Not Dining Out Tonight

The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.4 in July, down 0.1 percent from June and its fourth consecutive decline. In addition, the RPI stood below 100 for the third consecutive month, which signifies contraction in the index of key industry indicators.

Chicago PMI

56 vs 62 prior. In line.

The Chicago-PMI survey registers manufacturing and non- manufacturing activity in the Chicago region. Investors care about this indicator because the Chicago region somewhat mirrors the nation in its distribution of manufacturing and non-manufacturing activity. Many like to compare the Chicago-PMI with following business day's ISM manufacturing index but they do not always move in tandem since the national ISM is only for manufacturing.
Data Source: Haver Analytics

Just for fun

PBoC Governor goes missing. Rumours abound that the Peoples Bank has lost 430bn opening US assets (derivative bets gone awry?)

Composite of Regional Fed Surveys

Click on graph for larger image 

Rare Earth Export Curbs

Backlash over China curb on metal exports

China's draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.

Click HERE for full story

This week's schedule

This will be another busy week - the August employment report on Friday is the key economic release this week.

The previous post is the summary of last week.


----- Monday Aug 30th -----

8:30 AM ET: Personal Income and Outlays for July 2010. The consensus is for a 0.3% increase in both income and spending (compared to June). The core PCE Price Index is expected to increase 0.1%.

10:30 AM Dallas Fed Manufacturing Survey for August. The consensus is for a decrease in the index to flat (neither expanding or contracting) from 5 last month. These regional surveys are important now since it appears manufacturing is slowing (or contracting like the Philly Fed survey showed).

----- Tuesday Aug 31st -----

9:00 AM: S&P/Case Shiller Home Price Index for June (3 month average). The consensus is for prices to be mostly flat in the June report.

9:45 AM Chicago Purchasing Managers Index (PMI) for August. The consensus is for a decline to 56.0 from 62.3 in July.

10:00 AM Consumer confidence index from the Conference Board for August. The consensus is for a slight increase to 51.0 from 50.4.

2:00 PM: FOMC Minutes, Meeting of August 10, 2010

----- Wednesday Sept 1st -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been fairly flat over the last couple of months - suggesting reported existing home sales in August will not be much stronger than in July.

8:15 AM: ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for +20,000 payroll jobs in August, down from +42,000 in July.

10:00 AM: ISM Manufacturing Index for August. The regional Fed reports suggest a decline in the ISM manufacturing index. The consensus is for a decline to 53.0 from 55.5 in July.

10:00 AM: Construction Spending for July. The consensus is for a 0.6% decline in spending.

4:00 PM (approx): Light Vehicle Sales for August. The various manufacturers will report August sales in the morning. Usually around 4 PM I post an estimate of SAAR for the month. The consensus is for sales of 11.6 million, about the same as in July.

NOTE: There is a conference on Wednesday and Thursday in Washington, D.C. at the Federal Reserve: Federal Reserve REO and Vacant Properties Summit

----- Thursday Sept 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released. Consensus is for a slight decrease to 470K from 473K last week. The increase in weekly claims is very concerning and the 4-week average is at the highest level since last November.

8:30 AM: Nonfarm Productivity for Q2 (Final)

10:00 AM: Manufacturers' Shipments, Inventories and Orders for July.

10:00 AM: Pending Home Sales Index for July. The consensus is for a slight increase (about 1.5%) in contracts signed. This index declined 2.6% in June (after collapsing in May). It usually takes 45 to 60 days to close, so this will provide an early indication of closings in September.

----- Friday Sept 3rd -----

8:30 AM: Employment Report for August. The consensus is for about a loss of 90,000 payroll jobs, with 116,000 fewer Census jobs, or about +26,000 ex-Census increase in payrolls. The consensus is for the unemployment rate to increase slightly to 9.6% from 9.5% in July. For a preview, see: Will the unemployment rate spike higher?

10:00 AM: ISM Non-manufacturing Index for August. The consensus is for a decrease in the service index to 53.0 from 54.3 in July.

After 4:00 PM: The FDIC will probably have another busy Friday afternoon ...

