Mortgage Applications (week ending 8/26)

Purchase Index - Week/Week Change +0.9 %
Refinance Index - Week/Week Change -12.2 %
Composite Index - Week/Week Change -9.6 %

The increase in the purchase index is good news for the huisng sector which is in serious need of good news.  The refi index is rate sensitive and next week will probably show an increase for this week.

ADP Jobs

ADP Private Sector Jobs was +91,000 for August.

This is a graph of ADP vs. BLS Jobs.  BLS is this Friday.

 

 

Challenger Jobs Cuts

This is a report of announced jobs cuts at large companies.  Announced layoffs in August were 51,114, down from July's 66,414.

Manufacturing

Factory Orders - Month/Month change +2.4%.  This is largely about recovery in the auto sector.

ISM - Chicago

The Institute for Supply Management business barometer index for the Chicago area was 56.5 for August down from 58.8. 

 

 

Consumer Confidence

Consumer Confidence (a survey measurement of predisposition to spend) fell from 59.5 to 44.5 in August.  (WSJ used the words "plummeted" and "plunge.") This is the lowest level of Consumer Confidence since April 2009. This is in-line with the Consumer Metrics measurement of increased online discretionary spending in early July which flattened at the end of that month. Consumer Confidence is measured by an indepenent entity called the Conference Board - a 501(c)(3) nonprofit, non-advocacy group.

This is a chart of Retail Sales (grey bars) and Consumer Confidence (blue line.)

 

Retail Sales

ICSC-Goldman Store Sales

Store Sales - Week/Week +0.1 %
Store Sales - Year/Year +3.0 %

Redbook

Store Sales Year/Year  +4.0 %

This data and the data for next week should be dismissed because what we see is a spike in sales as people stocked up pre-hurricane.

Housing

S&P Case-Shiller Home Price Index (June)

10-city, not Seasonally Adjusted  -  change +1.1 %
10-city, Seasonally Adjusted - Month/Month change 0.0 %
10-city, not Seasonally Adjusted - Year/Year change -3.9 %

The key number here (I think) is the Seasonally Adjusted Month/Month which shows that prices were flat.

 

 

Pending Home Sales (July)

Pending Home Sales Index - Month/Month was -1.3 %.  Same old story - weak housing market. 

Personal Income and Expenses

Personal Income - Month/Month change +0.3 %
Personal Income - Year/Year change +5.3 %
Consumer Spending - Month/Month change +0.8 %
Consumer Spending - Year/Year change +5.1 %
Core PCE price index - Month/Month change +0.2 %
Core PCE price index - Year/Year change +1.6 %

PCE is a measure of inflation including only stuff which individuals buy.

http://mam.econoday.com/showimage.asp?imageid=21293  Real Disposable Income

http://mam.econoday.com/showimage.asp?imageid=21294  Real PCE

This data is reflecting the sharp recovery in Consumer Spending which the Consumer Metrics Institute started showing on July 7.  Unfortunately that increase noted by Consumer Metrics flattened two weeks ago.

The storm which hit the East Coast this past weekend will take a bite out of consumer spending but create spending on repairs in the coming weeks and months.

Dallas Federal Reserve Manufacturing Survey

The Dallas Fed general business activity index in July went from -17.5 to -2.  Another case of "the good news is that the bad news isn't as bad as it was."

It may be the weekend after but the fact is that last Friday's GDP report was dismal and on the same day Bernanke essentially admitted that there was nothing more, at present, that monetary policy could do.

GDP

BEA revised 2ndQ2011 GDP down to +1.0% annualized.  With BEA making so many discretionary adjustments it is getting difficult to gauge just how bad the economy is. If I were the suspicious sort I might be thinking that BEA saw +1.0% as a psychological barrier fearing much more serious equity selling if GDP were reported below that.

The GDP deflator (a measure of inflation which weights each component by its percent of GDP) was +2.4% (seasonally adjusted annual rate.) 

Corporate Profits

BEA announced Corporate Profits as unchanged year over year.  BEA has different measure of Corporate Profits which you are welcome to learn about here.

 

Bernanke

Bernanke's Jackson Hole, WY speech is in progress and he appears to be saying, "we'll do whatever is necessary, blah, blah, blah" and is making no suggestions of a QE III.

 

Jobs

 

Initial Jobless Claims (week ending 8/20) were 417,000
4-week Moving Average 402,500. 

The jobs market is still quite weak.

 

Bloomberg Consumer Comfort Index

 

Tnis is another one of those B-list reports based on a weekly, random survey of people with incomes > $100,000 http://www.bloomberg.com/news/2011-08-25/consumer-comfort-index-in-u-s-stabilizes-close-to-record-low.html 

Last week's reading was -47

 

Consumer Metrics

 

This index of on-line discretionary spending, while not widely discussed, may be the best leading indicator of GDP.  It started moving higher just after July 4 but has slowed its growth since the equity instability started.

