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In the News

Consumer credit for September beat market expectations by expanding at an annual rate of 3.5 percent to $7.4 billion, according to the latest data released by the Federal Reserve last week. Analysts had expected consumer credit growth to hit $5 billion for the month.
 
Total consumer credit for September hit $2.45 trillion, with revolving debt (such as credit cards) decreasing to $789.6 billion for the month and non-revolving debt (such as student and car loans) increasing to $1.66 trillion.
 
September’s activity marked the third consecutive monthly drop in revolving debt, an indicator of continued consumer caution during a difficult economic recovery.
 
Looking at the wholesale sector, sales for merchant wholesalers in September increased by 0.5 percent over August to total $403.1 billion, the Census Bureau reported last week. In terms of categories, the big movers for the month were chemical and allied product sales, which increased 7.8 percent, and petroleum and petroleum products, which gained 3.9 percent.
 
Total inventories for wholesalers dropped 0.1 percent in September to $462 billion. This put September’s inventory-to-sales ratio at 1.15, slightly down from September 2010′s ratio of 1.18.
 
Foreign trade for September was encouraging, with total exports of $180.4 billion and imports of $223.5 billion resulting in a goods and services deficit of $43.1 billion, which was down from August’s $44.9 billion, the Census Bureau and the Bureau of Economic Analysis reported last week.
 
September exports were $2.5 billion more than August’s exports of $177.9 billion. September imports were $0.7 billion more than August imports of $222.8 billion.
 
Initial claims for jobless benefits filed during the week ending November 5 dropped to 390,000, a welcome decrease of 10,000 from the previous week’s revised figure of 400,000, the Employment and Training Administration reported last week. The four-week moving average was 400,000, a decrease of 5,250 from the previous week’s revised average of 405,250.
 
The total number of insured unemployed workers during the week ending October 29 dropped to 3,615,000, a decline of 92,000 from the preceding week’s revised level of 3,707,000. The four-week moving average was 3,690,250, a decrease of 19,500 from the preceding week’s revised average of 3,709,750.
 
This week’s slate of economic news starts tomorrow with October’s producer price index from the Bureau of Labor Statistics, October retail sales and September’s business inventories from the Census Bureau.
 
On Wednesday, the Bureau of Labor Statistics follows up with its October consumer price index. Also on Wednesday, the Federal Reserve releases October’s industrial production and capacity utilization figures.
 
Thursday sees initial jobless claims data from the Employment and Training Administration for last week, as well housing construction starts and building permits for October from the Census Bureau. The week closes with leading economic indicators for October from the Conference Board.

In the News

Investors had been hoping for Federal Reserve Chairman Ben Bernanke to announce a new round of Quantitative Easing in his speech at the Economic Symposium in Wyoming Friday, but only received some hints that QE3 may be in the works for the September Fed meeting.
 
“The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting,” said Bernanke, adding, “We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September.” So, the door is still open for more Fed stimulus, but nothing set yet. Earlier this month the Fed did announce that short-term interest rates would remain near zero through 2012 and 2013.
 
Turning to the housing market, new home sales dropped to their lowest level in six months, according to the latest figures from the Census Bureau released last week. Sales of new single-family homes in July 2011 dropped to an annual rate of 298,000, the Bureau reported. This marked a 0.7 percent drop from June’s revised June rate of 300,000. That said, it was 6.8 percent above July 2010′s estimate of 279,000.
 
In terms of price, the median sales amount for new houses sold in July was $222,000, and the average sales price was $272,300. The estimate of new homes for sale at the end of July was 165,000, which represented a 6.6-month supply at the current sales rate.
 
“Without any meaningful job growth, we’re going to continue to look at a housing sector that is moribund,” Eric Green, chief market economist at TD Securities Inc., told Bloomberg.
 
Where jobs were concerned, the tough market might continue. The number of initial jobless claims for the week ending August 20 jumped by 5,000 to 417,000, according to last week’s release from the Employment and Training Administration. The four-week moving average was 407,500, an increase of 4,000 from the previous week’s revised average of 403,500.
 
However, the total number of insured unemployed workers during the week ending August 13 dropped to 3,641,000, a decrease of 80,000 from the preceding week’s revised level of 3,721,250. The four-week moving average was 3,701,000, a decrease of 19,500 from the preceding week’s revised average of 3,720,750.
 
Meanwhile, new orders for manufactured durable goods in July increased $7.7 billion or 4.0 percent to $201.5 billion, the Census Bureau reported last week. The increase followed a 1.3 percent drop in June. Excluding transportation, new orders increased 0.7 percent. Excluding defense, new orders increased 4.8 percent. The largest increase was seen by transportation equipment, which saw a $6.7 billion increase, or 14.6 percent, to $53.0 billion. This was led by non-defense aircraft and parts which increased $3.2 billion.
 
