

World View & Market Commentary.
Forest first; Trees second.
Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.
Highlights
In what is very good news for the economy, the number of unemployed filing for first-time jobless claims fell 16,000 in the June 11 week to 414,000 (prior week revised 3,000 higher to 430,000). The four-week average, though unchanged at 424,750, is more than 15,000 below where it was a month ago in a comparison that points to stronger payroll growth and a lower unemployment rate for the June employment report. Continuing claims also came down, down 21,000 to 3.709 million in data for the June 4 week with the unemployment rate for insured workers unchanged at 2.9 percent. There are no special factors skewing this report, one that should help boost confidence in the economic outlook and help limit the troubles underway in the financial markets.
Highlights
Housing construction shows signs of life in May. Housing starts rebounded 3.5 percent, following a revised 8.8 percent drop in April (originally down 10.6 percent). May's annualized pace of 0.560 million units topped analysts' projection for 0.547 million units and is down 3.4 percent on a year-ago basis. The gain in May was led by a 3.7 percent rebound in the single-family component, following a 3.3 percent decline in April. The volatile multifamily component made a partial comeback, rising 2.9 percent after falling 21.7 percent the month before.
By region, the drop in starts in was led by a monthly 18.1 percent gain in the West with the South rising 1.5 percent. However, the Midwest and Northeast saw declines of 4.1 percent and 3.3 percent, respectively.
Housing permits are pointing to a little more optimism on the part of homebuilders. Housing permits jumped 8.7 percent in May, following a 1.9 percent decrease in April. Overall permits posted at an annualized rate of 0.612 million units and are actually up 5.2 percent on a year-ago basis.
Housing starts remain at low levels but the May numbers for starts and permits indicate that there is modest demand in some local markets for new construction-likely built to order rather than spec. But the fundamentals are unchanged. There is still enormous supply on the market and the best sustainable trend in the near term is incrementally up or more likely merely holding steady.
On the news, equity futures rose (became less negative) with a better-than-expected jobless claims number also contributing.
Highlights
The nation's current account deficit deepened in the first quarter, to $119.3 billion vs a revised $112.2 billion in the fourth quarter (revised from $113.3 billion). The deeper deficit is due to a wider trade gap on goods & services, at $140.8 billion vs the fourth quarter's $118.8 billion. Note that much of this is tied to oil prices. A plus in the report is the balance on investment income which rose to a surplus of $54.8 billion vs the fourth quarter's $39.9 billion reflecting mostly short-term investment from foreigners. The bottom line is that the current account as a percentage of GDP is 3.2 percent, above 3.0 percent in the fourth quarter but under the 3.3 percent of the third quarter.
Highlights
Mortgage bankers were very busy in the June 10 week as applications for both purchases and especially for refinancings jumped sharply. The purchase index rose 4.5 percent to offset a similar sized decrease in the prior week. The refinancing index added to a solid gain in the prior week with a 16.5 percent surge. Favorable terms are an important plus behind the demand with 30-year mortgages down three basis points to an average 4.51 percent. One week's data is only week's data but the June 10 week is a good start for the summer housing season. Home builders will have their say at 10:00 a.m. ET this morning with the housing market index.
Highlights
Consumer price inflation softened in May on a decline in energy costs. The consumer price index in May grew at a 0.2 percent rate, down from 0.4 percent in April. The latest figure, however, came in higher than the consensus forecast for no change. Excluding food and energy, the CPI jumped 0.3 percent, following a 0.2 percent rise the month before. Analysts had forecast a 0.2 percent increase.
Turning to major components, energy came down 1.0 percent, following a string of strong gains including 2.2 percent in April. Gasoline declined 2.0 percent after jumping 3.3 percent in April. Food prices rose 0.4 percent, matching the boost in April.
Within the core, indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April. These increases more than offset declines in the indexes for airline fare, tobacco, and personal care. New & used vehicles rose a strong 1.0 percent but this may be a temporary effect of supply disruptions of parts from Japan and less availability of some auto models.
Year-on-year, overall CPI inflation worsened to 3.4 percent (seasonally adjusted) from 3.1 percent in April. The core rate bumped up to 1.5 percent from 1.3 percent in April on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in May while the core was up 1.5 percent.