----- Likely, but not scheduled -----

Expected early in the week: Q2 Quarterly Banking Profile from the FDIC.

Expected on Thursday: August Personal Bankruptcy Filings

"Hard Nosed" Fed

AEP of the Telgraph..Click Here

Negative Equity Continues

CoreLogic reports that 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the second quarter of 2010, down from 11.2 million and 24 percent from the first quarter of 2010. Foreclosures, rather than meaningful price appreciation, were the primary driver in the change in negative equity. An additional 2.4 million borrowers had less than five percent equity. Together, negative equity and near negative equity mortgages accounted for nearly 28 percent of all residential properties with a mortgage nationwide.
...
"Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time," said Mark Fleming, chief economist with CoreLogic.

Not so Durable Goods orders

Durable goods orders widely miss expectation, coming in at +0.3%, on a consensus of +2.8%, with the previous -1.2% drop revised to just -0.1%. Durable goods ex transportation came in at -3.8%, on expectations of 0.5% (previous -0.9% revised to 0.2%). And the kicker - non-defense capital goods ex. aircraft came in at -8.0% M/M versus expectations of 0.4% (with the previous print of 0.2% revised far higher to 3.6%). The 10 Year has hit 2.439% on the news. Goldman is pretty laconic: "This report is weak and much worse than expected." Pretty much game over for the reflation scenario. Check to you Bernanke - the only option left is the nuclear one.

The Shtimulus Schtick - say goodnight as it winds down - CBO

So, without the "stimulus" the Q2 would have been negative. Egad, no wonder nobody can allocate capital rationally in this environment!

The massive stimulus package boosted real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work, the nonpartisan Congressional Budget Office said on Tuesday.

CBO's latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

Economists surveyed by Reuters expect that revised numbers due out on Friday will show that the economy grew at an anemic 1.4 percent pace during that time period -- less than the boost of at least 1.7 percent that the stimulus provided, according the CBO estimate.

BIg Dates coming up.

This Friday: Final revision on Q2 GDP...Ests range around 1.5%.  But, with the latest trade data, we could see sub 1%.

Sept 3:  August Employment.  There are a number of seers who have been looking for a big August number (positive), notably among them our friends at ISI (funny how they share the same acronym with the Pakistani Secret Police)...

Homes for Sale, and Ben's Brain.

Inventory, in months...  The FED focuses on: U-6, the S&P 500, Real Estate, and Inflation/Deflation expectations.  This is what drives Ben's thinking, and at the end of the day, it is Ben's thinking that counts.

Econ releases this week

Three key housing reports and the second estimate of Q2 GDP will be the highlights this week. Existing home sales will be released on Tuesday, New Home sales on Wednesday, the MBA Q2 National Delinquency Survey on Thursday, and Q2 GDP on Friday. A busy week ...


----- Monday Aug 23rd -----

8:30 AM ET: Chicago Fed National Activity Index (July). This is a composite index of other data.

10:30 AM: Q2 Quarterly Banking Profile from the FDIC.
Note: could be released on Tuesday.

----- Tuesday Aug 24th -----

8:15 AM: Chicago Fed President Charles Evans will speak to the Indianapolis Neighborhood Housing Partnership (Evans will be on the FOMC in 2011).

10:00 AM: Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for a decrease to 4.65 million (SAAR) in July from 5.37 million in June. Take the under! Housing economist Tom Lawler is projecting 3.95 million SAAR. In addition to sales, the level of inventory and months-of-supply will be very important (since months-of-supply impacts prices).

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August. The consensus is for a decrease in the index to +11 (still expanding) from 16 last month. These regional surveys are important now since it appears manufacturing is slowing (or contracting like the Philly Fed survey showed last week).

----- Wednesday Aug 25th -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index declined sharply following the expiration of the tax credit, and the index has only recovered slightly over the last few weeks - suggesting reported home sales in July and August will be very weak.

8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 2.5% increase in durable good orders.