Shipments of manufactured durable goods in July, up seven of the last eight months, increased $5.0 billion or 2.5 percent to $202.2 billion. This followed a 1.1 percent June increase. However, inventories of manufactured durable goods were at an all-time high in July. Up 19 consecutive months, inventories increased $2.9 billion or 0.8 percent to $361 billion. This was at the highest level since 1992, and followed a 0.6 percent June increase.
 
This week sees a number of financial headlines, starting today with personal income and spending for July from the Bureau of Economic Analysis. This is followed tomorrow by July’s consumer confidence data from The Conference Board.
 
Wednesday the Census Bureau releases its data for July’s factory orders, and Thursday the Employment and Training Administration releases its totals for initial jobless claims for last week. Also on Thursday will be new car and truck sales for August from the auto manufacturers; July’s construction spending from the Census Bureau; and second quarter non-farm productivity and labor costs from the Bureau of Labor Statistics.
 
This week’s financial news wraps up on Friday with August’s unemployment rate, payrolls, hourly earnings and average work week from the Bureau of Labor Statistics.

In the News

The largest economic headline maker was the massive selloff in the markets last week. A large unloading of stocks that started in Europe on Thursday intensified in the United Statesin the wake of the budget agreement that was struck by Congress and signed into law by President Obama on Tuesday. At the end of trading on Thursday, the Dow had dropped 512.76 points, the largest single-day plummet it has suffered since the mortgage crisis of 2008.
 
The big question on market watchers’ minds is whether or not there are any efforts being made by the Fed to bolster the economy in the face of the drop. However, the most recent word on the subject from Federal Reserve Chairman Ben Bernanke was that while the Fed was willing to step in to negate the impact of any major downturn, it expected a turnaround in the second half and wasn’t yet ready for any stimulus or similar efforts. Whether or not the Fed will change its tune in the face of last week’s sell-off remains to be seen.
 
Meanwhile, personal income for June skirted up while spending dipped. June personal income increased $18.7 billion, or 0.1 percent, and disposable personal income (DPI) increased $16.3 billion, or 0.1 percent, the Bureau of Economic Analysis reported last week. Personal consumption expenditures (PCE) decreased $21.9 billion, or 0.2 percent.
 
Personal outlays (PCE, personal interest payments and personal current transfer payments) decreased $22.6 billion in June. Personal saving (DPI less personal outlays) was $620.6 billion in June, and personal saving as a percentage of disposable personal income was 5.4 percent in June.
 
In terms of wages and salaries, private wage and salary disbursements decreased $2.2 billion in June, in contrast to an increase of $15.0 billion in May. Goods-producing industries’ payrolls decreased $1.8 billion in June; manufacturing payrolls decreased $2.1 billion; and services-producing industries’ payrolls decreased $0.3 billion. Supplements to wages and salaries (such as rental and personal income) increased $1.5 billion in June.
 
“If the recovery is ever going to gain speed, it will have to come from households deciding they want to spend money again,” said Joel Naroff, president and founder of economic consulting firm Naroff Economic Advisors. “Of course, to be able to spend a lot of money you need to make a lot of money and income growth is extremely weak.”
 
In housing, construction spending for June hit an annual rate of $772.3 billion, a 0.2 percent hike over May’s revised estimate of $770.5 billion, but 4.7 percent below the June 2010 estimate of $810.4 billion, according to the latest figures from the Census Bureau released last week.
 
Spending on private construction was at an annual rate of $493.4 billion, 0.8 percent over May’s revised estimate of $489.6 billion, and residential construction dropped to an annual rate of $235.8 billion in June, 0.3 percent below May’s revised estimate of $236.5 billion. Overall, construction spending for the year is tapering back. During the first six months of this year, construction spending amounted to $357.5 billion, 5.4 percent below the $377.9 billion for the same period in 2010.
 
The jobs report returned better numbers than expected for July, with the Labor Department report noting that 117,000 jobs were added to the economy in July and the unemployment rate ticked down 0.1 percent to 9.1 percent. For the week ending July 30, initial claims for jobless benefits dipped slightly to 400,000, a decrease of 1,000 from the previous week’s revised figure of 401,000, the Employment and Training Administration reported. The four-week moving average was 407,750, a decrease of 6,750 from the previous week’s revised average of 414,500.
 
The total number of insured unemployed workers for the week ending July 23 rose to 3,730,000, an increase of 10,000 from the preceding week’s revised level of 3,720,000. The four-week moving average was 3,729,750, an increase of 4,500 from the preceding week’s revised average of 3,725,250.
 
This week, the financial headlines start tomorrow with non-farm worker productivity and costs data for the second quarter of this year from the Bureau of Labor Statistics. This is followed Wednesday by wholesale inventory data for June from the Census Bureau. The Treasury Department also releases its July budget data on Wednesday.
 
Thursday, the Employment and Training Administration will release initial jobless claim data for last week, and the Census Bureau will distribute its trade balance figures for June. The Bureau will follow that on Friday with its retail sales data for July and business inventory figures for June.