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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for March, 2008

2008-03-28 US Economic Releases

Posted by Sada Mosler on 28th March 2008

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?

Posted in Daily | 2 Comments »

Plosser the hawk

Posted by Sada Mosler on 28th March 2008

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.

Posted in Fed | No Comments »

2008-03-27 US Economic Releases

Posted by Sada Mosler on 27th March 2008

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


Posted in Daily | 4 Comments »

The full employment recession is over

Posted by Sada Mosler on 27th March 2008

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.

Posted in USA | No Comments »

2008-03-27 JN Highlights

Posted by Sada Mosler on 27th March 2008


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


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.

Posted in JN | No Comments »

2008-03-27 UK Highlights

Posted by Sada Mosler on 27th March 2008

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.

Posted in UK | No Comments »

Changing dynamics for the Fed

Posted by Sada Mosler on 26th March 2008

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

Posted in Fed | 1 Comment »

2008-03-26 US Economic Releases

Posted by Sada Mosler on 26th March 2008

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

Posted in Daily | No Comments »

2008-03-25 US Economic Releases

Posted by Sada Mosler on 26th March 2008

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.

Posted in Daily | No Comments »

2008-03-24 US Economic Releases

Posted by Sada Mosler on 24th March 2008

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.

Posted in Daily | No Comments »

FT: Japan’s Financial Services Minister Offers Advice for US

Posted by Sada Mosler on 24th March 2008

US can learn from Japan’s crisis

by Michiyo Nakamoto

(Financial Times) The US should inject public funds into its financial system, which is undergoing a worse crisis than that experienced by Japan during its non-performing loan crisis, according to Japan’s financial services minister.

“It is essential [for the US] to understand that given Japan’s lesson, public fund injection [into the financial sector] is unavoidable,” Yoshimi Watanabe told the Financial Times..

The blind leading the blind.

What turned Japan was 7%+ deficits particularly when you include fx purchases.

Same with the US in 2003.

It’s always fiscal that supports aggregate demand as a point of logic.

Posted in Articles, Japan | No Comments »

2008-03-21: Valance Chart Review

Posted by Sada Mosler on 24th March 2008

Twin themes continue: weakness and higher prices.

A substantial pickup in net government spending beginning late Q2 and continued strong exports should keep GDP in positive territory.

Saudis/Russians continue as swing producers and should continue to hike prices.

Pension funds are also continuing to increase allocations to passive commodities and non-US equities.

2008-03-21 Capacity Utilization, ISM Manufacturing

2008-03-21 Philly Fed, Chicago PMI, ISM Manufacturing

2008-03-21 Philly Fed Backlog, Chicago PMI Backlog, ISM Manufacturing Backlog

All the above charts together indicate a continued slowing of demand that took a blip down for the worse right around year end. There are some signs of a small bounce back, but the general downward bias remains.Rent levels for Q1 suggest real GDP growth is near zero, after growth of 0.6% in Q4.

Also, survey results have been known to reflect current psychology rather than actual results.

2008-03-21 Wholesale Inventories, Business Inventories

Business inventories have been kept reasonably low (not typical of past recessions).

2008-03-21 Retail Sales, Total Vehicle Sales, Redbook Retail Sales

2008-03-21 Personal Spending, Personal Income

Retail sales have been decelerating over the last several months, though still up year over year.Personal income is a bit softer, though still growing and probably not softening as much as aggregate demand has softened and still sufficient to support nominal spending and nominal GDP growth.

2008-03-21 Non-farm Payrolls, Average Hourly Earnings, Average Weekly Hours, Unemployment Rate

2008-03-21 Total Hours Worked, Labor Participation Rate, Duration of Unemployment, Household Job Growth

2008-03-21 Initial & Continuing Claims

The labor data taken together tells the same story of a gradual decrease in demand since the middle of 2006, but not yet at previous recession levels.Also, the Fed expects the labor force participation rate to drift lower over time due to demographics.

This means employment growth is population limited, which limits non-inflationary GDP growth to something near productivity growth.

Also, the Fed considers 4.75% the non inflationary full employment level.

The current 4.8% unemployment rate is therefore very close to what the Fed considers to be full-employment.

