2008-03-28 US Economic Releases

2008-03-28 Personal Income

Personal Income (Feb)

Survey 0.3%
Actual 0.5%
Prior 0.3%
Revised n/a

This is what supports the economy longer term and cushions downturns.


2008-03-28 Personal Spending

Personal Spending (Feb)

Survey 0.1%
Actual 0.1%
Prior 0.4%
Revised n/a

Down some, but with personal income remaining firm spending is sustained over the medium term.


2008-03-28 PCE Deflator YoY

PCE Deflator YoY (Feb)

Survey 3.5%
Actual 3.4%
Prior 3.7%
Revised 3.5%

Not good, and more price increases are in the pipeline.


2008-03-28 PCE Core YoY

PCE Core YoY (Feb)

Survey 2.1%
Actual 2.0%
Prior 2.2%
Revised 2.0%

Back to the high end of the Fed’s comfort zone, but with higher prices in the pipeline, it’s looking to move higher.


2008-03-28 U. of Michigan Confidence

U. of Michigan Confidence (Mar F)

Survey 70.0
Actual 69.5
Prior 70.5
Revised n/a

2008-03-28 U. of Michigan Confidence TABLE

U. of Michigan Confidence TABLE

2008-03-28 Inflation Expectations

Inflation Expectations

Current conditions up, expectations down. Sound familiar?

Plosser the hawk

Plosser, Dissenting Fed Voter, Says Price Stability Is Priority

By John Brinsley
March 28 (Bloomberg) — Federal Reserve Bank of Philadelphia President Charles Plosser, who voted against this month’s interest-rate cut, said keeping inflation in check is the “most effective” way of ensuring economic growth and job creation.

“Price stability is not only a worthwhile objective in its own right,” Plosser said in the text of a speech at a conference in Cape Town today. “It is also the most effective way monetary policy can contribute to economic conditions that foster the Federal Reserve’s other two objectives: maximum employment and moderate long-term interest rates.”

Plosser said today that keeping prices steady has to be the primary obligation of the central bank in order to ensure the economy runs as efficiently as possible. Price stability helps an economy’s ability “to achieve its maximum potential growth rate,” he said.

This is the mainstream macro economic position. (Not mine!)

It also addresses the dual mandate in the only logical manner the mainstream theory can address:

Low and stable inflation is the necessary condition for optimal growth and employment.

And they have volumes of maths to back it up.

In an effort to fend off a U.S. recession, Fed Chairman Ben S. Bernanke and his colleagues have slashed the federal funds rate by 2 percentage points this year, the most aggressive easing in two decades, even as surging oil and food costs threaten to stoke inflation. Plosser and Dallas Fed President Richard Fisher opposed the March 18 decision to cut the Fed’s main lending rate by three-quarters of a percentage point to 2.25 percent.

“Stable prices also make it easier for households and businesses to make long-term plans and long-term commitments, since they will know what the long-term value of their money will be,” Plosser said. “Price stability helps a market economy allocate resources efficiently and operate at its peak level of productivity.”

The Fed has lowered its benchmark rate six times in as many months since the collapse of U.S. subprime mortgages started to infect markets around the world in August last year. The world’s biggest financial companies have posted at least $195 billion in writedowns and credit losses tied to American mortgage markets.

“There seems to be a view that monetary policy is the solution to most, if not all, economic ills,” Plosser said. “Not only is this not true, it is a dangerous misconception and runs the risk of setting up expectations that monetary policy can achieve objectives it cannot attain.”

Public misconceptions over what central banks can and cannot do have “risen considerably over the years.” Central banks must therefore effectively communicate their goals and limitations, Plosser said.

The mainstream position is that rather than add to demand to address near term weakness and risk elevating inflation expectations, the government should instead let the output gap (unemployment and excess capacity in general) rise and bring inflation down.

If it does add to demand in an attempt to keep the output gap low and inflation elevates, a much larger output gap will soon be required to reign in the accelerating inflation problem.

The dissenting votes reflect this mainstream view that appears to be playing out in the least desirable way.

2008-03-27 US Economic Releases

2008-03-27 GDP Annualized

GDP Annualized (4Q F)

Survey 0.6%
Actual 0.6%
Prior 0.6%
Revised n/a

2008-03-27 Personal Consumption

Personal Consumption (4Q F)

Survey 1.9%
Actual 2.3%
Prior 1.9%
Revised n/a

Revised up to a very respectable number. And income remains positive, and employment is at high levels.


2008-03-27 GDP Price Index

GDP Price Index (4Q F)

Survey 2.7%
Actual 2.4%
Prior 2.7%
Revised n/a

A bit better than previously reported, but prices have subsequently gone much higher.


2008-03-27 Core PCE QoQ

Core PCE QoQ (4Q F)

Survey 2.7%
Actual 2.5%
Prior 2.7%
Revised n/a

The Fed is more concerned about this and the evidence food and energy is getting passed through from headline to core measures.


