"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Friday, April 29, 2011

Personal Income and Outlays

Personal income and outlays tracks overall changes in - at the rick of sounding stupid about this - personal income.  And personal outlays.  Essentially, how much has the average person's income changed, how much has their spending changed, and how much is one particular measure of inflation changed.  This is big, because this represents around one-third of GDP.
Last month, personal income was a disappointing 0.3%, consumer spending was up an expectation-beating 0.7%, and the core PCE was up 0.2% (which met expectations).  Disposable personal income was up 0.3%, although real DPI[1] was down 0.1%.  Personal current taxes increased $2.2 billion, personal savings as a percentage of DPI fell to 5.8%, and the PCE price index increased 0.4%.
For March, the Econoday-surveyed analysts are mildly optimistic.  They're expecting to see Personal Income increase 0.4%, Consumer Spending increase 0.5%, and the Core PCE price index increase only 0.1%.  For the actual results, we will turn to the Bureau of Economic Analysis.
The Personal Income and Outlays, March 2011 report shows Personal Income increasing 0.5%, consumer spending increasing 0.6%, and the Core PCE price index increased 0.1%.  In other words we beat expectations on two out of three items, which is nice to see after yesterday's dismal Q1 GDP showing.
Other interesting facts include disposable personal income increasing 0.6%, real disposable personal income increasing 0.1%, and the PCE price index increasing 0.4%.  Personal savings as a percentage of DPI fell to 5.5%, and personal current taxes increased $2.5 billion.
I now return you to your regularly scheduled ROYAL WEDDING!!!!!!
[1] Disposable Personal Income adjusted to account for price changes.

World News

All news brought to you from the linked sources.  The sarcasm is entirely my own.

Thursday, April 28, 2011

World News

  • Israel, in an effort to prevent a Palestinian campaign to win UN recognition of statehood, has dismissed the reconciliation between Hamas and Fatah as "a fatal mistake that will prevent the establishment of a Palestinian state and will sabotage chances of peace and stability in the region."  The Palestinians disagree, saying that Hamas is part of Palestine and needs to be included.
  • This is probably not a surprise, but Japanese factory output fell by 15.3% in March, the largest single-month decline in their history.  On the heels of the report came the announcement from the Bank of Japan that they would leave interest rates unchanged at a target rate of 0% to 0.1%.
United States
  • Professor Ognjen Milatovic was arrested ay and removed from a US Airways flight after fellow passengers reported that he had a "suspicious package".  The package?  Keys, a bagel with cream cheese, and a hat.

Advance Q1 2011 GDP

I believe that I've remarked on this before, but there is simply no bigger economic measure than GDP.  It's the Gross Domestic Product, the sum total of private domestic consumption plus gross private domestic investment plus government spending plus the current trade balance.  It's the scorecard used to determine the health of the US economy, and it dominates everything else in its path because it is everything else in its path.
It comes out in an interesting fashion, as well.  Today, we get the initial estimate.  Next month around this time, we'll get the revised estimate.  Then, in June, we'll get the final revision.
The Q4 2010 final figures were pretty much right in line with expectations.  GDP increased at an annual rate of 3.1%, the GDP price index increased 2.1%, and the core GDP price index increased 1.1%.  The Econoday-surveyed analysts are not feeling as optimistic about Q1 2011, though.  They're calling for GDP to have increased 2.0%, and the GDP price index to have increased 2.2%[1].  Are they right?  Let's visit the Bureau of Economic Analysis to find out.
The Gross Domestic Product, 1st quarter 2011 (advance estimate) shows GDP growing at an annual rate of 1.8% (missing expectations).  The price index increased 3.8%, with the core price index increasing 2.2%.[1]
To quote the release:  "The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency.  The 'second' estimate for the first quarter, based on more complete data, will be released on May 26, 2011."  So things could improve as more data comes in.  But still.[1]
The takeaway here?  At least as far as initial estimates are concerned, inflation far outstripped economic growth in Q1.
[1]  Ouch.