2008-03-21 Durable Goods

These look reasonably good, especially considering manufacturing has been in decline for a long time.Exports have been picking up the slack in demand from weak housing and weak consumer spending.

2008-03-21 NAHB, Conference Board Homebuying Intentions

2008-03-21 Housing Starts, Building Starts, Housing Affordability

2008-03-21 MBA Mortgage Applications, OFHEO Home Prices

Housing has been the largest drag on GDP, subtracting about 1% for the last several quarters.Should it bottom at these historically very low levels it will stop subtracting from demand and begin to make a positive contribution.

2008-03-21 Fiscal Balance, Government Public Debt, Government Spending, Government Revenue

I expect net government spending to contribute perhaps an additional 2% to GDP vs 2007. The fiscal package will add about 1%, and it looks like 2007 spending may have been moved forward to 2008 as forecast increases in the deficit project additional net spending of 1%.

2008-03-21 Current Account Balance

2008-03-21 Trade Weighted Dollar

Exports have picked up much of the slack from housing and consumer spending, and look to be further accelerating as non-residents continue to desire to reduce their accumulation of USD financial assets.

2008-03-21 CPI, Core CPI

2008-03-21 PPI, Core PPI, Import Prices, Import Prices ex. Petro

2008-03-21 Export Prices, CRB Index, U. of Mich

2008-03-21 Empire Prices, Philly Fed Prices

All this is sending prices up to rates not seen since the great inflation of the 1970’s, especially when taking into consideration the changes to measurement of the CPI and other indexes.

2008-03-21 ABC

Confidence remains at the lows with a small blip up coinciding with slightly less bearish reporting from CNBC.

2008-03-21 Fed Funds Rate, 30Y Fixed Mortgage

2008-03-21 10Y Tips, Ratio of 10Y to 3M

Even as the Fed cuts the Fed Funds rate, mortgage rates remain unchanged, and the yield curve steepens, as markets anticipate higher rates from the Fed down the road when they expect the Fed to turn to fighting inflation.The lower tips rates indicate markets expect the Fed to keep relatively low real rates for quite a while, even when fighting inflation.

Posted in USA | No Comments »

2008-03-20 US Economic Releases

Posted by Sada Mosler on 20th March 2008

2008-03-20 Initial Jobless Claims

Initial Jobless Claims (Mar 15)

Survey 360K
Actual 378K
Prior 353K
Revised 356K

This has been trending higher but still not at recession levels.

(This series is not population adjusted so an upward drift over time is neutral.)

The American Axle strike also had some impact that will be reversed.

2008-03-0 Continuing Claims

Continuing Claims (Mar 8)

Survey 2840K
Actual 2865K
Prior 2835K
Revised 2833K

This series is also not at recession levels but is a lagging indicator.

It shows the job situation has been weakening since Q3.

This is what export economies tend to look like – labor markets always have a bit of slack, and domestic consumption is relatively low as the population works, gets paid, and can’t afford to consume its own output domestically, with the balance getting exported.

And GDP muddles through.

2008-03-20 Philadelphia Fed.

Philadelphia Fed. (Mar)

Survey -19.0
Actual -17.4
Prior -24.0
Revised n/a

2008-03-20 Philadelphia Fed. TABLE

Philadelphia Fed. TABLE

Better than forecast, some improvement, but still negative numbers.

For another rate cut, numbers have to come in worse than forecast.

Prices show continuing upward pressures. Fed needs these to level off.

Karim Basta:

  • Headline stays very weak at -17.4 (from -24)
  • Prices paid rises from 46.6 to 54.4 but Prices received drops from 24.3 to 21.2 (margin squeeze)
  • Employment drops from +2.5 to -4.7; emerging consensus of -50k drop in March payrolls
  • Workweek drops from -3.9 to -10
  • Special survey question on Q2 growth expectations: 0%

2008-03-20 Leading Indicators

Leading Indicators (Feb)

Survey -0.3%
Actual -0.3%
Prior -0.1%
Revised -0.4%

As expected, continuing weakness.

Stock market still the most reliable leading indicator.

Posted in Daily | No Comments »

Re: Credit recap

Posted by Sada Mosler on 20th March 2008

(an interoffice email)

>    On Thu, Mar 20, 2008 at 8:55 AM, John wrote:
>    The other thing about the IG widening is that the financial mess
>    has an outsized impact on the widening- so if you think we can
>    see the end of the tunnel on that, then IG likely to tighten.

