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

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Thursday, August 18, 2011

FW: First Time Jobless Claims

And, of course, we have the first time jobless claims.  If you're new to this, this report is a measure of how many people filed for unemployment insurance in the previous week.
Last week, the figures for the week ending 8/6 were better than expected.  New claims for 7/30 were revised upwards to 402,000 - technically putting us at 20 upwards revisions in 24 weeks, although it did only increase by 2000 this time.  The seasonally adjusted 8/6 initial new jobless claims figures came in at 395,000 (beating  while the actual numbers came in at 351,370.   and the total number of people claiming benefits in all programs fell to a level of 7,479,915.

But all that was last week.  For the week ending 8/13, our Econoday-surveyed analysts are a little less optimistic, and are expecting 400,000 new claims.  To check the accuracy of the prediction, we turn to the US Department of Labor's Unemployment Insurance Weekly Claims Report.
Right off the bat, the DoL breaks with tradition by revising the 8/6 seasonally adjusted initial claims downward to 399,000[1].  That's nice to see.  On the other hand, the advance figure for seasonally adjusted initial claims for the week ending 8/13 comes in at 408,000, missing expectations.  The unadjusted number of actual initial claims for 8/13 comes in at 342,669 (down 8,701 from the previous week), and the total number of people claiming benefits in all programs comes in at 7,336,178 (a decline of 143,737)[2]..
The markets will probably see beating expectations on new claims as a win.  Will it be enough of a win to offset the CPI results?  We should start finding out here in about 5 minutes.
[1]  Improving their batting average to 20 upwards revisions in 25 weeks.
[2]  Sounds nice, doesn't it?  But here's your weekly dose of economic malaise:  the Employment Situation report for July 2011 shows an increase in nonfarm payroll employment of only 117,000.  Now, in the month of July, there were 2,060,000 first time jobless claims.  So 2 million people lost jobs, and only 117 thousand people found jobs.  The operative phrase here is "net loss".

Consumer Price Index News Release

Bureau of Labor Statistics
The latest Consumer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/cpi.pdf and also archived at http://www.bls.gov/news.release/archives/cpi_08182011.pdf. Highlights are below.

Consumer prices rise 0.5% in July as gas, food, and shelter prices rise


On a seasonally adjusted basis, the CPI-U increased 0.5 percent in July after falling 0.2 percent in June. The index for all items less food and energy rose 0.2 percent in July after increasing 0.3 percent in June.

HTML | PDF | Local and Regional CPI

Consumer Price Index

Yesterday, we got to see what inflation is doing to consumers.  Now, it's our turn.  It's time for the CPI, and that means inflation.
Well, technically it could also mean deflation.  But nobody really expects that, because the Fed distinctly dreads and detests deflation[1].  And also because, low interest rates notwithstanding, there is a huge sum of money sitting out there waiting to roll out and transform our economy.
June's inflation results were, and I seem to be saying this a lot, a mixed bag.  Headline inflation - the Consumer Price Index for All Urban Consumers (or CPI-U) - declined 0.2%, which was right in line with expectations.  Core inflation - the CPI-U sans food and energy - increased 0.4%, which was twice the expected increase.  Most of the decline in headline inflation was driven by declining energy costs, as energy CPI dropped 4.4%.  All of which meant that, looking at the rolling year, CPI-U increased 3.6%, core CPI-U increased 1.6%, food CPI increased 3.7% and energy CPI increased 20.1%.
So that was June.  For July, the Econoday-surveyed analysts are feeling a little bearish.  They're calling for a 0.2% increase in CPI-U, and a 0.2% increase in core CPI-U.  But, to find out if they're right, we turn to the Consumer Price Index Summary from the Bureau of Labor Statistics.  And, wow.  They weren't bearish enough.
CPI-U increased 0.5% in July, badly missing expectations, driven by a 0.4% increase in food CPI-U and a 2.8% increase in energy CPI-U.  For what it's worth, core CPI-U hit right in line with expectations, coming in at a 0.2% increase.  So yes, the Fed will say that inflation is only 0.2%.
For the rolling year, CPI-U is still up 3.6%, core CPI-U is up 1.8%, food CPI is up 4.2%, and energy CPI is up 19.0% (with gasoline up 33.3%).
So, yeah.  The markets probably won't be happy with this.  Let's see if First Time Jobless Claims improve their mood.
[1]  Say that ten times fast.  I dare you . 

Wednesday, August 17, 2011

World News!

