2008-01-31 US Economic Releases

2008-01-31 Personal Income

Personal Income (Dec)

Survey 0.4%
Actual 0.5%
Prior 0.4%
Revised n/a

2008-01-31 Personal Income TABLE

Personal Income TABLE

A bit better than expected, holding up reasonably well, as declining interest rates reduce interest income component.


2008-01-31 Personal Spending

Personal Spending (Dec)

Survey 0.1%
Actual 0.2%
Prior 1.1%
Revised 1.0%

2008-01-31 Personal Spending TABLE(1)

2008-01-31 Personal Spending TABLE(2)

Personal Spending TABLE

OK number after last month’s large increase.

Also holding up reasonably well, but trending modestly downward.


2008-01-31 PCE Deflator YoY

PCE Deflator YoY (Dec)

Survey 3.5%
Actual 3.5%
Prior 3.6%
Revised n/a

Too high for the Fed, but hopefully it will come down to core.


small-2008-01-31-pce-core-mom.gif

PCE Core MoM (Dec)

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

Actual was 0.23%


2008-01-31 PCE Core YoY

PCE Core YoY (Dec)

Survey 2.2%
Actual 2.2%
Prior 2.2%
Revised n/a

Fed OK with this number and should be OK next month as January 2007 was up 0.2%. After that, the 2007 numbers are 0.1%’s for a while; so, there’s a better chance of YoY increases after that.


2008-01-31 Initial Jobless Claims

Initial Jobless Claims (Jan 26)

Survey 319K
Actual 375K
Prior 301K
Revised 306K

Big jump up as expected by Karim.

4 week average about 325,000 likely return to pre-January trend of about 350,000 (See Karim’s report).

Not yet the stuff of recession.


2008-01-31 Continuing Claims

Continuing Claims (Jan 19)

Survey 2685K
Actual 2716K
Prior 2672K
Revised 2669K

Moved back up some.

Also not yet the stuff of recession.


2008-01-31 Employment Cost Index

Employment Cost Index (4Q)

Survey 0.8%
Actual 0.8%
Prior 0.8%
Revised n/a

2008-01-31 Employment Cost Index YoY

Employment Cost Index YoY

Survey n/a
Actual 3.3%
Prior 3.3%
Revised n/a

As expected, Fed is OK with this, but may be giving it too much weight, as it may be the last inflation indicator to move in this cycle.


2008-01-31 Chicago Purchasing Manager

Chicago Purchasing Manager (Jan)

Survey 52.0
Actual 51.5
Prior 56.6
Revised 56.4

Still above 50, not the stuff of recession yet.


2008-01-31 Help Wanted Index

Help Wanted Index (Dec)

Survey 20
Actual 22
Prior 21
Revised n/a

Very small uptick from a very low level.


2008-01-31 NAPM-Milwaukee

NAPM-Milwaukee (Jan)

Survey n/a
Actual 58.0
Prior 62.0
Revised n/a

No recession here, yet.


♥

Re: ECB funding Spanish mortgage banking system

(an interoffice email)

Deep,

Interesting!

In the case of a bank failure, Spain still is the entity that would
repay depositors. To get the funds Spain would somehow liquidate the
failed bank. If the loss was large enough so that Spain couldn’t
raise the funds to pay off the depositors (via both liquidating the
bank and attempting to borrow in the credit markets) payment to the
depositors would be delayed until Spain did raise the funds.

The ECB would either return the mtg collateral to Spain for payment,
or, if Spain would not or could not receive the collateral vs payment,
the ECB would liquidate the collateral and hold Spain responsible for
any deficiency balance.

This makes the ECB much like any other depositor, but with collateral
as security.

It does not reduce the risk of loss to bank shareholders should the
mtgs not perform.

It does not remove ultimate liability from Spain.

It does not involve risk to the ECB beyond that of Spain paying for
any deficiency, and presumably the ECB isn’t loaning at 100% of market
value.

It does not create a ‘moral hazard’ issue as bank shareholders and
Spain are still in first loss position for any loan losses.

It does prevent a disruptive ‘fire sale’ from ‘technical volatility’
of forced liquidations.

It does provide bank funding at the ECB’s target rate for interbank
lending, which is what the target is all about, so that seems ok?