10:00 AM: New Home Sales for July from the Census Bureau. The consensus is for a slight increase in sales to 340K (SAAR) in July from 330K in June. New Home Sales already collapsed in May since sales are counted when contracts are signed - whereas existing home sales will collapse in July (counted when sales are closed).

10:00 AM: 10:00 FHFA House Price Index for June. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

----- Thursday Aug 26th -----

Note: Aug. 26-28th Kansas City Fed Economic Symposium at Jackson Hole, WY

8:30 AM: The initial weekly unemployment claims report will be released. Consensus is for a slight decrease to 495K from 500K last week. The increase in weekly claims is very concerning, and the 4-week average will probably be at the highest level since last November.

10:00 AM: MBA's Q2 2010 National Delinquency Survey (NDS). This is key report of mortgage delinquencies. I'll also report on the conference call Thursday AM.

11:00 AM: Kansas City Fed regional Manufacturing Survey for August. The index was at 14 in July.

----- Friday Aug 27th -----

8:30 AM: Q2 GDP (second release). In the advance release, the BEA reported real GDP increased at a 2.4% annualized rate in Q2. However subsequent economic releases for construction spending, inventory and trade all suggest downward revisions in the second release. The consensus is for a downward revision to 1.3% real annualized growth.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for August).

10:00 AM: Fed Chairman Ben Bernanke will speak at the Jackson Hole Economic Symposium in Wyoming. The speech is titled "The Economic Outlook and the Federal Reserve's Policy Response".

After 4:00 PM: The FDIC will probably have another busy Friday afternoon ...

CBO uh oh

Those who were disappointed by the earlier CBO budget reestimate which increased total deficit by about $44 billion over the next two years, will have to weep more tears based on the just released statement by Congressional Budget Office director Doug Elmendorf who said that in reality the budget deficit could come much higher than the just disclosed estimates, and the recent economic data releases have been "more negative" than data factored into the projection

Class, what rhymes with Greece? Anyone? Anyone? Anyone?

yes that's right class, California and Oregon

From Bob Egelko at the San Francisco Chronicle: Furloughs back on starting this Friday

The state Supreme Court allowed Gov. Arnold Schwarzenegger on Wednesday to resume unpaid furloughs of 144,000 state employees for three days a month, starting this Friday ... The governor ordered the new round of furloughs in late July, claiming executive authority to cut costs while the state faces a $19 billion deficit.
And from Michelle Cole at The Oregonian: With projected revenues dropping by as much as $1 billion, Oregon leaders debate what to do (ht Scott)
On Tuesday, Gov. Ted Kulongoski advised legislative leaders, school superintendents and agency directors that state economists expect tax collections to be down significantly more than the $577 million shortfall projected in May. ... Now state economists believe revenues will shrivel by an additional $200 million to $500 million, prompting Kulongoski to send a flurry of letters and notices warning of more cuts to schools and state services.
Just a couple reminders that there are more state and local cuts coming ...

Japan BOJ calls emergency board mtg

Boj freaks out over the Yen, and needs to kill it...
One likely way that the central bank may do this is to expand the funds it offers to financial institutions at a 0.1% fixed rate to Y30 trillion from Y20 trillion, or lengthen the program to six months from three months, the report said.

The report also noted the BOJ may announce the new measures at an emergency policy board meeting ahead of an upcoming meeting between Prime Minister Naoto Kan and BOJ Gov. Masaaki Shirakawa.

Deleveraging. Total debt declines

From the NY Fed: New York Fed Releases New Report, Web Page on Household Credit Conditions in U.S., Select States Showing Decline in Consumer Indebtedness

The Federal Reserve Bank of New York today announced the release of a new Quarterly Report on Household Debt and Credit and an accompanying web page. The report shows that households steadily reduced aggregate consumer indebtedness over the past seven quarters. In the second quarter of 2010, they owed 6.4 percent less than they did in 2008, the peak year for indebtedness.