I see the macro economy stabilizing and modest gdp growth returning as per previous consensus forecasts.

net govt spending increasing-

fiscal package

07 spending was moved forward to 08

total demand increase maybe 2% of gdp

foreign sector reducing the rate of accumulation of $US financial assets

US exports booming- up 16% + last month

trade gap still 58 billion, down from 70 billion, so the accumulation has gone down with rising exports, but there could be a long way to go

total net demand increase maybe 2% for 08

Pension fund ‘remonetizing’ by allocating to passive commodities could add another 1/2% to agg demand.

Total add to agg demand from those two sources are 4% of gdp. this should be plenty to support gdp at modest positive levels, and potentially a lot more.

Corporate earnings and cash flows still high, ex financial writeoffs.

Housing near 0 in my estimation, with no where to go but sideways or, more likely, up.

Actual quantities of physical housing inventories are down from the highs.

The govt. will ensure the agencies originate, hold, buy all available paper and support new lending to qualified buyers.

Employment is holding up pretty well. Unemployment history:

Nov: 4.7

Dec 5.0

jan 4.9

feb 4.8

Yes, it could move up a few tenths and be deemed a ‘disaster’ but it’s not the 1930′s 15% level, or the double digit levels of the 70′s, or 6% + seen in the 90′s

Over 30% of workers are paid directly or indirectly by gov and get headline cpi annual increases +.

Add pensioners and probably over half of income or more doesn’t ever go down. So the other half has to drop a lot just for the total to get to 0 nominal growth.

Same with consumer spending.

A negative gdp is likely to be a combination of rising nominal gdp but a higher deflator.

These are all minority positions. Psychology can’t get any worse- another bottoming condition.

I also see prices continuing to rise.

Saudis are price setter and it will take a swing of at least 5 million bpd of net world supply to dislodge them.

Posted in Email | 3 Comments »

2008-03-19 US Economic Releases

Posted by Sada Mosler on 19th March 2008

2008-03-19 MBAVPRCH Index

MBAVPRCH Index (Mar 14)

Survey n/a
Actual 365.0
Prior 368.8
Revised n/a

Leveling off at 2003 levels, which corresponds to housing starts well over 1.5 million.

Also, this is a seasonally adjusted number, so as it stays level at current levels it corresponds to the typical spring increases in sales.

Still way above recession levels of the past, and mtg bankers have lost market share to the banks as well.

2008-03-19 MBAVREFI Index

MBAVREFI Index (Mar 14)

Survey n/a
Actual 2335.0
Prior 2448.2
Revised n/a

Refi activity remains moderate.

Posted in Daily | 5 Comments »


Posted by Sada Mosler on 18th March 2008

Karim Basta:

  1. Further cut to gwth outlook
  2. Financial conditions tighter and housing getting worse
  3. Inflation receives greater concern than prior statement
  4. Conclusion: downside risks predominant and ‘timely’ means another intermeeting cut on the table.

Agreed, further comments below:

Release Date: March 18, 2008

For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Could have been 100 as anticipated by the markets. Fed shaded its cut to the low side of the priced in expectations.

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed

Implies there is still some growth, not negative yet.

and labor markets have softened.

Looking unrevised February payroll number, not the lower unemployment rate. In January they looked at the higher unemployment rate. Unemployment has subsequently gone from 5.0% to 4.9% to 4.8% (rounded).

Financial markets remain under considerable stress,

They went a long way to relieve stress over the weekend.

and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Housing starts were revised up, and other indicators indicate it may have bottomed.

Inflation has been elevated, and some indicators of inflation expectations have risen.

This was noted in several Fed intermeeting speeches.

The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.

They continue to make this projection even after being completely wrong for many meetings.

Still, uncertainty about the inflation outlook has increased.

That’s why – their forecasts have proven unreliable, and crude/food continues to rise as the USD continues to fall.

It will be necessary to continue to monitor inflation developments carefully.

Only ‘monitor’? No action planned.

Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Intermeeting action is on the table, for both growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

Wonder how much less aggressive?

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.

