There are no notable fundamentals today.  As the year ends it is worth nothing that 2011 was a great year for Treasury debt and that lower Treasury yields drove mortgage rates lower.

 

The root cause was and continues to be EU concern.  There will be no resolution of EU debt soon and that will continue to drive US Treasury yields and mortgage rates even lower in 2012.

Jobs

Jobs

 

Initial Jobless Claims (week ended 12/24)

 

- New Claims 381,000.
- Previous was 364,000.  Consensus was 372,000.
- 4-week Moving Average was 380,250

 

The 4-week Moving Average is still trending down.

 

 

One point to keep in mind is that there is imperfect correlation between Jobless Claims and jobs.  If the 4 -week average is 380,250 then in the last 4 weeks 1,521,000 people lost jobs.  Yet, the net change is jobs for the month is likely about 100,000.

 

The decrease in Initial Jobless Claims is good news but how this translates into jobs remains to be seen.

 

Pending Home Sales (November 2011)

 

Pending Home Sales Index - 100.1  this was 7.3 % higher than October.  With the data coming from NAR which just last week admitted that it had been publishing incorrect data on Existing Home Sales for the past 5 years feel free to decide how to interpret this data.

 

Chicago PMI

 

The Business Barometer Index for the Chicago region was 62.5 for December.  Any value above 50 indicates expansion.  Keep in mind that this is the wholesale side.  If the consumer does not increase purchasing then the wholesale index will diminish.

 

Bloomberg Consumer Comfort Index (week ended 12/25)

 

This is a survey index of consumer attitudes.  The level fell from -45.0 to -47.5.  This says more about consumer psyche than economics.  For example, in this survey the consumer stated that he intended to buy less, his personal finances were worse, but that current state of the economy was better. Go figure.

Retail (week ended 12/24)

 

ICSC-Goldman Store Sales

 

Store Sales - Week/Week +0.9%.  Previous was +3.4%.
Store Sales - Year/Year +4.5%. Previous was +4.6%.

 

Redbook

 

Store Sales Year/Year change +4.3%.  Previous was +3.4%.

These two reports indicate an improved holiday retail season.

 

EU Situation

 

From WSJ: The amount of money parked by euro-zone banks at the European Central Bank surged to another new record, as banks used the ECB's latest vast liquidity injection to build up reserves rather than take on new risks.

 

Interbank lending in the EU is evaporating in a manner similar to that which happened in the U.S. post-Lehman.  Banks both in the U.S. and the EU are choosing to park their excess reserves at the central bank rather than lend it and suffer possible loss.

 

Add to this the new capital requirements of Basel III and you have an excellent plan for stagnation.

There are no major fundamentals this week but only the usual this and that.

 

Housing

 

Case-Shiller Home Price Index

 

20-city, Seasonally Adjusted - Month/Month  -0.6 %
20-city, Not Seasonally Adjusted - Month/Month -1.2 %
20-city, Not Seasonally Adjusted - Year/Year -3.4 %

 

Housing market data has been interesting of late.  Last week, NAR admitted that the past 5 years of Existing Home Sales were inflated making the most recent data better than the previous data only because the previous data was revised down.  There was a modest rise in Housing Starts last month but if today's data is accurate it was at the expense of prices.  Only when the inventory and shadow inventory of foreclosures is cleared will the housing market start making sense.

 

Consumer Confidence

 

Consumer Confidence 64.5, previous was 56.0, consensus was 59.0.  Much of this is attitude regarding the jobs market.  With the Unemployment Rate declining but the Labor Participation Rate also declining the view of the jobs market may not be fact-based.

 
Richmond Fed Manufacturing Index

 

Level was +3, previous was flat, consensus was +5

 

Dallas Fed Manufacturing Survey

 

Business Activity Index  -3.0.  Previous was 3.2, consensus was 5.0.

New Home Sales

 

- New Home Sales for November were 315,000 (annualized.)
- Previous was 307,000.  Consensus was 314,000.

 

While 315,000 is better than 307,000 the fact is that both are horrible.  Until excess inventory created during the housing bubble is sold, there is little reason to build new homes.

 

Durable Goods Orders

 

DG Orders - Month/Month change +3.8 %
DG Orders - Year/Year Change +12.1 %
Ex-transportation - Month/Month +0.3 %
Ex-transportation - Year/Year +7.2 %

 

Much of the overall gain is in aircraft.

