| Survey | 48.0 |
| Actual | 49.6 |
| Prior | 49.1 |
| Revised | n/a |
Better than expected.
Still on the soft side.
| Survey | 46.1 |
| Actual | 39.0 |
| Prior | 45.0 |
| Revised | n/a |
Worse than expected.
GDP muddling through with the fiscal package supporting domestic demand as price pressures continue to escalate.
[top]
| Survey | 0.4% |
| Actual | 1.9% |
| Prior | 0.2% |
| Revised | 0.3% |
Higher than expected as fiscal rebates kick in, and last month revised up some as well.
| Survey | 0.7% |
| Actual | 0.8% |
| Prior | 0.2% |
| Revised | 0.4% |
Also higher than expected with consumers spending a higher % of fiscal rebates than expected.
| Survey | 3.2% |
| Actual | 3.1% |
| Prior | 3.2% |
| Revised | n/a |
A bit lower than expected.
| Survey | 0.2% |
| Actual | 0.1% |
| Prior | 0.1% |
| Revised | n/a |
Also lower than expected.
| Survey | 2.2% |
| Actual | 2.1% |
| Prior | 2.1% |
| Revised | n/a |
This is lower than expected as well.
Karim writes:
Yesterday Kohn mentioned there were only a few signs of higher headline inflation ’embedding’ themselves into core; this report another sign of that.
| Survey | 56.7 |
| Actual | 56.4 |
| Prior | 56.7 |
| Revised | n/a |
Karim Writes:
[top]
(an email exchange)
On Thu, Jun 26, 2008 at 2:25 PM, Tom wrote:
>
>
>
Where’s Bernanke’s Inner Volcker?
by Larry Kudlow
(NRO) On the day after an unusually important Fed policy meeting both gold and stocks severely rebuked the central bank’s decision to take no action in support of the weak dollar or to curb rapidly growing inflation. Gold spiked $30, a clear message that Bernanke & Co. won’t stop inflation. Stocks plunged over 200 points, an equally clear message that the Fed’s cheap-dollar inflation is damaging economic growth.
These market warnings are two sides of the same coin. Inflation, which is caused by excess dollar creation, is the cruelest tax of all. It is a tax on consumer and family purchasing power. It is a tax on corporate profits. It is a tax on the value of stocks, homes, and other assets. Crucially, the capital-gains tax  the most important levy on all wealth-creating assets  is un-indexed for inflation. Hence, long before Barack Obama or Congress can legislatively raise the capital-gains tax rate, rising inflation is increasing the effective tax rate on real capital gains. That’s an economy-wide problem.
By doing nothing at the June 25 meeting the Fed turned its back on the very inflation-tax problem it helped create. The spanking it received from the markets was well deserved.
Former Fed chairman Paul Volcker, who is advising Sen. Obama’s presidential campaign, issued a stern warning at the New York Economics Club a few months back. He said inflation is real and the dollar is in crisis. Soon after, Fed head Ben Bernanke changed his tune in public speeches, pledging greater vigilance on inflation and hinting at a defense of the dollar. Treasury man Henry Paulson and President Bush also stepped up their rhetoric regarding a stronger greenback.
But words were no substitute for actions this week.
It is an interesting historical footnote that Paul Volcker is still highly regarded as the greatest inflation fighter of our time. Working with Ronald Reagan, it was Volcker who slew the inflation dragon in the 1980s. Indeed, the combination of tighter monetary control from the Fed and abundant new tax incentives from Reagan launched an unprecedented twenty-five-year prosperity boom characterized by strong growth and rock-bottom inflation. At the center of the boom was a remarkable 12-fold rise in stock market values, a symbol of the renaissance of American capitalism. But that was then and this is now.
Talk of major new tax hikes is in the air today, while the inflationary decline of the American dollar is plain fact. It’s as though our economic memory is being erased, both in tax and monetary terms. Staunchly optimistic supply-siders Arthur Laffer and Steve Moore are even finishing a book on the subject. Called The Gathering Economic Storm, its concluding chapter is titled: “The Death of Economic Sanity.â€ÂÂ
The Volcker anti-inflation model presumably handed down to Alan Greenspan and Ben Bernanke always argued that price stability is the cornerstone of economic growth. Yet it appears that today’s Fed has reverted to a 1970s-style Phillips-curve mentality that argues for a trade-off between unemployment and inflation, rather than the primacy of price stability.