  • With US Vice-President Joe Biden getting ready to arrive in China, our single largest sovereign debt holder has spelled out exactly what they want to hear from its debtor:  "As the United States' largest foreign creditor, China has much at stake over US economic policy changes and a stable US dollar[1].  Therefore, Washington's handling of all the related issues in a responsible manner will contribute to the steady growth of China-US ties and the stable development of the world economy given the mounting concern about European and US debt woes and fragile global economic recovery."
  • Remember the report from a couple of days ago, claiming that Pakistan had given China access to the wrecked stealth helicopter used in the raid that killed Bin Laden?  The Chinese defence minsitry has denied it, and US officials have been unable to confirm the story.
  • Rebel forces have attacked the oil refinery at Zawiyah, one of the last sources of fuel for loyalist troops and the city of Tripoli.  In related news, the rebel National Transitional Council has also denied negotiating a peaceful conflict to the civil war with the Libyan government.
  • The good news is that "shelling and the sound of tank machineguns [are] subdued today".  The bad news is that Syrian "security personnel" are rounding up hundreds of people in Latakia and forcibly interring them in a stadium.  Condemnations continue to trickle in from the rest of the world[2], with Turkey taking the hardest line to date:  "if the operations continue in Syria and the operations become a regional problem Turkey can naturally not remain indifferent".
United States
  • Texas governor and Republican presidential candidate Rick Perry declared that it would be "treasonous" if Ben Bernanke "prints more money between now and the election".  He didn't quite advocate murder as a response, but it's hard to interpret the following comment in a different light:  "If this guy prints more money between now and the election, I don't know what y'all will do to him in Iowa, but we would treat him pretty ugly down in Texas."
  • President Obama's response to Governor Perry's remarks?  "You know, Mr. Perry just got into the presidential race.  I think that everybody who runs for president, it probably takes them a little bit of time before they start realizing that this isn't like running for governor or running for senator or running for Congress, and you've got to be a little more careful about what you say.  But I'll cut him some slack.  he's only been at it for a few days now."
  • Warren Buffett - yes, that Warren Buffett - has suggested that the US "Stop Coddling the Super-Rich".
  • In "you know, they were called coffin nails in the 19th century" news, RJ Reynolds Tobacco, Lorillard Tobacco, Commonwealth Brands, Liggett Group and Santa Fe Natural Tobacco have filed suit against the Food and Drug Administration to stop a new law that would require them to place graphic health warnings on cigarette packets.  The suit claims that the law violates their constitutional right to free speech.
[1]  To quote Xinhua:  "Among China's more than 3 trillion dollars foreign exchange reserves, 1.16 trillion dollars were US Treasuries bonds as of May, according to the US Treasury Department.  'If the greenback devalues by 10 percent to 20 percent, China will suffer another loss of as much as 200 billion to 300 billion in the near future,' according to Chen Xiankui, a professor at Renmin University of China."
[2]  Polonius:  What do you read, my lord?
     Hamlet:  Words, words, words.

Producer Price Index News Release

Bureau of Labor Statistics
The latest Producer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/ppi.pdf and also archived at http://www.bls.gov/news.release/archives/ppi_08172011.pdf. Highlights are below.

In July the PPI for finished goods increases 0.2% and finished core advances 0.4%


The Producer Price Index for finished goods rose 0.2 percent in July, seasonally adjusted. This advance followed a 0.4-percent decrease in June and a 0.2-percent rise in May. Prices for finished goods less foods and energy rose 0.4 percent.


Producer Price Index

We've only got one major piece of market data today, but it's a big one:  the Producer Price Index (or, more precisely, indexes).  Given the title of this news item, this should be no surprise.
The Producer Price Index is actually a set of indexes that measure the change in costs of supplies used by manufacturers at all stages of the manufacturing and production process - raw materials, intermediate goods, and finished products.  It's very much like the Consumer Price Index, except for producers, because it is essentially a measure of inflation.  If PPI is up, you can expect to see it eventually flow through to the CPI as well - although not always at a 1:1 ratio.  After all, a lot of manufactured goods are discretionary, and if the prices go up too far people will just refuse to buy them.
Nevertheless, the market pays attention to this figure.  Rising costs, particularly if they don't get passed on to the consumer, cut into corporate profits
The June 2011 results were mixed.  PPI for finished goods fell 0.4% (beating expectations), but core PPI rose 0.3% (missing expectations).  The overall change in PPI was driven by a 2.8% decrease in finished energy.  Intermediate goods PPI changed 0.0%, and crude goods PPI fell 0.6%.
For July 2011, the Econoday-surveyed analysts aren't quite as optimistic.  They're calling for a 0.0% change in PPI for finished goods, and a 0.2% increase in core PPI for finished goods.  And as always, we turn to the US Bureau of Labor Statistics' Producer Price Indexes - July 2011 to see if the analysts are right.  And the short answer is that they are not right.
The Producer Price Index for finished goods actually rose 0.2% (missing expectations), and the core Producer Price Index rose 0.4% (also missing expectations).  The report pins the blame for the core PPI increase on a 2.8% increase in tobacco product prices[1], as well as on an increase in the cost of light motor trucks and pharmaceutical preparations.  The increase in overall PPI is blamed on finished consumer foods, which increased 0.6% (driven by a 2.7% increase in beef and veal prices and by higher prices for fresh fruits and melons), offset slightly by a 0.6% decline in finished energy prices (led by gasoline, which fell 2.8%).
PPI for intermediate goods rose 0.2%, mostly on a 2.1% increase in the cost of plastic resins and materials.  PPI for crude goods fell 1.2%, driven by a 2.6% decline in crude energy materials and a 0.8% decline in crude foodstuffs and feedstuffs.
All in all, not great.  But far from terrible, really.
[1]  Tobacco:  not food, and not energy.

Monday, August 15, 2011

World News!

  • In "just when you though relations couldn't get any worse" news, the Financial Times has reported that Pakistan gave China access to the crashed US stealth helicopter that was part of May's commando raid to kill Osama bin Laden.  The reports indicate that China was allowed to take pictures and samples of the aircraft's skin.  Pakistan has officially denied the report.
South Korea
  • Syria is on its thrid day of brutal tank-based repression of protests in the port city of Latakia[1], supplementing the conventional ground forces with naval bombardments.  Fortunately, according to the official Syrian news agency, the tank-based "order preservation forces" are entirely blameless;  all of the damage and civilian deaths are being caused by armed terror gangs "using machineguns and explosives from rooftops and from behind barricades".
United States
[1]  They're on month 5 of the brutal tank-based repression of the populace in general.  Kinda makes you wonder where the outrage from NATO and the UN is, doesn't it?