 

Personal Income and Spending

 

Personal Income - Month/Month +0.1 %
Consumer Spending - Month/Month +0.1 %
Core PCE price index - Month/Month +0.1 %
Core PCE price index - Year/Year 1.7 %

 

PCE is a measure of inflation geared for the consumer.  Real (inflation adjusted) wages are declining. The economy continues to leave the average family behind. In fact, a good part of the increase in Personal Income this year has been from the decline in Social Security contributions, money that has to be made up from somewhere at some time in the future.

 

GDP

As I have discussed here and in my weekly newsletters, we are seeing today another instance of revision of very important macroeconomic data.

 

BEA's final GPD for 3rdQ2011 is now +1.8%. It started at 2.5% and was first revised to 2.0%. This "final" GDP will continue to be revised for years to come making one wonder WTF?

 

Some of the source of these revisions are understandable because investments, exports and imports only have two months' data when the first release is issued necessitating guessing at the last month of the quarter.
Rick Davis of Consumer Metrics Institute has written extensively about this making the case that some of what BEA does lacks transparency because they use deflators (adjustments for inflation) which are out of line with CPI and PPI and for which BEA offers not explanation as to their primitive data or methods.

  

Jobs

  

- Initial Jobless Claims for the week ending 12/17 were 364,000.

- Previous was 366,000. Consensus was 380,000.

- 4-week Moving Average was 380,250.

- Continuing Claims for the week ended 12/10 were 3,546,000 - the lowest level since GDP started back up.

Consumer Sentiment

 

Consumer Sentiment for December is 69.9 up from 64.1 in November. This is not hard data but a survey intended to measure predisposition to spend.

  

Leading Economic Indicators

 

LEI for November was +0.5%. Previous was +0.9%. This is a rehash of 10 other bits of data. It is very much influenced by monetary policy (rates and money supply.) It is intended to forecast GDP growth 3-6 months in the future.

 

FHFA Home Price Index

 

Index level for October was -0.2% month/month and -2.8% year/year. Consensus for October was +0.3%. Home prices have not yet bottomed out. Add to that the admission yesterday by NAR that it had been overestimating Existing Home Sales for 5 years and one does not get imbued with confidence.

 

Corporate Profits

3rdQ2011 Corporate Profits were +6.2% year/year.

Housing

 

Existing Home Sales

 

One of the things which amazes me the most about many of the fundamentals I write about is how poorly they are measured.  Today we have the granddaddy of bogus data.  NAR today said that Existing Home Sales for November were at a seasonally adjusted annual rate of 4,420,000.

 

This is good because October was revised down from 4,250,000 even though it was previously reported at 4,970,000.  In fact, NAR revised downward sales for the part 5 years meaning that the housing bust was much worse that NAR had been stating.

 

MBA Mortgage Applications

 

Purchase Index - Week/Week -4.9 %
Refinance Index - Week/Week -1.6 %
Composite Index - Week/Week -2.6 %

 

Yesterday's Treasury Auctions

 

The results of Yesterday's auction of 4-week Treasury bills is worth looking at.  Treasury auctioned $30 billion in 4-week notes.  The interest rate was 0.000%.  The bid/cover ratio (bids received/bids accepted) of 9.07.  The 5-year auction went out at 0.875% with a bid/cover of 2.86.  Wealth holders are so concerned about the EU, some U.S. banks and recently bloated equity prices that the are willing to let Treasury hold it for nothing or next to nothing.

Housing Starts (November 2011)

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- Housing Starts 685,000 (seasonally adjusted, annualized)
- Building Permits 681,000 (seasonally adjusted, annualized)

 

This is another "better than expected but not great bit of data and may be indicating continuing if modest recovery.  The natural level for Housing Starts to keep it in line with population growth and scrappage is about 1,500,000.

 

Retail

 

ICSC-Goldman Store Sales

Store Sales - Week/Week +3.4%
Store Sales - Year/Year +4.6 %

A healthy recovery from the previous bad week.

Redbook

Store Sales Year/Year +3.4% 

Housing Market Index

 

The National Association of Home Builders Index rose to 21 from a reading of 20 last month.

 

This is a fairly thin data week with the exception of so called "final" 3rdQ2011 GDP Thursday.  BEA continues to revise these quarterly GDP's for years afterwards.  We also have Existing Home Sales (Wednesday), Durable Goods (Friday) and Personal Income & Expenses (Friday.)

CPI (November 2011)

 

CPI overall - Month/Month  0.0 %
CPI less food & energy - Month/Month +0.2 %

 

Inflation remains well contained.  The message should be that if the Fed does another QE we will have another inflation spike.  Expanded money supply has led neither to substantial increase in economic activity (GDP) nor inflation.