GDP

 

- 4thQ2011 GDP was revised upward to +3.0%

 

The problem is that almost 2/3'rds (1.94% of those 3.0%) was in wholesale inventory growth and that will be given back because consumer spending did not keep pace.

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=22126

 

MBA Mortgage Applications

 

Composite Index - Week/Week -0.3%
Purchase Index - Week/Week +8.2%
Refinance Index - Week/Week -2.2%

 

Purchases may have been bumped by the 3-day Presidents Day weekend.

 

Chicago PMI (February 2012)

 

This is another measure of wholesale activity.

 

Business Barometer Index - Level  64.0. Previous was 60.2

Graph here: http://mam.econoday.com/showimage.asp?imageid=22129

Housing

 

Case-Schiller Home Price Index

 

20-city, Seasonally Adjusted - Month/Month  -0.5%. Previous was -0.7%
20-city, Not Seasonally Adjusted - Month/Month -1.1%. Previous was -1.3%
20-city, Not Seasonally Adjusted - Year/Year -4.0 %

 

Housing Prices are falling.  The supply of foreclosures was slowed by lawsuits over sloppy work on the part of note holders but will have the effect of drawing out the time it takes the housing market to recover.

 

Durable Goods Orders (January 2012)

 

New Orders - Month/Month -4.0%
New Orders - Year/Year 8.1%
Ex-transportation - Month/Month -3.2%
Ex-transportation - Year/Year  5.7%

 

Durables corrected downward offsetting the too optimistic buildup in wholesale.  Consumer spending has not kept pace and this necessitates a slowing in wholesale.  This will show up in the "I" component of GDP where GDP = C(onsumer Spending) + (G)overnment Spending) + I(nvestments) +(e(X)ports-i(M)ports)

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=22118

 

Consumer Confidence (February 2012)

 

Consumer Confidence - a survey measuring predisposition to spend and a leading indicator of consumer spending - was 70.8 up sharply from 61.1 in January.  People are more confident about the jobs market.  We shall see on March 9 what BLS says.

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22122

 

Retail

 

ISCS/Goldman

 

Store Sales - Week/Week -1.0%
Store Sales - Year/Year 2.7%

 

Redbook

 

Store Sales Year/Year +3.4%.

 

Redbook is calculated differently from ISCS.

 

All in all a strange day for fundamentals.  Consumers say they are more confident but they are not buying houses or spending cash at chain stores.  The sharp increase in gas prices will affect discretionary consumer spending.

 

Greek Default?

 

We are now starting the process of determining whether or not Greece is in default and if CDS (Credit Default Swaps) will have to be paid.  U.S. banks hold the risk on a significant amount of Greek CDS.

Pending Home Sales Index

 

- Index for January 2012 was 97.0.  Previous was 96.6.  That 96.6 was down 3.5.  NAR revised the previous to 95.1 and headlines this as a 2% gain.  This must be part of "the new math."

 

This is an NAR constructed index intended to be a leading indicator of housing activity.

 

Dallas Fed Manufacturing Survey

 

 

The Dallas Fed index of Texas manufacturing increased in February.  The Production Index rise from 5.8 to 11.2. New orders were up but at a slower rate of increase.  Shipments were down and Capacity Utilization was up.

 

The general business index was 17.8 up from 15.3 in January.

 

The report is here http://dallasfed.org/data/outlook/

 

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.