History teaches us otherwise. It states that since rising inflation corrodes economic growth, inflation and unemployment move together  not inversely. Even in the last 18 months this is proving true. Inflation bottomed around 1 percent in late 2006. Unemployment bottomed at 4.4 percent about 6 months later. Today, the CPI inflation rate has climbed to over 4 percent, wholesale prices have jumped to 7 percent, and import prices have spiked to 18 percent. Unemployment, meanwhile, has moved up to 5.5 percent.
Over the past five years the greenback has lost 40 percent of its value. Oil is close to $140 a barrel. And gold, now trading above $900 an ounce, is warning that if the Fed fails to stop creating excess dollars, inflation could rise to 6 or 7 percent.
I had hoped Ben Bernanke would reveal his inner Volcker at Wednesday’s meeting. He didn’t. While the Fed acknowledged that “the upside risks to inflation and inflation expectations have increased,†it took no action taken to raise the fed funds target rate, which now stands at 2 percent and is actually minus-2 percent adjusted for inflation. Even a quarter-point rate hike  merely taking back the last easing move in April  would have been a shot heard ’round the world in defense of the beleaguered dollar. It didn’t happen.
Only Richard Fisher, president of the regional Dallas Fed, dissented in favor of a higher target rate. That leaves the hard-money Fisher as the lone remaining protégé of Paul Volcker.
Of course, if Fed policymakers reconvene immediately to right their wrongheaded mistake, the value of our money could be quickly restored. The next scheduled Open Market meeting is August 5, but they needn’t wait that long.
Let’s hope they come to their senses.
>
>
>
Good, thanks, as expected, this is where the mainstream (no pun intended) is going, though Kudlow is of course not ‘center’ mainstream.
Good luck to us!
[top]
(an interoffice email)
On Thu, Jun 26, 2008 at 7:48 AM, Karim wrote:
>
>
>
Global Economic Integration and Decoupling
Vice Chairman Donald L. Kohn
At the International Research Forum on Monetary Policy, Frankfurt, Germany
June 26, 2008
For the moment, higher headline rates of inflation have shown only a few tentative signs of embedding themselves in core inflation or in longer-term inflation expectations.
> -talking about u.s. here
>
>
>
However, policymakers around the world must monitor the situation carefully for signs that the increases in relative prices globally do not generate persistently higher inflation. Additionally, in those countries where strong commodity demands are associated with rapid growth in aggregate demand that outstrips potential supply, actions to contain inflation by restraining aggregate demand would contribute to global price stability.
> -not describing/talking about u.s. here;
> focusing on EM primarily.
>
>
right, gets back to bernankes testimony a while back that the falling dollar has been a good thing as it works to lower the trade gap via increasing US exports that sustain US demand. the old ‘beggar they neighbor’ policy from the 30’s.
unfortunately for us it’s actually a ‘beggar thyself’ policy on closer examination as most mainstream economists will attest. they all say you don’t ‘inflate your way to prosperity’ by weakening your currency. otherwise latin america and africa for example would be the most prosperous places in the world
seems they are still in the mercantalist mode where exports are good and imports bad, and this policy is making us look like a bananna republic at an increasing rate.
recall from previous emails the dollar decline has been triggered by paulson succeeding in keeping cb’s from buying $US, Bush keeping oil producing monetary authorities from accumulating $US, and Bernanke discouraging foreign portfolio managers from accumulating same.
(more later on how it’s actually not happening due to fed rate policy, but they think it is)
as suspected, the $US is most likely to take another major leg down as it adjusts to a level where the trade gap is in line with foreign desire to accumulate $US financial assets which is probably a lot lower than the current 55-60 billion per month.
the ‘cost push inflation’ is pouring in through the trade channel, and the fed is increasingly taking the heat from the mainstream (not me- i’m the only one who thinks inflation isn’t a function of rates the way they do) for its apparent weak $US/inflate your way out of debt approach.
furthermore, the mainstream (and the stock market) sees the low interest rate/weak dollar policy as taking away US domestic demand as higher price for food/fuel leave less domestic income for everything else, including debt service.
that is, they see the falling dollar hurting us domestic demand more than the low interest rates are helping it.
the reality is there’s foreign monopolist- the saudis (and maybe russians)- that’s milking us for all they can with price hikes, and keeping us alive buying our goods and service and thereby keeping US gdp muddling through.