Additionally, for the first time since early 2006, the share of total household debt in some stage of delinquency declined, from 11.9 percent to 11.2 percent. However, the number of people with a new bankruptcy noted on their credit reports rose 34 percent during the second quarter, considerably higher than the 20 percent increase typical of the second quarter in recent years.
...
The next quarterly reports are expected to be released on November 8, 2010, February 14, 2011, May 9, 2011 and August 8, 2011.
Here is the report: Quarterly Report on Household Debt and Credit


From the NY Fed:
Aggregate consumer debt continued to decline in the second quarter, continuing its trend of the previous six quarters. As of June 30, 2010, total consumer indebtedness was $11.7 trillion, a reduction of $812 billion (6.5%) from its peak level at the close of 2008Q3, and $178 billion (1.5%) below its March 31, 2010 level. Household mortgage indebtedness has declined 6.4%, and home equity lines of credit (HELOCs) have fallen 4.4% since their respective peaks in 2008Q3 and 2009Q1. Excluding mortgage and HELOC balances, consumer indebtedness fell 1.5% in the quarter and, after having fallen for six consecutive quarters, stands at $2.31 trillion, 8.4% below its 2008Q4 peak.

For the first time since early 2006, total household delinquency rates declined in 2010Q2. As of June 30, 11.4% of outstanding debt was in some stage of delinquency, compared to 11.9% on March 31. and 11.2% a year ago. Currently about $1.3 trillion of consumer debt is delinquent and $986 billion is seriously delinquent (at least 90 days late or "severely derogatory"). Delinquent balances are now down 2.9% from a year ago, but serious delinquencies are up 3.1%.

Kyle Bass "I don't know how you can be long stocks"

This is food for thought...watch the entire segment.

Click HERE for the Bass Interview

Eton Park takes GLD to #1 holding

Bought $800mm+ during Q2.  Joins Soros and Paulson in the group of large funds that have GLD as their largest holding.

Ind Production

The second graph shows industrial production since 1967.

This is the highest level for industrial production since Oct 2008, but production is still 7.3% below the pre-recession levels at the end of 2007.

The increase in July was above the consensus of a 0.5% increase in Industrial Production, and an increase to 74.5% for Capacity Utilization.

This is so good it gets posted

Euro bond spreads widening again

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Aug 11th):

Click on graph for larger image in new window.

From the Atlanta Fed:

Peripheral European bond spreads (over German bonds) narrowed between the June and August FOMC meetings, though they were rising over the past week.

Between the June and August FOMC meetings, the 10-year Greece-to-German bond spread has narrowed by 50 basis points (bps) (from 8.01% to 7.51%) through August 10, though it has risen by 12 bps in the past week. Similarly, with other European peripherals’ spreads, Portugal’s is lower by 54 bps during the period, and Spain’s is lower by 37 bps, though both are up from the week prior.

As of today, the Greece-to-German spread has widened to 7.98% (peaked at over 8%) and the Ireland-to-German spread has increased to 2.88%.

Claims - wkly

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The four-week average of weekly unemployment claims increased this week by 14,250 to 473,500.
Highest wkly claims since Feb 2010.

CMI seems to lead pretty accurately

CMI: Let's hope those at the Fed are watching this!!!

August 3, 2010 - 'Daily Growth Index' Turns Sharply Down:

Since last week our 'Daily Growth Index' has dropped significantly, putting the trailing 91-day moving 'quarter' at a contraction level that would place a similar calendar quarter of GDP growth below the 5th percentile of all quarters since 1947. Under normal circumstances we might expect a quarter that bad once in slightly over 5 years:

Not so Productive

Nonfarm productivity - Q/Q change - SAAR 2.8 % 0.0 % -0.8 % to 2.5 % -0.9 % Unit labor costs - Q/Q change - SAAR -1.3 % 1.5 % -1.0 % to 2.0 % 0.2 %

Highlights A 3.6 percent increase in hours worked outpaced a 2.6 percent increase in output, making for a 0.9 percent quarter-to-quarter decline in second quarter productivity and ending five straight quarters of strong growth. In a partial offset, first-quarter productivity was revised 1.1 percentage points higher to plus 3.9 percent.

Drats - Small Biz Survey

Click on graph for larger image in new window.