(an email exchange)
>
> On Thu, Aug 7, 2008 at 7:15 AM, Scott wrote:
>
> crude moves further in backwardation.
>
Right, indicating futures buying subsiding and inventories not above desired levels for commerce.
>
> CL vs brent now 160 over vs 120 under 2 weeks ago!
>
Also indicating any excess inventory is gone, thanks!
Might be near the end of the second Master’s sell off.
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| Survey | 425K |
| Actual | 455K |
| Prior | 448K |
| Revised | n/a |
Karim writes:
| Survey | 3255K |
| Actual | 3311K |
| Prior | 3282K |
| Revised | 3280K |
Karim writes:
Cesar writes:
A year ago we were at 4.7% unemployment rate (7,137 unemployed/ 153,182 labor force)
We are currently at 5.7% unemployment rate (8,784 unemployed/ 154,603 labor force)
Seems nearly the entire jump in unemployment is due to labor force increases.
Total employed is about flat.
In that case, GDP growth is about equal to productivity growth.
Karim writes:
| Survey | -1.0% |
| Actual | 5.3% |
| Prior | -4.7% |
| Revised | -4.9% |
Karim writes:
Q2 GDP for Japan and Germany are out next week. A German newspaper yesterday leaked German GDP growth likely to be -1 to -1.5%. Much of this is a giveback for a strong Q1 of +1.5% but definitely weaker than expected. Of concern to the ECB is that Spain (industrial production now down 10% y/y) and Italy already written off, so much depends on Germany. Moreover, German PMIs have gotten off to a very weak start for Q3. I imagine that was at the root of Trichet’s more dovish tone today.
Estimates for Japanese Q2 GDP are in the -1% to -3.5% range. The July Tankan and the foreign orders component of last night’s machinery orders data also don’t bode too well for Q3.
| Survey | n/a |
| Actual | -12.1% |
| Prior | -14.8% |
| Revised | n/a |
Looks like it has bottomed and moving up as prices have adjusted and GDP has improved.
Housing my no longer be subtracting from GDP.
| Survey | n/a |
| Actual | 89.0 |
| Prior | 84.5 |
| Revised | n/a |
Looks to have found support and probably bottomed albeit at very low levels.
| Survey | 3.4% |
| Actual | 2.6% |
| Prior | 4.3% |
| Revised | 4.2% |
Less then expected but not bad.
| Survey | $6.3B |
| Actual | $14.3B |
| Prior | $7.8B |
| Revised | $8.1B |
Volatile series. Moving up some to support higher levels of spending.
Note from the graph the improving position of the domestic sector as the government deficit and net exports rise and support domestic ‘savings’ and spending. The US budget deficit is expected to exceed 3% this year and exports should remain firm even with slowing foreign economies. In fact, that’s one of the primary reasons those economies are slowing.
U.S. June Consumer Credit Up $14.3 Billion, More Than Forecast
by Shobhana Chandra
(Bloomberg) U.S. consumers borrowed more than twice as much as economists forecast in June as the slump in real-estate prices prevented American homeowners from tapping into home-equity lines of credit.
Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed’s report doesn’t cover borrowing secured by real estate.
Consumers are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home- equity lines. The Bush administration sent out tax rebate checks in the past three months to help support spending, which accounts for more than two-thirds of the economy.
“Consumers are stressed, and some who are short of cash are relying more on credit cards,” Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California, said before the report.
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Highlights:
| ECB Leaves Interest Rates at Seven-Year High to Fight Inflation |
| German industrial orders drop |
| Western European Car Sales Fall by 6.7% in July, JD Power Says |
| German June Exports Rise the Most in Nearly Two Years |
| German Economy Contracted as Much as 1.5% in 2Q |
| French Trade Deficit Expands to Record as Euro Curbs Exports |
| Italian June Production Stalls as Record Oil Prices Damp Growth |
| Fall in output fuels Spanish recession fears |
Article snip:
ECB Leaves Interest Rates at Seven-Year High to Fight Inflation (Bloomberg) – The ECBkept interest rates at a seven-year high to fight inflation even as evidence of an economic slump mounts. ECB policy makers meeting in Frankfurt left the benchmark lending rate at 4.25 %, as predicted by all 60 economists in a Bloomberg News survey. The bank, which raised rates last month, will wait until the second quarter of next year to cut borrowing costs, a separate survey shows. The ECB is concerned that the fastest inflation in 16 years will help unions push through demands for higher wages and prompt companies to lift prices. At the same time, record energy costs and the stronger euro are strangling growth. Economic confidence dropped the most since the Sept. 11 terrorist attacks in July and Europe’s manufacturing and service industries contracted for a second month. ECB President Jean-Claude Trichet will hold a press conference 2:30 p.m. to explain today’s decision.
Same as UK, less costly to address inflation now rather than support growth and address inflation later if it gets worse.
It’s been said in the US that the Fed needs to firm up the economy first, and then address inflation. To most Central Bankers this makes no sense, as they use weakness to bring inflation down.