2008-03-27 Initial Jobless Claims since 1998

Initial Jobless Claims (Mar 22)

Survey 370K
Actual 366K
Prior 378K
Revised 375K

2008-03-27 Continuing Claims since 1998

Continuing Claims (Mar 15)

Survey 2885K
Actual 2845K
Prior 2865K
Revised 2850K

Best guess:

The jobless recovery that morphed into the full employment recession now appears to be over with today’s jobless claims numbers leaning in the same direction as other data released earlier this week.

That does not mean the issues with the financial sector are all behind us – far from it.

It does mean the real economy has figured out how to move on with what’s left of the financial sector.


2008-03-27 Help Wanted Index

Help Wanted Index (Feb)

Survey 20
Actual 21
Prior 21
Revised 22

[comments]

The full employment recession is over

Best guess:

The jobless recovery that morphed into the full employment recession now appears to be over with today’s jobless claims numbers leaning in the same direction as other data released earlier this week.

That does not mean the issues with the financial sector are all behind us – far from it.

It does mean the real economy has figured out how to move on with what’s left of the financial sector.

2008-03-27 JN Highlights

Highlights:

Fukuda Offers To Free Up Road Revenues For General Spending From FY09

Adds to aggregate demand.

MOF Frets Over Yen, But No Threat Of Action

Don’t want Paulson to call them a currency manipulator.

Suda: Natural For BOJ To Aim For Rate Hike

They see inflation heating up over time.

Some Gas Stations Raise Prices Ahead Of Expiring Surcharge
Toyota, Nissan To Raise Entry-Level Pay For College Graduates
Bonds: End Up On Weak Stocks: CPI, Tankan Eyed

Article:

Bonds: End Up On Weak Stocks: CPI, Tankan Eyed

TOKYO (Dow Jones)–Japanese government bonds ended higher Thursday due to weakness in Tokyo stocks but the upside was limited ahead of the fiscal-year end and major domestic events.

Market participants are now waiting for domestic economic data, including the consumer price index due out Friday, and the Bank of Japan’s quarterly tankan survey on April 1.

“If the CPI figure comes out better than market expectations (and tops 1%), BOJ rate cut views may slightly recede,” said Naomi Hasegawa, senior strategist at Mitsubishi UFJ Securities.

Note the rhetoric that states higher inflation is ‘better’ !!!

I still have a TIBOR short a year out as a bet they don’t cut as much as is priced in.

Japan’s nationwide core CPI, excluding fresh food, is expected to have risen 0.9% on year in February, according to economists surveyed by Dow Jones and Nikkei. The index climbed 0.8% in January. The five-year yield dropped 3.0 basis points to 0.725%. Yields on 10-year and 20-year JGBs were both down 1.0 basis point at 1.265% and 2.010% respectively.

2008-03-27 UK Highlights

Things may have started turning up in March in the UK as well as the US and the eurozone.

U.K. Business Spending Reaches Highest Since 2005 (Bloomberg) – U.K. business investment rose to the most in 2 1/2 years in the fourth quarter, led by manufacturing companies. Investment in equipment, vehicles and buildings rose 1.8 % from the three months through September, the Office for National Statistics said today in London. Spending rose 5.3 % from a year earlier to 36.7 bln pounds, the most since the second quarter of 2005. The report suggests manufacturers, which account for 15 % of the economy, spent on their businesses after profiting from a weaker pound and reaching the strongest level of factory production since 2001 last year.

U.K. Sales Index Rises for First Time in Four Months, CBI Says (Bloomberg) – An index of U.K. retail sales rose for the first time in four months in March as shoppers spent more on shoes and groceries, the Confederation of British Industry said. The survey of 152 retailers showed 36 % sold more goods than a year earlier and 35 % sold fewer, the biggest U.K. business lobby said today. The net rounded balance of 1 %age point was higher than the minus 3 from last month.

Changing dynamics for the Fed

Cutting 75 basis points rather than the expected 100 basis points gave the Fed positive near term reinforcement from market participants:

  • Dollar went up
  • Food/fuel/commodities went down
  • Stocks did ok, including housing companies
  • Credit did ok

But it’s going to look to the Fed a bit like taking medicine: initial small doses have the desired effect, then things settle back, and it takes ever larger doses to keep moving the needle.

So now crude/food is moving back up, the USD is moving back down, stocks are doing ok, exports are booming, and the fiscal package is about to kick in.

For the Fed to keep moving the needle away from inflation it’s going to keep needing to not give markets all they are anticipating.

So with a 25 cut anticipated, they will realize they need to do no cut for a positive inflation response, and with no cut anticipated they need to hike, etc.

Credit markets will quickly get ahead of this and begin anticipating hikes.

The irony is higher rates will help support demand via the interest income channel.

And higher rates will support price increases via the cost channel.

