, not deterioration.

David Fuller's view I have always preferred to see fundamental data in graphic form and that is exactly what Bernard Tan has done in this concise report. Since he used Bloomberg for most of the fundamental graphs I recreated the volume of interbank loans among US commercial banks, mentioned above. I also show it on a weekly basis going back to 2004 and a monthly basis commencing in 1983.

The additional data shows the severity of this crisis for US banks. But we need to remember; banks were at the epicentre of the financial earthquake. Much of the other data shown by Bernard Tan is far less alarming in terms of the overall decline, not least US Chain Store Sales.

Here is the weekly graph of US Chain Store Sales dating back to 2004. They appear to have resumed their overall ranging upward trend, which dates back a very long way as you can also see from this monthly chart commencing in 1990. I asked Bernard Tan for his thoughts on the seasonality shown by this data. Here is his reply:

Here's my take on the seasonality.

Thanksgiving is held on the 4th Thursday of November. Effectively, this is the last week of November. This is an important shopping holiday usually marked by a shopping spree. On the chart you should see some a muted pickup in weekly sales. In part because chain stores use Thanksgiving weekend promotions to entice shoppers.

But the following week, the first week of Dec, everything goes quiet again. The Thanksgiving offers are close and the Christmas promotions have yet to start in earnest. Why? Because over the years, the retail stores have trained Americans to wait. The closer it gets to 25th Dec, the more aggressive the promotions. So, people learn to wait.

That is why you see the bump up in late Nov, a spike down in first week of Dec and then it rises through into the last week of Dec (the post-Christmas sales).

Americans truly have no purchasing power!

ISCS weekly data included Walmart right until Jun 09. You can imagine that during a recession, wealthy people may downgrade from niche/standalone stores to higher end chain stores. Not so wealthy people downgrade from higher-end chain stores to Walmart!

The data shows the ever-rising consumption until the recession hit. Then it went sideways (instead of going down) because chain stores grabbed market share from the more expensive niche/standalone stores.

That's how I would explain it.

This makes sense to me. It is the small retailers who are most vulnerable and we see that in the UK as well.

I maintain that the US economy has avoided a double-dip recession to date because many of America's multinational companies are earning good profits due to their leverage to the global economy.