Housing

 

Existing Home Sales (January 2012)

 

- Seasonally Adjusted Annual Rate was 4,570,00
- This was lower than the data released last month for December but higher than the revised data
- the median price fell 4.6% to $154,700.

 

Home Sales are increasing at the expense of prices.  This is  good for buyers, bad for sellers and bad for anyone wanting to refinance and now faced with too little equity.

 

Graph:  http://mam.econoday.com/showimage.asp?imageid=22094

 

Mortgage Applications (week ended 2/17/2012)

 

Purchase Index - Week/Week -2.9%
Refinance Index - Week/Week  -4.8%
Composite Index - Week/Week  -4.5%

 

Retail

 

ICSC-Goldman Store Sales

 

Store Sales - Week/Week +3.0%
Store Sales - Year/Year +3.2%

 

Redbook

 

Store Sales Year/Year change +2.9%.

 

Chicago Fed National Activity Index

 

This is a composite index of 85 monthly indicators.

 

For January 2012 the index was +0.22 down from 0.54 in December.

 

Greece

 

Greece apparently won a second round of bailout from the EU but nothing fundamental has changed.  Greece must come closer to balancing its budget and the parties holding their debt must agree to haircuts.  A default was avoided.  The EU will agree to lower the interest rate on the 2010 rescue. 

 

The agreement will ask Greece to maintain certain debt/GDP ratios in the future. One of the underlying problems is that in a nation with a relatively transparent economy such as the U.S. it is nearly impossible to determine what the debt/GDP ratio will be eight years in the future.  In a country such as Greece with so much of the economy off the books, GDP calculation and tax revenue become impossible to estimate. I would also guess that the implementation of austerity will drive even more of the economy to the grey market.

 

The IMF has proved to be unable to see that Greece, Ireland and Iceland were running unsustainable debt.  IMF must have learned underwriting from the stated income subprime mortgage era.

 

Inflation

 

CPI (January 2012)

 

CPI - Month/Month change  0.2%
CPI - Year/Year change  2.9%
CPI - Month/Month (less food & energy) 0.2%
CPI - Year/Year change (less food & energy change) 2.3%.

 

These numbers are close to the point where they are of concern.  If inflation increases, accommodative Fed money supply will be blamed.

 

Graoh: http://mam.econoday.com/showimage.asp?imageid=22083

 

It is inflation which ultimately drive long-term interest rates.  This includes mortgages.

 

Leading Economic Indicators  (January 2012)

 

This is a rehash of already released data weighing the components and producing a picture of where GDP will be in 3-4 months.

 

LEI was +0.4% in January down from +0.5% on December. Some is this is monetary policy, some is increased manufacturing and some is due to the unseasonably warm weather which kept construction going.

Initial Jobless Claims (week ended 2/11/2012)

 

- New Claims 348,000.
- Previous was 358,000.  Consensus was 365,000.
- 4-week Moving Average was 365,250.

 

This is the lowest level of Initial Claims in almost four years.

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=22074

 

Details here from the Labor Department.

 

This is seasonally adjusted data.  Unadjusted totaled 361,928, a decrease of 39,328 from the previous week. There were 424,400 initial claims in the comparable week in 2011.

 

The adjusted data may be lower because the adjusted data allows for adding in an allowance for people normally laid off by bad weather.  Since the weather had been mild over most of the country there likely have been fewer weather related layoffs.

 

Housing Starts  (January 2012)

 

Starts - 699,000 (seasonally adjusted annualized rate)
Permits -  676,000 (seasonally adjusted annualized rate)

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=22076

 

I offer the same comment here about the effect of seasonal adjustment.  Because of good weather the adjustments may be inflating the data.

 

Inflation

 

PPI

 

PPI - Month/Month change +0.1%
PPI core (less food & energy) - Month/Month change 0.4%.

 

This data may seem odd at first.  There were inconsistent changes in energy prices which blunted the increase in overall. The cost of electrical power was down1.7%.  Natural Gas prices were lower. Gasoline was +2.0%.  Food was down 0.3%.

Graph here: http://mam.econoday.com/showimage.asp?imageid=22078

Mortgage Applications

 

Composite Index - Week/Week -1.0%
Purchase Index - Week/Week -8.4%
Refinance Index - Week/Week +0.8%

 

The housing market is far from recovery.  Aggressive monetary and fiscal policy have failed to grow GDP and increase the number of people working fast enough to make more folks homebuyers.  The policies and the settlement regarding foreclosures have served to stretch out the time it will take to clear the inventory of unsold and soon-to-be-foreclosed-upon homes.