 

 

 

MBNA Mortgage Applications (week ending 8/19)

Purchase Index - Week/Week Change  -5.7 %
Refinance Index - Week/Week Change -1.7 %
Composite Index - Week/Week Change -2.4 %

Concern here is for the weak showing in the purchase sector in a week which should be in the heart of the home buying season.  This is the same old story:  lack of confidence from would-be buyers, concern that values may erode further and tough qualifying standards.

FHFA Home Price Index (June)

Month/Month change +0.9 %
Year/Year change -4.3 %

This index measures home prices on loans with FNMA/FHLMC financing.  Yesterday's fundamentals indicated geographic shift in home sales with the Northeast and West declining and the South gaining. But y'all knew that already.

 

Durable Goods Orders (July)

New Orders - Month/Month change  4.0 %
New Orders - Year/Year Change  9.2 %
Ex-transportation - Month/Month 0.7 %
Ex-transportation - Year/Year 9.6 %

This is a positive report.  The Month/Month change in overall vs. ex-trans indicated strength in the automotive sector.

Retail Sales

ICSC-Goldman Same Store Sales

Store Sales - Week/Week -1.0 %
Store Sales - Year/Year  3.0 %

Redbook Same Store Sales

Store Sales Year/Year change 3.6 %. Previous was 4.7%.

If the consumer keeps slowing spending we are going to have another recession.

Richmond Fed Manufacturing Index

Change in level -10.  Prior was -1.

This is another indication that the supply side was more confident than the demand side.  Now both are pulling back.

New Home Sales

Seasonally Adjusted Annual Rate was 298,000.  This was below previous and below consensus.  It also show some inmigration.  Home sales were down in the Northeast and West and up in the South. 163,000 of those 298,000 sales were in the South. Details here. People appear to be moving to places where homes are affordable and, presumably, where there are jobs.

Total new homes for sale is at at 50 year low.  With construction financing  tough and values soft, builders see little reason to bet on this market.  Homebuilding is a major contributor to jobs and this data offers no relief for unemployed construction workers and the jobs market in general.

We are starting the week with "VOLATILITY" written in large letters so any deviation of fundamentals from expectation could have an outsized result.

Chicago Fed National Activity Index (July)

Level -0.06
3 Month Moving Average -0.29 

New Home Sales are Tuesday, Durable Goods Orders are Wednesday, and Friday has 2nd look 2ndQ2011GDP, Consumer Sentiment and Corporate Profits.

GDP consensus is 0.7% to 1.6%. If that comes in lower, that coupled with the bullish Treasury techs could set off a rally in Treasuries driving yields to record lows.

The nagging concern is that a sovereign debt crisis in Europe could set off a banking crisis there.

There are no economic fundamentals today but we have a market environment which looks as if investors are close to completely losing confidence in the health of the economy which could see a significant sell-off of equities and a move to cash, Treasuries and gold. This could send mortgages to record low rates as long as MBS track Treasuries.

 

This is not simply about the U.S. economy.  It extends to Europe and Japan as well.

Inflation

 

CPI - M/M change +0.5 %
CPI - Y/Y change +3.6 %
CPI - Month/Month core (less food & energy) 0.2 %
CPI - Year/Year core (less food & energy)  +1.8 %

This retail inflation is always difficult to explain because while it is most certainly the overall number which affects everyone, it is core which is of interest to economists because core is what shows the trend in inflation.  Under the present circumstances both of these numbers are too high.  My belief is that further expansion of money supply (QE) will increase inflation while doing little to stimulate growth.

One point which is plainly obvious is that we are not having deflation.

Jobs

 

Initial Jobless Claims were 408,000 last week.  The 4-week moving average was 402,500.

 

 

This shows a continuing weak jobs market.  The "we got under 400,000" euphoria of last week has dissipated.

Housing

 

Existing Home Sales

 

Existing Home Sales - Level - (Seasonally Adjusted Annual Rate)  4,670,000 M
Existing Home Sales - Month/Month -3.5 %
Existing Home Sales - Year/Year +21.0 %

 

The consumer remains suspicious about the health of the economy.

 

Leading Economic Indicators

 

Leading Indicators - Month/Month change for July +0.5%.

 

Because of volatility and the way this index is constructed I would deem this datum useless at present.

 

Philadelphia Fed

 

The Philadelphia Federal Reserve survey of General Business Conditions was a mind-boggling -30.7.

What I find most compelling is that despite higher than expected inflation (which, after all is said and done, should be the driver of interest rates) we saw a major bond rally yesterday which continues today. 

The technical patterns of the 30-year bond future which I use the forecast rate movement are extremely bullish and indicate the possibilities of a move in yields into uncharted territory.