Today's inflation report lowers the odds of the Fed engaging in QE3 as there clearly are some warm spots within the CPI. With energy softening a bit, food price inflation is standing out more.
HighlightsUmmm, it was the weather! No, it was Japan. But it couldn’t possibly be debt saturated American “consumers” within their debt saturated governments, could it? Oh never mind, get out there and shop some more, your nation needs you… to be further in debt.
For the first time since November, monthly business conditions in the New York manufacturing region contracted in what is an ominous, though nevertheless still isolated, indication for the national economy. The Empire State index fell nearly 20 points in the June reading to minus 7.79 in what the report describes as a "steep" decline. New orders fell nearly 21 points to minus 3.61, again a negative reading indicating month-to-month contraction compared to May. Shipments are even worse, down nearly 35 points to minus 8.02.
Other details include faster delivery times, which is an indication of weak activity, and a moderating rate of inventory accumulation which is another sign of weakness. Input costs remain extremely high while pricing power for output prices is easing. The report also shows a moderating rise in the number of employees and a contraction in the workweek.
If the sister report on Thursday from the Philadelphia Fed also turns negative, talk will definitely pick up for contraction in the national ISM manufacturing report for June. National data for May on the manufacturing sector will be posted at 9:15 a.m. ET this morning in the industrial production report.
Highlights
Industrial production posted a modest rise in May but was held back by a drop in utilities. Manufacturing improved moderately but was quite strong outside of autos. Overall industrial production in May edged up 0.1 percent, following no change in April (originally unchanged). The market median forecast was for a 0.2 percent gain.
However, manufacturing made a comeback, rebounding 0.4 percent in May, following a 0.5 percent fall the prior month. April auto production had been constrained by shortages of parts from Japan related to the March earthquake and tsunami and this damping effect appears to have continued into May with motor vehicle assemblies essentially flat. Excluding motor vehicles, manufacturing advanced a robust 0.6 percent after a 0.1 percent dip in April.
Utilities dropped 2.8 percent after increasing 2.4 percent the month before. Mining output expanded 0.5 percent after a 0.8 percent boost in April.
On a year-on-year basis, overall industrial production slowed to 3.4 percent from 4.7 percent in April.
Overall capacity utilization in May was unchanged at 76.7 and came in lower than the consensus estimate for 77.0 percent.
The details for the production report are quite encouraging as the headline number was weighed down by utilities and manufacturing excluding autos was very healthy. Taking into account that auto assemblies eventually will work around current parts shortages, forward momentum looks good and the national numbers for May are much more positive than the June numbers from the Empire State report.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Highlights
The net inflow of foreign investment improved in April but is still at a very moderate $30.6 billion, far below what's needed to fund the nation's fiscal debt and trade deficit. Private foreign accounts were however big buyers of US equities in the month with a net inflow of $16.6 billion. Including official accounts, the net inflow into equities was $17.8 billion. But April was a good month for the stock market which hit a peak at month end, a peak that is now a distant memory and which points to trouble for these readings in the coming reports.
Outside of equities, official accounts, which include foreign central banks, were the biggest buyers in the month with net inflow into Treasuries of $24.4 billion vs a net outflow from private accounts of $1.0 billion. There was a net outflow from both official and private accounts for corporate bonds. When including short-term securities, total inflow in the month nearly doubled to $127.1 billion which is a welcome positive. But a negative in the report is a high level of outflow from the US into foreign securities, at $14.2 billion in the month.
A look at Treasury holdings by nations shows a $7.6 billion rise in mainland China, which is also a positive, to $1.15 trillion and a small decline in Japan to $906.9 billion. UK-based accounts, which are the third largest holders of US Treasuries, shows a $7.8 billion increase to $333.0 billion.
Highlights
You would never know the economy is in recovery based on reports from the National Federation of Independent Business whose small business optimism index continues to move south, down three tenths in May to a recessionary level of 90.9. The report points to weak consumer spending as the main factor, one that's hitting services which is a central sector to small businesses. The report has a sharp political tone saying, without much detail, that Washington policies aren't encouraging small businesses to hire. The report's job creation indications are deteriorating with capital spending and inventory plans weakening. One in four respondents say weak sales are their top problem. Inflation is also cited as a major concern.