 

Housing Market Index

 

The National Association of Home Builders Housing Market Index increased for 25 to 29.  These folks are optimistic.  Hosing Starts post tomorrow and New Home Sales post on 2/24.

 

Industrial Production (January 2012)

 

Industrial Production was flat in January.  The report shows manufacturing strong but utilities down.  Manufacturing was boosted by a large (+6.8%) increase in autos. The utilities component could be due to unseasonably warm weather.

 

Capacity Utilization was 78.5%.  Previous was 78.1%.

 

Empire State Manufacturing Survey (February 2012)

 

Level was 19.53.  Previous was 13.48.

 

This is a survey index of manufacturers in New York State conducted by the New York Fed.

 

 

Tomorrow has Housing Starts, PPI and Initial Jobless Claims all of which can move the markets.

Retail

 

Retail Sales (January 2012) 

 
Retail Sales - Month/Month +0.4 %. Prior was +0.1%.  Consensus was +0.7%
Retail Sales less autos - Month/Month +0.7 %. Prior was -0.2%.  Consensus was +0.6%.

 

ISCS-Goldman Chain Store Sales (week ending 2/11)

 

Store Sales - Week/Week -2.0%
Store Sales - Year/Year +2.8%

 

Redbook Chain Store Sales (week ending 2/11)

 

Store Sales Year/Year change 2.7%

 

Business Inventories (December 2011)

 

Business Inventories were +0.4% in December.

 

Import/Export Prices (December 2011)

 

Export Prices - Month/Month +0.2 %
Export Prices - Year/Year +2.5 %
Import Prices - Month/Month +0.3 %
Import Prices - Year/Year +7.1 %

 

Not well hidden in the above is the increase in the price of oil and the resulting increase in gas prices. This reduces discretionary spending and hurts GDP.

There are no fundamentals today.  This week has PPI (Thursday) and CPI (Friday).  Core CPI has been extremely low so we could see some selling it it reports at, say, +0.3%.  Housing Starts will be reported on Thursday.

 

Greece

 

The situation in Greece is hardly settled. This week the politicians need to finish the details to explain to the EU how they intend to reduce spending.  Once a deal to write down Greek debt is reached we must see who is affected and how.

Trade Deficit (December 2011)

 

$48.8 Billion. Previous was $47.7 billion.  The increased Trade Deficit decreases GDP. Non-petroleum trade deficit rose to $36.5 billion from $34.1 billion in November.

 

Greece

 

Today the news is bad in as much as Greek politicians do not seem to be willing to go along with the extent of the EU demand for less deficit spending.

 

Consumer Sentiment

 

University of Michigan Consumer Sentiment

 

Sentiment Index - 72.5.  Previous was 75.0. It has not been well-reported that Consumer Spending was disappointing in December and that the new year started poorly.  The consumer is finally admitting that he is not planning on increasing spending.

Jobs

 

- Initial Jobless Claims 358,000
- Previous was 367,000.  Consensus was 370,000
- 4-week Moving Average 366,250.  Down 15,000 from previous week.

 

The jobs market is showing modest improvement. The one caveat is that unseasonably warm weather may have held down seasonably related layoffs in construction.

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=22042

 

Bloomberg Consumer Comfort Index

 

Index Level -41.7. Previous was -44.8. 

 
 

Wholesale Trade

 

Inentories - Month/Month change +1.0 %.  Previous was +0.1%.  This must be backed up by stronger Retail Sales (next Tuesday) or the increase in wholesale inventories will wane.

 

Greece

 

Greek politicians seem to have reached an agreement on budget matters which will comply with the dictates of the rescue funds.  The market views this as positive news strengthening the Euro and causing selling of U.S. Treasuries (higher rates.)  The bigger picture is more complex.  Losses still have to be taken and if fiscal austerity is put in place, economic activuty will wane.

 

Bloomberg Consumer Comfort Index

 

This is weekly sample of consumers' views on the state of the economy.

 

Level -44.8. Previous was -41.7. 

Housing

 

 
Purchase Index - Week/Week  +0.1%
Refinance Index - Week/Week +9.4%
Composite Index - Week/Week +7.5%

 

The housing market remains flat.

 

Attention remains focused on the Greek debt issue but the issue of sovereign debt is a much larger problem.

 

Bernanke's testimony yesterday before the Senate Banking Committee indicated that:

 

- the jobs market has improved but only modestly
- Congress must act on the "Bush tax cuts" before this year's election.

 

The underlying theme remains that the Fed is powerless to help the economy if fiscal policy remains unsustainable.  Sustainable fiscal policy is not conducive to reelection.