Posted in Fed, Interest Rates | 2 Comments »

Watch Here: Discussion of March 18th, 2008 Fed meeting

Posted by Sada Mosler on 18th March 2008

Discussion of March 18th FOMC meeting

Tuesday, March 18th, 2008 @ 11AM EST

The audio doesn’t work in the beginning – equipment upgrade next time.

Posted in Video | 2 Comments »

2008-03-18 US Economic Releases

Posted by Sada Mosler on 18th March 2008

2008-03-18 Producer Price Index MoM

Producer Price Index MoM (Feb)

Survey 0.4%
Actual 0.3%
Prior 1.0%
Revised n/a

2008-03-18 PPI Ex Food & Energy MoM

PPI Ex Food & Energy MoM (Feb)

Survey 0.2%
Actual 0.5%
Prior 0.4%
Revised n/a

2008-03-18 Producer Price Index YoY

Producer Price Index YoY (Feb)

Survey 6.8%
Actual 6.4%
Prior 7.4%
Revised n/a

2008-03-18 PPI Ex Food & Energy YoY

PPI Ex Food & Energy YoY (Feb)

Survey 2.1%
Actual 2.4%
Prior 2.3%
Revised n/a

Troubling as the Fed has indicated it’s getting passed through to core CPI measures.

2008-03-18 Housing Starts

Housing Starts (Feb)

Survey 995K
Actual 1065K
Prior 1012K
Revised 1071K

More indications of a possible bottom in housing, meaning it won’t be subtracting as much from GDP for the rest of the year.

Karim Basta:

Housing starts fall 0.6% in Feb, but January revised higher by 5.8%.

One notable trend is single vs multi-family starts. The latter has now risen for 3 straight months, whereas the former continues to decline across most regions. A couple explanations out there-foreclosures, real income weakness driving trend towards apartments/condos vs homes.

Permits fall another 7.8%; suggesting more declines in housing contribution to GDP going forward.

Margin squeeze evident in PPI as headline rises 0.3% and core by 0.5%.

2008-03-18 Building Permits

Building Permits (Feb)

Survey 1020K
Actual 978K
Prior 1048K
Revised 1061K

Looking down, but the prior revision might be more relevant.

2008-03-18 FOMC Rate Decision

FOMC Rate Decision (Mar 18)

Survey 2.25%
Actual 2.25%
Prior 3.00%
Revised n/a

2008-03-18 ABC Consumer Confidence

ABC Consumer Confidence (Mar 16)

Survey n/a
Actual -31
Prior -30
Revised n/a

Yet another chart that may have bottomed?

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Live Video: Tuesday, March 18th @ 11AM EST!

Posted by Sada Mosler on 17th March 2008

Discussion of March 18th FOMC meeting.

Tuesday, March 18th, 2008 @ 11AM EST
Discussion of March 17th, 2008 Fed meeting

If you have an advanced questions, please email or leave a comment; otherwise, call (339) 368-6098 during the video conference.

Posted in Fed, Interest Rates, Video | No Comments »

2008-03-17 US Economic Releases

Posted by Sada Mosler on 17th March 2008

2008-03-17 NAHB Housing Market Index

NAHB Housing Market Index (Mar)

Survey 20
Actual 20
Prior 20
Revised n/a

Still looking like housing may have bottomed October/November, as previously discussed.

2008-03-17 Current Account Balance

Current Account Balance (4Q)

Survey -$183.8B
Actual -$172.9B
Prior -$178.5B
Revised -$177.4B

The dollar flight picks up steam.

2008-03-17 Empire Manufacturing

Empire Manufacturing (Mar)

Survey -7.4
Actual -22.2
Prior -11.7
Revised n/a

2008-03-17 Empire Manufacturing TABLE (1)

2008-03-17 Empire Manufacturing TABLE (2)

Empire Manufacturing TABLE

The chart looks far worse than the table, which actually looks somewhat constructive.

And prices up (surprise!).

2008-03-17 Industrial Production

Industrial Production (Feb)

Survey -0.1%
Actual -0.5%
Prior 0.1%
Revised 0.1%

Q1 looking weak as advertised.

2008-03-17 Capacity Utilization

Capacity Utilization (Feb)

Survey 81.2%
Actual 80.9%
Prior 81.5%
Revised n/a

Some slack forming but not much.

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