Highlights
At the producer level, inflation slowed but there were still f hot spots in the data. Overall PPI inflation in May softened to 0.2 percent from April's 0.8 percent jump. May came in higher than the median projection for a 0.1 percent increase. By major components, energy still gained, by 1.5 percent after a 2.5 percent gain in April. Specifically, gasoline increased 2.7 percent, after jumping 3.6 percent in April. However, food fell 1.4 percent, following a 0.3 percent rebound the month before. At the core level, PPI growth eased to 0.2 percent after a 0.3 percent rise in April and equaling the median forecast for 0.2 percent.
Highlights
Headline retail sales slipped in May, tugged down largely by auto sales and with other components mixed. Overall retail sales in May dipped 0.2 percent, following a revised 0.3 percent gain in April (originally up 0.5 percent). May's decline was less negative than the median forecast for a 0.3 percent decrease. Excluding autos, sales advanced 0.3 percent, following a 0.5 percent rise in April. The consensus called for a 0.3 percent increase. Gasoline sales gained but only moderately. Sales excluding autos and gasoline in May printed at a 0.3 percent rise, matching the increase the month before. Overall, the trend is upward but at a modest pace the last two months following strong months in March and February.
Surging college costs price out middle class
NEW YORK (CNNMoney) -- What do you get when college costs skyrocket but incomes barely budge? Yet another blow to the middle class.
"As the out-of-pocket costs of a college education go up faster than incomes, it's pricing low and medium income families out of a college education," said Mark Kantrowitz, publisher of financial aid sites FinAid.org and FastWeb.com.
The numbers confirm what most middle class families already know -- college is becoming so expensive, it's starting to hold them back.
The crux of the problem: Tuition and fees at public universities, according to the College Board, have surged almost 130% over the last 20 years -- while middle class incomes have stagnated.
Tuition: In 1988, the average tuition and fees for a four-year public university rang in at about $2,800, adjusted for inflation. By 2008, that number had climbed about 130% to roughly $6,500 a year -- and that doesn't include books or room and board.
Income: If incomes had kept up with surging college costs, the typical American would be earning $77,000 a year. But in reality, it's nowhere near that.
In 2008 -- the latest data available -- the median income was $33,000. That means if you adjust for inflation, Americans in the middle actually earned $400 less than they did in 1988. (Read: How the middle class became the underclass).
Financial aid: Meanwhile, the amount of federal aid available to individual students has also failed to keep up. Since 1992, the maximum available through government-subsidized student loans has remained at $23,000 for a four-year degree.
"There does seem to be this growing disparity between income and the cost of higher education," said Justin Draeger, president of the National Association of Student Financial Aid Administrators. "At the same time, there's been a fundamental shift, moving away from public subsidization, to individuals bearing more of the cost of higher education."
Facing that disparity, it's no wonder then that two other trends have emerged: Families are taking on unprecedented levels of debt or downgrading their child's education from a four-year, to a two-year, degree to cut costs.
Student debt is often viewed as a good kind of debt, because a college education seems to promise a better future.
College grads, after all, have much lower unemployment rates than high school grads. And they earn $1 million more over their lifetimes, according to a much-quoted figure from the Labor Department . (Read: Is a college degree really worth $1 million?)
But even in this case, too much of a good thing can still be bad.
About two thirds of students graduating with four-year degrees recently did so with loans hanging over their heads, and their average bill comes in at a whopping $23,186, according to FinAid.org.
Of those, Kantrowitz estimates that about half will still be repaying their loans in 20 years -- the traditional student loan period. And for many, that may very well mean they won't be able to buy a home, save for retirement or fund the next generation's education.
"They could still be paying back their own student loans, when their children are in college," he said.
Hot Particles From Japan to Seattle Virtually Undetectable when Inhaled or Swallowed
With all the disinformation and left/right “solutions” that the mainstream and conflicted politicians use to box us in with, it’s obvious that the majority have their minds captured as well. I sure hope that we won’t always have to be, living in a fantasy…