Demand is being supported by increasing net fed spending and rising exports due to the reduced desires of non-residents to accumulate USD financial assets.

They no longer want to accumulate a net $60 billion a month of US financial assets (negative trade gap) due to the big 4 screaming fire in a crowded theater of previously content patrons:

  1. Paulsen calling CBs that buy USD currency manipulators
  2. Bush making it politically impossible for Muslim nations to further accumulate USD reserves
  3. Bernanke giving inflation a back seat to ‘market functioning’ via deep rate cuts into a triple supply shock
  4. Pension funds diversifying to passive commodity and non US equity strategies

2008-03-26 US Economic Releases

2008-03-26 MBAVPRCH Index

MBAVPRCH Index (Mar 21)

Survey n/a
Actual 403.7
Prior 365.0
Revised n/a

More evidence of a turn in housing:

Mortgage applications spike after Fed action

(Reuters) The Mortgage Bankers Association’s mortgage applications index jumped 48.1 percent to a seasonally adjusted 965.9 in the week ended March 21, its highest level since early February.

An 82 percent surge in refinancing applications overshadowed a 10.6 percent rise in home purchase loan requests, lifting total applications from the previous week, when home loan demand sank to the lowest since end-December.

On a four-week moving average, which adjusts for volatility, total applications rose 11.3 percent, while the purchase index gained 3.1 percent and the refinancing index climbed 18.3 percent.

Crude oil creeping back up. One thing the Fed knows for sure is demand is strong enough to support food and energy price increases at dangerous levels, and they have also commented that they are being passed through to core measures.


2008-03-26 MBAVREFI Index

MBAVREFI Index (Mar 21)

Survey n/a
Actual 4255.1
Prior 2335.2
Revised n/a

Another good sign for ‘market functioning’.


2008-03-26 Durable Goods Orders

Durable Goods Orders (Feb)

Survey 0.7%
Actual -1.7%
Prior -5.3%
Revised -4.7%

2008-03-26 Durable Goods YoY

Durable Goods YoY (Feb)

Survey n/a
Actual 4.3%
Prior 4.2%
Revised n/a

Looking weak month over month, but ok year over year.

Tax advantages that begin in May could be delaying reported investments.


2008-03-26 Durables Ex Transportation

Durables Ex Transportation (Feb)

Survey -0.3%
Actual -2.6%
Prior -1.6%
Revised -1.0%

2008-03-26 New Home Sales

New Home Sales (Feb)

Survey 578K
Actual 590K
Prior 588K
Revised 601K

Looks like a possible bottom. Last month revised up and this month’s number a bit higher than last month’s original reported number.


2008-03-26 New Home Sales MoM

New Home Sales MoM (Feb)

Survey -1.7%
Actual -1.8%
Prior -2.8%
Revised -1.6%

Not strong but, as above, not a continuing collapse

2008-03-25 US Economic Releases

2008-03-25 S&P-CS Home Price Index

S&P-CS Home Price Index (Jan)

Survey n/a
Actual 180.7
Prior 184.9
Revised 185.0

2008-03-25 S&P-CS Composite 20 YoY

S&P-CS Composite-20 YoY (Jan)

Survey -10.5%
Actual -10.7%
Prior -9.1%
Revised -9.0%

Still falling.  January/Winter numbers.  Lagging indicators.

Just kicked in in March.


2008-03-25 Consumer Confidence

Consumer Confidence (Mar)

Survey 73.5
Actual 64.5
Prior 75.0
Revised 76.4

Down sharply, a lagging indicator, and subject to sharp reversals.


2008-03-25 House Price Index MoM

House Price Index MoM (Jan)

Survey n/a
Actual -1.1%
Prior -0.2%
Revised -0.6%

Was still heading south in January.


2008-03-25 Richmond Fed Manufacturing Index

Richmond Fed Manufacturing Index (Mar)

Survey -5
Actual 6
Prior -5
Revised n/a

Quite a few March numbers are looking up.


2008-03-25 ABC Consumer Confidence

ABC Consumer Confidence (Mar 23)

Survey n/a
Actual -31
Prior -31
Revised n/a

Another March number that shows some signs of life after a rough winter.

2008-03-24 US Economic Releases

2008-03-24 Existing Home Sales

Existing Home Sales (Feb)

Survey 4.85M
Actual 5.03M
Prior 4.89M
Revised n/a

2008-03-24 Exisiting Home Sales MoM

Existing Home Sales MoM (Feb)

Survey -0.8%
Actual 2.9%
Prior -0.4%
Revised n/a

2008-03-24 Existing Home Sales Inventory

Existing Home Sales Inventory (Feb)

Survey n/a
Actual 4.034
Prior 4.160
Revised n/a

Better than expected.

Inventories coming down.

Median price down.

Expanded agency limits for conforming mortgages begin in May, which may be delaying closings for higher priced homes.

An upturn in housing can put the Fed on hold and support higher Q2 GDP growth.