(from Patrick Doyle)

Below is a table of the results of the last 3 TAF auctions

Of note is the spread to OIS (FF’s) which is inside the historic LIBOR / OIS spread. There were less participants in this round as well

This all bodes well and is showing the easing of pressure in the funding markets.

	Jan. 15 2008	Dec. 21 2007	Dec. 19 2007
Stop-out rate:	3.95%	4.67%	4.65%
Total propositions submitted:	$55.526 Bil.	$57.664 Bil.	$61.553 Bil.
Total propositions accepted:	$30.000 Bil.	$20.000 Bil.	$20.000 Bil.
Bid/cover ratio:	1.85	2.88	3.08
Number of bidders:	56	73	93
Term	28-day loan	35-day loan	28-day loan
Settlement Date	Jan. 17, 2008	Dec. 27, 2007	Dec. 20, 2007
Maturity Date	Feb. 14, 2008	Jan. 31, 2008	Jan. 17, 2008

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Producer Price Index MoM (Dec)

Survey	0.2%
Actual	-0.1%
Prior	3.2%
Revised	n/a

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PPI Ex Food & Energy MoM (Dec)

Survey	0.2%
Actual	0.2%
Prior	0.4%
Revised	n/a

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Producer Price Index YoY (Dec)

Survey	7.1%
Actual	6.3%
Prior	7.2%
Revised	n/a

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PPI Ex Food & Energy YoY (Dec)

Survey	2.0%
Actual	2.0%
Prior	2.0%
Revised	n/a

Inflation pressures remain alarming.

2007 highest inflation since the early 1980s, when inflation was on the way down.

Last hit this number on the way up was in the 1970s.

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Advance Retail Sales (Dec)

Survey	0.0%
Actual	-0.4%
Prior	1.2%
Revised	1.0%

Previous month still very high, two month average looks OK.

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Retail Sales YoY % Change

Year over year numbers still modestly moving back up.

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Retail Sales Less Autos (Dec)

Survey	-0.1%
Actual	-0.4%
Prior	1.8%
Revised	1.7%

Same as above.

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Empire Manufacturing (Jan)

Survey	10.0
Actual	9.0
Prior	10.3
Revised	9.8

Empire Manufacturing TABLE

A close look at the table shows prices still very strong.

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Business Inventories (Nov)

Survey	0.4%
Actual
Prior	0.1%
Revised

Chart looks OK - no excessive build.

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Data not in, until 5PM EST..

ABC Consumer Confidence (Jan 13)

Survey	-21
Actual
Prior	-20
Revised

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(an interoffice email)

On Jan 15, 2008 9:23 AM, Karim Basta wrote:
>
>
>
> US Daily Comment – Tax Receipts: How Good an Indicator?
> Summary: Although Treasury income tax receipts are a popular measure of
> economic activity, they are generally too noisy and susceptible to calendar
> distortions to be very informative. Indeed, the recent strength in
> withholding tax receipts in the fourth quarter (+10.5% year-on-year) seems
> to be largely due to an extra Monday during the quarter. Adjusting for this
> factor, year-on-year growth in withholdings was about 6% year-on-year,
> roughly 3 percentage points below the 2006-2007 average and broadly
> consistent with the data on employment and earnings. In contrast, state
> sales tax receipts are a quite useful measure. While less timely, they are
> also less noisy than income tax receipts and provide information on one
> issue that is poorly covered in the standard economic data, namely
> consumption at a regional level. Recent trends in sales tax receipts are
> consistent with a more substantial consumption slowdown than suggested by
> the national consumption and retail sales data, especially in states hard
> hit by the housing crisis.

Thanks!

Agreed.

Fed tax receipts have been slowing for a year or so, but no sudden drop at year end, just a continuation of the general downslope. Haven’t seen the sales tax graph, but should also reflect gradual fall off in demand.

Twin themes remain: weakness and higher prices.

PPI finished year with largest gain since coming off higher numbers in the early 80’s, and probably 10 years before that when they hit 6% + on the way to higher levels.

Demand is definitely on the weak side, but strong enough to generate alarming price increases in food/fuel/imports/exports.

warren

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EU Headlines:

Same twin themes as the US, weakness and inflation:

Spain Core Inflation Rises for Fifth Month on Food

German Economic Growth Slowed as Sales Tax Increased

German Investor Confidence Dropped to 15-Year Low

French inflation at highest level since 2004

by Ben Sills
(Bloomberg) In France, the euro region’s second-biggest economy, inflation accelerated to 2.8 percent in December, the fastest pace in almost four years. Inflation held at 3.1 percent for the whole of the single currency area, matching the fastest pace since the euro was introduced.

Controlling Prices

The European Central Bank is “prepared to act preemptively so that second-round effects and risks to price stability do not materialize,” President Jean-Claude Trichet said at a press conference in Frankfurt Jan. 10.

By Christian Vits and Gabi Thesing
(Bloomberg) ECB policy makers, including President Jean-Claude Trichet and the Bundesbank’s Axel Weber, have threatened to raise interest rates if the increase in inflation leads to so-called second-round effects where workers demand higher wages to offset increased living costs.

European Bonds Gain for Second Day as German Confidence Slumps

anticipating ECB may cut due to weakness like the Fed

Prodi Government Names Antonio Lirosi as First `Inflation Czar’

Germany Says ECB’s Independence Won’t Be Questioned

They support the anti-inflation bias.

Portuguese Inflation Slowed to 2.7% in December on Transport

still high

A few highlights from Middle/Eastern Europe:

Romania Will Cut Budget Gap More to Fight Inflation

Fiscal tightening in general - slowing demand in the Eurozone.

Czech Producer Prices Unexpectedly Declined 0.1% in December

Still high and rising.

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