the real standard of living for most working americans has dropped by perhaps 10% as they work, get paid enough to eat and drive to work, and the rest of their real output is exported.
and our policy makers, including bernanke and paulson who’ve ‘engineered it’ think this is all a good thing- they think imports are bad and exports good and we are paying the price in declining real terms of trade.
while in my book interest rates are not a factor, the mainstream thinks they are, and the response when the inflation gets bad enough will be higher interest rates. The ‘correct’ anti-inflation rate last August was 5.25 when the fed didn’t cut.
by Jan 08 it was probably at least 7% with headline moving through 3% to get a sufficient ‘real rate.’
today it’s probably moved up to 8%+ as cpi is forecast to go through 5% over the next few months and gdp muddles through around 1%.
the mainstream (not me) will say that by having a real rate that’s too low now the fed will need a rate that much higher down the road as inflation accelerates due to over accommodative fed policy.
by the time the cost push inflation works its way to core- probably over the two quarters- the fed will ‘suddenly’ feel itself way behind the inflation curve and recognize they made a horrible mistake and now the cost of bringing down inflation is far higher than it would have been early on- just like they’ve always said.
the mainstream knows this, and now sees a fed with its head in the sand regarding inflation. they also see this weak dollar policy as subversive as it undermines the currency and inflation accelerates.
i expect there will be a groundswell of mainstream economists calling for the replacement of bernanke, kohn and the entire fomc very soon.
ironically, in my book low rates have helped moderate inflation via cost channels and have helped moderate domestic demand via interest income channels.
rate hike will add to domestic demand as net interest income of the private sectors from higher government interest payments add to personal income and demand.
and rate hikes will add to the cost push inflation via higher interest costs for firms.
it’ all going down hill fast, with policy makers both going the wrong way on key issues as they have the fundamentals backwards.
the only near term ‘solutions’ are near term crude oil supply responses like 30 mph speed limits which isn’t even under consideration in any form, nor are any other crude supply responses. most other alternative energy sources don’t replace crude.
medium term supply responses include pluggable hybrids that only start being produced in late 2010.
longer term supply responses include nuclear which might come on line 15 years down the road.
a collapse in world demand is possible if china/india let up on their deficit spending and growth, but so far that doesn’t seem in the cards. all their ‘tightebning’ seems to be on the ‘monetary’ side which does nothing of consequence apart from further increase inflation.
so with no supply responses on the horizon expect the saudis to keep hiking prices, and keep spending the new revenues to keep world gdp muddling through, cb’s hiking interest rates that will bring results that will cause them to hike further, and continuously declining real terms of trade for oil importers.
what to do?
cds on germany- it’s one go all go over there, and germany is the least expensive insurance.
forward muni bmas over 80 with no interest rate hedge as markets should discount the obama lead and long move up with inflation.
[top]
| Survey | 1.0% |
| Actual | 1.0% |
| Prior | 0.9% |
| Revised | n/a |
As expected. Weak but no recession.
| Survey | 1.0% |
| Actual | 1.1% |
| Prior | 1.0% |
| Revised | n/a |
A touch better than expected with further improvement in Q2 still expected.
| Survey | 2.6% |
| Actual | 2.7% |
| Prior | 2.6% |
| Revised | n/a |
A bit worse than expected.
| Survey | 2.1% |
| Actual | 2.3% |
| Prior | 2.1% |
| Revised | n/a |
More than a bit worse than expected.
ÂÂÂ
GDP better than expected, and inflation worse than expected was reflected in the Fed statement, but not in Fed action.
| Survey | 375K |
| Actual | 384K |
| Prior | 381K |
| Revised | 384K |
Unchanged from the previous week’s report that was revised up some. Still in the new range.
| Survey | 3105K |
| Actual | 3139K |
| Prior | 3060K |
| Revised | 3057K |
A little worse than expected, prior week revised down marginally.
Weak, but no recession yet.
| Survey | 19 |
| Actual | 17 |
| Prior | 19 |
| Revised | 18 |
All evidence shows labor markets still soft.
| Survey | 4.95M |
| Actual | 4.99M |
| Prior | 4.89M |
| Revised | n/a |
Continuing signs of a bottom.
