Global Business Confidence

Global business confidence has seemingly stabilized in recent weeks after downshifting significantly this spring and early summer. Sentiment has weakened across all of the questions posed in the survey, but hiring intentions are down most significantly. Sentiment has weakened most in the U.S. and Japan. It is a hopeful sign that confidence has held firm, at least so far, in the face of the debt-ceiling drama, revival of the European debt crisis, and recent slide in global stock prices. Confidence is now consistent with a global economy that is expanding at the low end of its potential.

FOMC Monetary Policy: 0.0 - 0.25%
The Federal Open Market Committee took the aggressive step of announcing that it expects to keep the target fed funds rate in its current 0% to 0.25% range through the middle of 2013. This is in response to growth that is soft, a weaker near-term forecast, a still-high unemployment rate, and the potential for lower inflation. The central bank will also continue to roll over maturing Treasuries on its balance sheet. Three members dissented.

ECRI Future Inflation Gauge: -1.8
The U.S. future inflation gauge decreased in July to 98.5 from 100.3 previously, its fourth consecutive drop. Since reaching a cyclical peak in March, the ECRI FIG has been easing. This is consistent with the recent spell of poor economic growth and suggests that inflation pressures are abating. 

Treasury Budget: -$129.4 bil
The unified budget deficit for July was $129 billion. Through the first 10 months of fiscal 2011, the deficit was down 6% from last year. The budget deficit will decline slightly in 2011; while the recovery is boosting personal and corporate income tax revenues, the Social Security payroll tax cut is reducing other revenues.

Bankruptcy Filings: -9.8%
Personal bankruptcy filings rose in the second quarter, and business filings declined only modestly. However, personal filings normally increase in the second quarter, and the year-over-year decline was the largest since immediately following the reform at 9.8%. The year-over-year decline in business filings was little changed at 15%. Business filings have been declining for two years on a quarter-to-quarter basis. Credit conditions improved despite the slowing recovery.

Productivity and Costs: -0.3%
Nonfarm business productivity fell 0.3% (SAAR) in the second quarter, as hours increased more than output. The consensus was for an increase of 0.2%. Unit labor costs rose 2.2% in the quarter. With recent revisions to the GDP data, productivity over the past few years has been weaker than originally reported, and the decline in unit labor costs has been smaller. Still, there are few inflationary pressures coming from the labor market. Slowing productivity and low unit labor costs should lead firms to hire as demand increases.

Wholesale Trade (MWTR): 0.6%
Wholesale inventories rose 0.6% in June after increasing a downwardly revised 1.7% in May (previously 1.8%). The rise in inventories fell short of the consensus expectation of a 1% gain. Sales rose 0.6% after falling a downwardly revised 0.3% last month (previously -0.2%). The inventory-to-sales ratio was unchanged at 1.16.

Employment Situation: +117,000
The labor market created 117,000 jobs on net, better than expected. In particular, private sector employment increased by 154,000. Further, much of the loss in the public sector is attributable to temporary layoffs of Minnesota's state government workers. The household numbers were less positive, however. Although the unemployment rate edged down to 9.1%, this was primarily due to labor force contraction, which took many unemployed workers out of the equation. The better than expected report may quell some of the doom and gloom that appeared this week. 

Monster Employment Index: -2
The U.S. Monster employment index fell by 2 points in July to 144. The fall in labor demand is in line with other surveys that suggest the U.S. labor market failed to improve markedly in July. A stronger U.S. recovery hinges on an improving labor market.

Job Openings and Labor Turnover Survey:+ 2.3%
The June JOLTS reports shows little evidence of further weakening labor market in June although the last two months show a marked change from earlier this year. Most measures were little changed in June from the prior month. As expected, gross hiring weakened, but only slightly compared with May; the economy generated 4.05 million jobs, down from 4.13 million in May. Hiring has remained fairly steady during the past four months. More surprising, the number of available jobs increased to 3.1 million from 3 million in May. Also surprising was the slight decline in layoffs following the May escalation. Total separations declined to 4 million from 4.15 million. Thus, net employment made little headway as both hiring and separations declined slightly.

MBA Mortgage Applications Survey: +21.7%
For the week ending August 5, the composite index increased 21.7% from the previous week, buoyed by a boom in refinance applications. The refinance index climbed 30.4%, to finish the week at 3,625.7. Meanwhile, the purchase index retrenched slightly, slipping 0.9% to 184.2.

 NAR Metro Prices: -2.8%
According to the NAR, year-to-year price declines are moderating, falling just 2.8% in the second quarter, about half the decline in the first quarter. Over the same period, home sales are down nearly 13%. On a regional basis, performance was mixed, with three of the four census regions posting year-to-year declines. Only the Northeast, where prices are up 5.4%, posted an annual gain. Price performance at the metro level was similar: 109 out of 150 metro areas are below year-ago levels.

 Creditforecast.com Household Credit Report: -3.2%
July was somewhat of a mixed month for consumer credit conditions. While default rates (including bankruptcies) dropped sharply, delinquencies were virtually unchanged and the pace of deleveraging accelerated. Balances were 3.2% below their year-ago level after dropping only 2.7% in June. The weakness in job growth and auto sales is likely taking a toll, although the weakness was most prevalent in mortgage and student loan lending. The decline in accounts also accelerated, to 0.9% from 0.6%. Conditions will improve more consistently later this year as economic growth reaccelerates. 

Consumer Credit (G19): +$15.5 bil
Consumer credit increased a better than expected $15.5 billion in June. The rise was the largest since the recession and included gains in both revolving and nonrevolving credit. Although the recent data on consumer spending have looked soft, it is encouraging to see that consumers are willing and able to get credit.

Chain Store Sales Snapshot: -0.5%
The ICSC chain store sales index posted its second straight decline, falling 0.5% in the latest week. Hot weather reportedly was a drag on back-to-school spending, but this was partly offset by sales tax holidays in several states. Year-over-year growth moderated to 3.6%, its lowest level in five weeks. The ICSC reported improved customer traffic at malls and discount outlets. Consumers are still spending.

 

Oil and Gas Inventories: -5.2 mil barrels
Crude oil inventories decreased by 5.2 million barrels during the week ending August 5, in stark contrast to the consensus expectation of an increase of 1.4 million barrels. Gasoline inventories decreased by 1.6 million barrels, contrasting with expectations of a 900,000-barrel increase. Distillate inventories fell by 700,000 barrels, below expectations of a 1.1 million-barrel increase. Total petroleum demand rose. This report supports higher oil prices.