I have no problem with institutional structure that doesn’t use the
liability side as a source of ‘market discipline’ and instead uses
capital requirements/ratios/gap rules, etc. and regulates the asset
side as well?

And with the right haircuts and regs funding non bank mtg production
can likewise suit public purpose.

>Spanish banks funding mtgs at the ECB
>
> Shortcut to:
> http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/28/bcnspa
> in128.xml
>
>
>

Claims, ECI

From Karim:

  • True to the past 5yrs pattern, claims seem to be reverting to trend after the first few weeks of January.

Right, good call!

  • IJC climbed from 306k to 375k; the trend before the January drop was around 340-350k; this number was for MLK holiday week, so an adjustment issue here as well; bottom line is I think trend is still around 350k.
  • Continuing claims rose from 2685k to 2716k.
  • ECI (both headline and wage component) up 0.8% q/q

Data below is for Dec, so was largely known in yday’s GDP number.

  • Personal income up 0.5%, with wage and salary component up 0.4%
  • Core PCE up 0.2% m/m (2.2% y/y)

Most meaningful data here was continuing claims (little to no hiring taking place) and ECI (wage gwth still tame).

And Fed still looking at this as an indication of ‘inflation expectations’.


♥

Monoline proposal

Fed by itself or working with AAA counterparty offers to sell supplemental bond insurance to investors. (AFLAC concept)

Maybe charge a point and insure up to a price of maybe 99, or whatever combo works.

Worst case the current insurers are downgraded to AA, so they should still be able to cover losses, so risk is minimal to the new insurer, and fees will likely be profits.

Only investors who care would buy it.

Bonds would remain AAA rated.

The key is the current insurer’s capital is still in first loss position, and the current insurance is probably still money good, or they’d be talking about a downgrade way below AA.

And not all bond holders care about AAA vs AA. Only those who care buy the supplemental insurance.


Poland cutting demand

This has been much the same for new members that previously had higher budget deficits.

It firms the Euro and keeps unemployment higher than otherwise.

[Before the euro, tight fiscal was ‘offset’ by the national CBs bought $ (I call that ‘off balance sheet deficit spending’) which supported employment and net export growth. While exports are a real cost, and this process thereby came at a real cost to the domestic standards of living, it did make the numbers (GDP, employment) look good.]

Poland likely to slash deficit in euro convergence plan

(Thomson Financial) Poland is likely to lower the public sector deficit in its new convergence programme for joining the euro, targetting a cut in its deficit to 1 pct of gross domestic product by 2011, a deputy finance minister said today.

He also said the government would aim to cut the 2009 deficit by several billion zlotys from the 27.1 bln zlotys planned for this year.

“From the convergence programme which should be approved by the government and sent to Brussels, it is possible that in 2008 the general government deficit will be 2.6-2.7 pct (of GDP), and in 2009 2-2.5 pct,” Stanislaw Gomulka, one of Poland’s four deputy finance ministers, said today. “In 2010 it may be around 1.5 pct and in 2011, 1 pct. I think the discussion will concern these levels,” Gomulka told reporters on the sidelines of a conference in Warsaw.

Asked by Thomson Financial News about next year’s deficit, he said: “The government may assume in its work on the 2009 budget, a deficit of several billion zlotys lower than the 27.1 bln zlotys planned for 2008.” The government normally lodges its initial budget assumptions in the middle of year after several months of consultations with other ministries.


♥

Oil comments

Iraqi Oil Minister Sees No Output Change from OPEC

(Reuters) Iraq’s oil minister Hussain al-Shahristani said on Thursday there was no sign of any shortage of oil in international markets and he did not expect OPEC to change its output levels at a meeting this week.

Saudis might like letting prices sag in front of meetings to stave off production increase talk.

“Quite frankly, the data we are looking at do not show any shortage of oil on the market. The prices are not really affected by any fundamental market forces,”

Right, just the Saudis (and probably Russians as well) setting price and letting the quantity they pump adjust, aka acting as swing producer.

Shahristani said ahead of the meeting on Friday of OPEC oil ministers in Vienna.

Twin themes continue – moderating demand and inflation.

So far, the Fed is directing all its efforts to the demand issue, including support for the coming fiscal package.