ÂÂÂ
Levels are too low given demographics and should recover substantially even with a weak market.
| Survey | 1.2% |
| Actual | 2.0% |
| Prior | -1.0% |
| Revised | n/a |
Better than expected.
| Survey | n/a |
| Actual | 208.6 |
| Prior | 201.2 |
| Revised | n/a |
The upturn in prices wasn’t even reported by the mainstream press while the downturns were sensationalized.
| Survey | n/a |
| Actual | -6.3% |
| Prior | -8.5% |
| Revised | n/a |
Year over year price declines are far less than the case-shiller index which reports only on the largest metro areas. OFHEO prices declined even less year over year. Again, the mainstream media doesn’t report this and continues to repeat case-shiller numbers.
| Survey | n/a |
| Actual | 4.485 |
| Prior | 4.549 |
| Revised | n/a |
I thought the last spike up was suspect- might have had something to do with foreclosures hitting the list- and may now be turning down as well, following the actual numbers of new homes for sale which has been falling rapidly.
[top]
Weakness and inflation= rate hikes in the eurozone.
Fed response to same conditions later today.
| Trichet Says Price-Stability Risks Have Intensified |
| Spanish Producer-Price Inflation Accelerates to 23-Year High |
| European Bonds Drop Before German Price Reports, as Stocks Gain |
| ECB’s Noyer Backs Inflation Vigilance, Flexible Exchange Rates |
| ECB’s Tumpel-Gugerell Says ECB Ready to Raise Rates If Needed |
| Wellink Says Inflation Accelerating, ECB on `Heightened Alert’ |
| ECB Confirms August Press Conference, Scraps Summer Holiday |
| Inflation Tops Unemployment as Main Concern in EU, Survey Shows |
| German Consumer Optimism Nears 3-Year Low, Stern Poll Shows |
| Spain Recession Risk Climbs as Rates Move Higher, Survey Shows |
| Europe Heavy-Truck Sales Fall on Eastern Region Drop |
[top]
| Survey | n/a |
| Actual | -9.3 |
| Prior | -8.8% |
| Revised | -8.7 |
| Survey | n/a |
| Actual | 333.4 |
| Prior | 360.2 |
| Revised | n/a |
| Survey | n/a |
| Actual | 1212.20 |
| Prior | 1378.60 |
| Revised | n/a |
Purchase mortgage applications back at the low end of the new range, partially because mortgage bankers have lost market share, but housing remains very slow as well.
| Survey | 0.0% |
| Actual | 0.0% |
| Prior | -0.5% |
| Revised | -1.0% |
About as expected. Remains on the weak side, but not at recession levels as economy continues to muddle through.
| Survey | -1.0% |
| Actual | -0.9% |
| Prior | 2.5% |
| Revised | 1.9% |
| Survey | 512K |
| Actual | 512K |
| Prior | 526K |
| Revised | 525K |
[comments]
| Survey | -2.7% |
| Actual | -2.5% |
| Prior | 3.3% |
| Revised | 4.8% |
A touch better than expected from a very low base.
[comments]
| Survey | n/a |
| Actual | 453.00 |
| Prior | 461.00 |
| Revised | n/a |
Lower than expected and working its way down nicely.
| Survey | 2.00% |
| Actual | 2.00% |
| Prior | 2.00% |
| Revised | n/a |
They don’t consider inflation a problem yet.
[top]
Tuesday, June 24, 2008 @ 10:20 EST
Houston Area: Houston 1110 AM KTEK
Dallas / Fort Worth Area: DFW 1110 AM KJSA
| Survey | |
| Actual | 169.9 |
| Prior | 172.2 |
| Revised | 172.2 |
| Survey | -16.0% |
| Actual | -15.3% |
| Prior | -14.4% |
| Revised | -14.3% |
Karim writes:
Inflation is biting harder than the lower Fed funds rate is helping.
The Fed has to decide whether a slightly higher Fed funds rate will bring more relief/benefit to consumers on the inflation side than possible additional drag from the interest rate side.
[top][end]
| Survey | 56.0 |
| Actual | 50.4 |
| Prior | 57.2 |
| Revised | 58.1 |
| Survey | -5 |
| Actual | -12 |
| Prior | -5 |
| Revised | n/a |
Not looking good.
Weakness and ‘inflation’ continue.
[top][end]
| Survey | -0.4% |
| Actual | -0.8% |
| Prior | -0.4% |
| Revised | -0.6% |
Back down, but at least not through the lows.
| Survey | – |
| Actual | – |
| Prior | -44 |
| Revised | – |
[top]
Looks to be slowly zigging and zagging its way higher.
[top]