In their view that means the Fed wants to get the economy strong enough to then weaken it.
The Fed majority sees it differently.
They agree with the above.
However, for the last year they have been forecasting lower inflation and lower growth were willing to take the chance that supporting growth would not result in higher inflation.
Now, a year later, the FOMC is faced with higher inflation and more growth than the UK and Eurozone, and systemic ‘market functioning’ risk remains.
The FOMC continues to give the latter priority as they struggle with fundamental liquidity issues that stem from a continuing lack of understanding of monetary operations.
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The mainstream view remains the cost of a near term recession in order to bring prices under control now is far less than the cost of a recession later if you support growth now and let prices continue higher.
Bank of England holds interest rate at 5%
by Gary Duncan, Grainne Gilmore
The Bank of England rebuffed mounting concerns over the rapidly weakening economy today and held interest rates at 5 per cent as it pursued its drive to quell soaring inflation.
The tough verdict from the Bank’s rate-setting Monetary Policy Committee (MPC) brushed aside pleas from business leaders and trade unions for a cut in base rates to shore up Britain’s growth, amid growing fears that the country is on the brink of recession.
The Bank’s decision came after headline consumer price inflation leapt to a 10-year high of 3.8 per cent in June, well above the Bank’s 2 per cent target, and amid expectations that it could hit 5 per cent over the summer, following swingeing increases in household gas and electricity bills imposed by utility companies.
The MPC had been widely expected to spurn pressure for a rate cut today in a bid to make clear its determination to bring inflation back to the target set by the Chancellor. The committee will almost certainly have discussed raising rates this morning, as it did last month, when Professor Tim Besley, voted for an immediate increase. He is expected to have done so again today, and may have been joined by other hawkish MPC members.
The Bank will set out its thinking more clearly next week when it publishes its latest forecasts for the economy in its quarterly Inflation Report. That is expected to emphasise the dilemma that the MPC confronts, with inflation set to soar far above target in the next few months, even as the economy slides towards a severe downturn.
The quandary facing the Bank was underlined yesterday as the International Monetary Fund sharply cut its forecasts for Britain’s growth this year and next, while issuing a warning that it saw “little scope” for interest rates to fall, although it also saw no need for an immediate rate rise.
Today’s no-change verdict by the MPC came despite bleak economic news in recent days, which have produced danger signs of recession.
Concern that Britain’s growth had ground to a virtual halt last month, and could even be in the grip of recession, were inflamed this week after bleak figures revealed growing frailty in the most critical parts of the economy.
These included shrinking activity in the services sector, the economy’s engine room that account for three quarters of the UK’s output, as well as in manufacturing.
The services sector, spanning businesses from cafes and leisure centres to accountancy and law firms, shrank for a third month in succession last month, according to the latest purchasing managers’ survey, regarded by the Bank as a key gauge of economic conditions.
Although services activity edged up from a seven-year low that was plumbed in June, the survey pointed to an even sharper slowdown ahead, with levels of outstanding business for the sector’s companies falling for a tenth month in a row, and inflows of new business dropping to a record low.
At the same time, it emerged that manufacturing is suffering its first sustained run of decline since 2001, after its output fell in June for a fourth month in a row, dropping by 0.5 per cent.
The figures were among the latest data confirming the dire plight of the economy, and came after official confirmation that the pace of Britain’s overall growth slowed to just 0.2 per cent in the second quarter, its weakest rate of expansion for three years.
The falling housing market remains a key source of economic anxiety, with the Nationwide Building Society reporting that house prices tumbled by a further 1.7 per cent last month, leaving them down 8.1 per cent on last year – their sharpest annual pace of decline since 1991.
The high street is also being badly hit by the downturn, with official figures showing that retail sales plunged by 3.9 per cent in June – their biggest monthly drop for 22 years.
Yesterday, the International Monetary Fund added to the mood of pessimism as it cut its forecast for Britain’s growth this year and next to only 1.4 per cent, and 1.1 per cent, respectively. The prediction of the UK’s worst performance since the end of the last recession raised the spectre of two years of economic misery.
In May, Mervyn King, Governor of the Bank, was forced to write an explanatory letter to the Chancellor, required by law, explaining why inflation had risen more than 1 point above its 2 per cent target, after it climbed to its then-high of 3.3 per cent. Mr King has admitted that he expects to write more such letters this year.
The Bank’s inflation headache has been further aggravated by signs of further severe price pressures in the pipeline to the consumer, Manufacturers’ costs rose at a record 30 per cent annual rate in June, and prices for goods leaving factories rose by a record 10 per cent. Inflation is being stoked by a sharp slide in the pound, by about 12 per cent over the past year, which lifts Britain’s bills for imported products.
However, there has been some let up in international food and energy costs, with oil prices tumbling by 13 per cent in a month, and prices for food products are also on the slide.
Generally up a touch but still looks to be slowly wiggling its way lower.
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