Weekly Economic Data - August 10, 2008
Previous Weeks Economic Data (August 4 - August 8)
| Date | Statistic | For | Actual | Briefing Forecast | Market Expects | Prior | Revised From |
|---|---|---|---|---|---|---|---|
| 8/4 | Personal Income | Jun | 0.1% | 0.0% | -0.2% | 1.8% | 1.9% |
| 8/4 | Personal Spending | Jun | 0.6% | 0.4% | 0.4% | 0.8% | - |
| 8/4 | Factory Orders | Jun | 1.7% | 0.5% | 0.7% | 0.9% | 0.6% |
| 8/5 | ISM Services | Jul | 49.5 | 51.0 | 48.7 | 48.2 | - |
| 8/5 | FOMC Policy Statement | - | - | - | - | - | - |
| 8/6 | Crude Inventories | 08/02 | 1614K | NA | NA | -81K | - |
| 8/6 | Consumer Credit | Jun | - | $7.0B | $6.0B | $7.8B | - |
| 8/7 | Initial Claims | 08/02 | 455K | 420K | 420K | 448K | - |
| 8/7 | Pending Home Sales | Jun | 5.3% | - | -1.0% | -4.9% | -4.7% |
| 8/8 | Productivity-Prel | Q2 | 2.2% | 2.5% | 2.5% | 2.6% | - |
| 8/8 | Wholesale Inventories | Jun | 1.1% | 0.6% | 0.6% | 0.9% | 0.8% |
Higher than expected growth in personal income and personal spending provides positive support of the US economy. The US economy is highly impacted by consumer spending, so income and spending strength is also important. However, the question of how much the $110 billion stimulus package has influenced these numbers remains. Walmart for example, provided caution in guidance suggesting weaker future sales because most shoppers have already received stimulus checks. In addition, continued productivity growth is a positive indicator. Productivity increases help drive GDP and keep cost-push inflation under control.
The FOMC also met last week. The fed left the key lending rate at 2%. In addition, the FOMC stated that inflation is of increasing concern and the risks to growth still remain.
Thus, I think economic indicators still paint a skeptical picture of the economy. The ability of the economy to grow in the face of dropping housing prices, rising unemployment, increasing inflation, and a deleveraging banking system paint a negative picture. However, I believe recent decreases in commodity prices the resilence of productivty and consumer spending are positive indicators. Also the rally in the stock markets driven by some positive earnings announcements, lower oil prices, and a rise in the value of the dollar relative to other currencies is encouraging.
For the general stock markets, this quote by the late Sir John Templeton is important: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Next Weeks Economic Data (August 12 - August 15)
| Date | Statistic | For | Actual | Briefing Forecast | Market Expects | Prior | Revised From |
|---|---|---|---|---|---|---|---|
| 8/12 | Trade Balance | Jun | - | -$59.B | -$61.9B | -$59.8B | - |
| 8/12 | Treasury Budget | July | - | NA | -$69.0B | NA | - |
| 8/13 | Export Prices ex-ag. | Jul | - | NA | NA | 0.9% | - |
| 8/13 | Import Prices ex-oil | Jul | - | NA | NA | 0.9% | - |
| 8/13 | Retail Sales | Jul | - | 0.4% | 0.5% | 0.1% | - |
| 8/13 | Retail Sales ex-auto | Jul | - | 0.7% | 0.6% | 0.8% | - |
| 8/13 | Business Inventories | Jun | - | 0.5% | 0.5% | 0.3% | - |
| 8/13 | Crude Inventories | 08/06 | - | NA | NA | 1614K | - |
| 8/14 | Core CPI | Jul | - | 0.2% | 0.2% | 0.3% | - |
| 8/14 | CPI | Jul | - | 0.3% | 0.4% | 1.1% | - |
| 8/14 | Initial Claims | 08/09 | - | NA | NA | 455K | - |
| 8/15 | NY Empire State Index | Aug | - | NA | -5.0 | -4.9 | - |
| 8/15 | Net Foreign Purchases | Jun | - | NA | NA | $67.0B | - |
| 8/15 | Capacity Utilization | Jul | - | 79.9% | 79.8% | 79.9% | - |
| 8/15 | Industrial Production | Jul | - | 0.1% | 0.0% | 0.5% | - |
| 8/15 | Mich Sentiment-Prel. | Aug | - | 63.0 | 62.0 | 61.2 | - |
The economic indicators I will be especially interested in monitoring are trade balance, retail sales, CPI, and industrial production.
Trade balance is a key indicator in the increasingly export driven United States economy. As the US dollar has decreased in relative value, exports have substantially increased. Continued export strength will boost the weak US economy.
Retail sales are critical for a consumer driven US economy. Retail sales have remain resilient in the face of rising commodity prices, lower home values, and slowing employment. The continued strength of retail sales is important especially because of the $110 billion stimulus package provided to citizens.
CPI, a measure of inflation, is also an important economic indicator. There is continued debate about the US economy is moving into a stagflation period, similar to the 1980s. In addition, rising inflation combined with a slowing economy places the Fed in a difficult position because cutting rates to boost the economy will increase inflation. While Core CPI has remained contained with a slowing economy, total CPI has been increase driven primarily by rising commodity prices. Recent decreases in commodity prices should help contain inflation, evidenced by decreases in the 5 and 10 year break even levels.
Industrial production has yet to substantially decrease on a year over year basis. In recessions, industrial production normally falls well below previous year levels. The continued resilience of this indicator is important.
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