Personal Income & Spending 

 

Personal Income - Month/Month  -0.1 %
Consumer Spending - Month/Month 0.2 %
Core PCE price index - Month/Month 0.1 %
Core PCE price index - Year/Year 1.6 %

This data and the graphs below are stark.  With less money coming in and less money to spend the consumer cannot drive economic growth.

 

 

 

 

 

Chicago PMI

 

ISM - Chicago Business Barometer Index was 60.4. Previous was 56.5.  Consensus was 55.4.

 

UMichigan Consumer Sentiment

 

- Index was 59.4
- Previous was 57.8
- Consensus was 57.8

This datum over 50 implied expansion but is inconsistent the Conference Board's Consumer Confidence released Tuesday which shows a smaller gain and an index under 50 implying contraction.   I am guessing that one of them is correct.

 

Money Supply

 

Yesterday' Fed M2 Money Supply Report showed a $14.9 billion contracion in M2.

 

 

The H.6 Fed report  shows excess banking reserves of $1,548,799,000,000.

GDP

To so-called "final" GDP for 2ndQ2011 was adjusted upward to  +1.3%.  The GDP Deflator (an index of inflation weighted by how much each item contributes to GDP) was +2.5%.  Final sales of domestic products was +1.6%.

 

 

Jobs

Initial Jobless Claims for the week ending 9/24 were 391,000.  Previous was 423,000,  Consensus was 420,000.

 

 

MBA Mortgage Applications

Purchase Index - Week/Week +2.1 %
Refinance Index - Week/Week +11.2 %
Composite Index - Week/Week +9.3 %

Refinancing activity was driven by the extremely low rates of last week.

Purchases are so small that a 2.1% bump is not that meaningful.

Durable Goods Orders

New Orders - Month/Month  -0.1 %
New Orders - Year/Year 12.3 %
Ex-transportation - Month/Month  -0.1 %
Ex-transportation - Year/Year   +7.8 %

Mixed message here.  Year/Year is good.  Month/month is weak.

GDP 3rd estimate is tomorrow.  This is called the "final estimate" even though it can get revised for the next 6 years.  With the data this weak the discretionary "corrections" made by BEA may be overwhelming the actual data.

 

Consumer Confidence

- Consumer Confidence - Level for September 45.4
- Previous 44.4.  Consensus 46.5

This is s survey by the Conference Board and it is supposed to measure consumers' predisposition to spend.

Retail

ICSC-Goldman Store Sales

Store Sales - Week/Week change -0.2 %
Store Sales - Year/Year +2.7

Redbook

Store Sales Year/Year change +4.2 %

Housing

S&P/Case-Shiller Home Price Indices (June-July)

- 10 City (NSA) Index was +0.9% 
- 20 City (NSA) Index was +0.9%
- 20-city, Seasonally Adjusted -  0.0 %
- 20-city, NSA - Year/Year -4.1 %

Home Sales

 

- New Home Sales for August were 295,000 (annualized)
- previous was 298,000

This is a 6-month low.  Prices were -7.7% year-on-year.  That is the worst since July 2009. 

This is despite lower prices and record low mortgage rates.

 

New Homes are important to economic growth.  They provide jobs for the workers who build them and many other jobs for the people who make the materials which build them and things such as carpet, paint and appliances.

 

Home Sales remain low because the market is still glutted with inventory and because people have too little confidence.  In addition, mortgage qualification is tougher.

 

Chicago Fed National Activity Index

 

This is a weighted average of 85 existing monthly indicators of national economic activity. 

- Index level -.43
- Previous was +.02
- 3-Month Average -.28

Initial Jobless Claims

- 423,000 for the week ending 9/17
- down 5,000 from previous
- 4-week Moving Average 419,500 - flat
- slight improvement but still weak

Leading Economic Indicators

LEI for August was +0.3%.  This is a statistic calculated from other data and the low reading is the consequence of flight-to-quality

Operation Twist

Rarely have I seen more inane discussion over an economic topic. The fact that the Fed suggested that rearranging the deck chairs of duration was somehow stimulative is bizarre.  It will certainly lower Treasury yields on duration greater that or equal to 7 year and it will lower mortgage rates but the fact is that it is not the case that business is not hiring because of interest rates.  Business is not hiring because business, banks and consumers lack confidence.

What the Fed has in fact done is admit that its claim that they still have tools to deploy is bogus.

Existing Home Sales (August)

Existing Home Sales - Seasonally Adjusted Annual Rate  5,030,000.  Pervious was 4,670,000
Existing Home Sales - Month/Month Change +7.7%

 

This is a chart of monthly Existing Home Sales (grey bars) and mortgage rates (brown line.) The value if that chart is mitigated by the First Time Homebuyer credit which expired April 2011.

It may be the case that folks believe that home prices will not increase any time soon and there is no rush to buy. 

MBA Mortgage Index

Purchase Index - Week/Week Change -4.7 %
Refinance Index - Week/Week Change 2.2 %
Composite Index - Week/Week Change 0.6 %

The positive news about Existing Home Sales is mitigated by the soft purchase index from MBA.

The best solution for the housing sector would be to encourage the clearing of existing inventory and shadow inventory by providing more FNMA lending for rentals.  The fact is that there are folks who are in homes they own and haven't made payments on for months.  The goal might be to have them stay but as renters.   

FOMC

The FOMC meeting ends today.  I don't believe that the usual discussion about rates or money supply are paramount.  The Fed must explain what its plans are for Eurozone dollar liquidity.

Housing Starts

 

- August Housing Starts were 571,000.
- Previous was 604,000. Consensus was 592,000.

- Permits were 620,000.
- Previous was 597,000. Consensus was 590,000.

 

http://mam.econoday.com/showimage.asp?imageid=21393

1,500,000 Housing Starts are required to house the increasing population.  Housing Starts well below that have been commonplace since the bubble burst.  We produced excess in driving that bubble and sold them to people who could not make the payments.

 

FOMC

 

The FOMC meets today and while faced with a near recession and a Presedent who wants to increase taxes despite near zero GDP growth the fact is that their attention will be turned to supporting banks in Europe and the U.S. when the inevitable debt default occurs.

 

The public simply is not aware of what the Fed does and the media and politicians do a horrible job of explaining what the Fed does and the objectives of, for example, Eurozone liquidity intervention.

Greece & Yield Forecast

As I have been saying for 7 weeks, concern over Eorozone debt will drive US Treasury yields to record lows.  The angst meter is moving to the right this morning.

Housing

National Association of Home Builders Housing Market Index for September was 14.  50 is neutral.

The remainer of this week has Housing Starts (Tuesday), Existing Home Sales (Wednesday), Leading Economic Indicators (Thursday) in addition to the weekly data.  There is also an FOMC meeting.

University of Michigan Consumer Sentiment

Sentiment Index - 57.8.  Previous was 55,7

This survey index is supposed to be a measurement of the predisposition of the consumer to spend.

I want to mention that yesterday's united message from the  central banks that they would provide liquidity to European banks had an oddball effect.  Equities rallied and Treasuries sold as if this were good news.  It is not good news.  It is recognition that bad news (default) is coming.  It does address the liquidity issue which will arise as a consequence.  Default of Eurozone debt will result in capital problems of large banks in France and the U.S. banks which hold the credit default swaps on that debt.