First Time Jobless Claims

If it's Thursday, it must be time for the crushing despair of first time jobless claims.
Well, all right.  Crushing despair is overstating things to a significant degree.  But the figures really haven't been all that good for a few years now, which is one of the reasons that the Fed has unemployment on its short list of "things that could easily derail the national recovery from the recession".  Case in point:  For the week ending 4/16 we came in at 403,000 initial claims, which missed expectations by 13,000.  The unadjusted initial claims figures came in at 380,658 (a decline from the previous week of 62,835), which was better.  The state program insured unemployment level for the week ending 4/2 came in at 3,695,000.
One mildly bright spot was that the total number of people claiming UI benefits declined by 287,735 to 8,229,810.  This isn't as bright as it could be, though.  The last few months have seen an average of about 200,000 new nonfarm jobs added per month, which we can call roughly 50,000 new jobs per week.  That means that only about 18% of that decline can be attributed to people returning to work;  the other 82% is most likely people using up their benefits.
And now that I've totally ruined your morning, let's move on to today's data.  The Econoday-surveyed analysts are expecting a mild improvement in the rate of people applying for first time benefits, calling for 390,000 new claims for the week ending 4/23.  As always, we turn to the US Department of Labor to find out how the analysts did.
The Unemployment Insurance Weekly Claims Report for the week ending 4/23 is, well, it's full of crushing despair.  Right out the gate, the initial claims figure for the week ending 4/16 was revised upwards to 404,000.  Then, for the week ending 4/23, initial claims are reported at 429,000 (missing expectations by 39,000).  The unadjusted number of claims for the same period was 385,622, an increase of 4,964.  The advance number for seasonally adjusted insured unemployment comes in at 3,641,000 (a decrease of 54,000), and the total number of people claiming benefits in all programs comes in at 8,187,232 (a decline of 42,578[1]).
So, what's the takeaway?  The new claims figures were terrible, but there is some potentially good news in the total number of claimants.
[1]  Meaning that, working with the average numbers I threw about a few paragraphs back, it is possible that every single person in that decrease was able to find a job.  That's a nice thought, isn't it?

Wednesday, April 27, 2011

World News

  • Belgium is celebrating one full year without a government today.  Caretaker Prime Minister Yves Leterme says three more months will be required to form a coalition government.  Belgium's economy grew at an annualized rate of 1.6% during the lack of a government, and it's budget deficit has fallen below 5% of GDP[1].



United Kingdom

  • UK GDP has grown by 0.5% in Q1 2011, reducing concerns about the risk of a double-dip recession.  However, given that Q4 2010 had a 0.5% decline in GDP, this means that the UK is not yet back to where it was at the end of Q3 2010.

United States

[1]  No specific moral here or anything.  I'm just repeating what the article said . 

Durable Goods Orders

Durable Goods Orders are up now, carrying with them the hopes and fears of anyone and everyone who invests in the manufacturing sector.  Or who invests in something that is impacted by GDP.  And everyone invests in something impacted by GDP.
The February figures, if you recall, were extraordinarily disappointing.  New orders for manufactured durable goods fell 0.9% (severely missing the analyst expectation of a 1.5% increase).  But this has not dampened the spirits of the Econoday-surveyed analysts, who are calling for a 1.9% increase in orders for March.  But does the US Census Bureau support this optimism?  Let's see.
The Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders March 2011 shows that, if anything, the analysts were not optimistic enough.  New orders for manufactured durable goods were up 2.5%, driven heavily by transportation equipment orders (ex-transportation, new orders were only up 1.3%).

MBA Weekly Applications Survey

Even after last week, we just can't seem to get enough housing data.  Last week, the Market Composite Index increased 5.3%, with the Refinance Index increasing 2.7% and the Purchase Index increasing 10.0%.  Refinancing dropped to 58.5% of total mortgage applications, adjustable-rate mortgages increased to 6.5% of total applications, and the average contract interest rate for a 30-year fixed-rate mortgage decreased to 4.83%
We now turn to the Mortgage Bankers Association press release for the latest news, which is not a good as we might have hoped.  The week ending 4/27 saw the Market Composite Index decline 5.6%, driven by a modest 0.6% decline in the Refinance Index and a steep 13.6% decline in the Purchase Index.  The MBA puts most of the blame for that 13.6% decline on new, higher FHA premiums.  "This decrease reverses a 20 percent increase in government purchase applications over a four week period, which was likely driven by borrowers attempting to beat this deadline," says Michael Fratantoni, MBA's Vice President of Research and Economics.
To list a few other pieces of information, refinancing increased to 61.6% of total mortgage applications, while adjustable-rate mortgages remained level at 6.5% of total applications.  Also, the average contract interest rate for a 30-year fixed-rate mortgage decreased to 4.80%.

Tuesday, April 26, 2011

Andrew Wakefield Must Be Proud

On April 20, the World Health Organization's European Region reported 6500 cases of measles year to date in 2011.  France alone has experienced 4937 cases reported between January and March 2011.  To put that in perspective, they reported 5090 cases in the whole of 2010 and they're currently on track to experience close to 20,000 cases if trends continue.  Why is this happening?  Well, the press release states:  "Outbreaks and the further spread of measles are likely to continue so long as people remain unimmunized or do not get immunized on time according to the routine immunization schedule."
Yep.  That's right.  The blame for the sudden uptick in measles cases can be laid squarely on the failure to immunize.  But why should we care?  How about the fact that 1% of all newborn children that died in 2008 died from measles[1], and that measles is the #4 cause of death for children in the first five years of life?  We just don't see it all that much in the US, because 95% of those deaths occur in low-income countries, where the mortality rate of measles can reach as high as 10%.
And so, rather than lift the third world up to our own standard of living and eradicate this disease, we seem to be in a downhill race to join them.
Well done, Andrew Wakefield.  Well done, Jenny McCarthy.  Well done.
[1]  That's between 10,000 and 20,000 children per year dying in the first month of life.

World News

United Kingdom
  • London Metropolitan Police plan to have 5000 officers on the streets on Friday to prevent any disruptions during the royal wedding.  In addition 60 known or suspected troublemakers - mostly people who were arrested during the recent student protests - have been banned from London for the day.  "If you see anybody in the crowd that is acting suspiciously please bring it to the earliest attention of our officers," said Assistant Commissioner Lynne Owens at a news conference, "There will be thousands of officers on duty, lining the route, and they are there to help you."
[1]  Annual economic output is GDP plus the total monetary value of goods and services consumed or used up as inputs in production.
[2]  As opposed to the sectarian Alawite on Sunni conflict we're seeing now . 

Consumer Confidence

It's time for Consumer Confidence, your monthly gauge of what consumer households think about the economy.  This is a huge measure, because it's current to forward looking, and because it directly samples the feelings of a group of people whose economic activity directly makes up around a third of GDP.  Respect Consumer Confidence.
Last month, the Consumer Confidence Index fell to a level of 63.4, missing expectations.  Most of the decline was credited to concerns about the economic future, as the Present Situation Index rose to 36.9 while the Expectations Index dropped to 81.1.  Looking to April, the Econoday-surveyed analysts are expecting an improvement to a level of 65.0.
And what actually happened?  Well, the report shows us that the Consumer Confidence Index beat expectations, rising to a level of 65.4, driven by an increase in both current and future expectations.  The Present Situation Index rose to 37.5, and the Expectations Index rose to 82.6.  According to Lynn Franco, the Director of The Conference Board's Consumer Research Center, "Consumer confidence, which had declined sharply in March, posted a modest gain in April. Consumers’ short-term outlook improved slightly, suggesting that the uncertainty expressed last month is easing. Inflation expectations, which had spiked, retreated somewhat in April. Although confidence remains weak, consumers’ assessment of current conditions gained ground for the seventh straight month, a sign that the economic recovery continues."
So not bad, not bad at all.  Of course, all eyes are focused on the FOMC and what their announcement will be tomorrow at 12:30 EDT.  The smart money is on no change in rates, but we won't know for sure until then.

Monday, April 25, 2011

World News

First of all, Happy World Penguin Day!
North Korea
  • Former President Jimmy Carter, leading a delegation of former state leaders known as The Elders - is visiting North Korea to talk about food aid and North Korea's nuclear program.  "the Elders are not in a position to negotiate, we're not mediators.  We're going to learn what we can and share what we find with the leaders with whom we have contact in the future," he said.  The objective is to find a way to provide humanitarian aid to the nation, where average calorie consumption has fallen from 1400 per day to 700 per day.
United States
  • A US Coast Guard report states that "Deepwater Horizon and its owner, Transocean, had serious safety management system failures and a poor safety culture.  Collectively, this record raises serious questions whether Transocean's safety culture was a factor that contributed to the disaster."  Transocean, which paid large cash bonuses to its entire board of directors on April 5th "in recognition of the Company's achievement of the objectives set at the beginning of 2010 relating to the Company's safety record" disagrees, and goes so far as to claim that "documentary evidence in the Coast Guard's possession refutes" the findings.
  • Bill Nye, aka "The Science Guy", was heckled and booed in Waco, Texas for saying that the moon does not emit light on its own .