by Calculated Risk on 7/28/2013 09:13:00 PM

Monday:
• 10:00 AM ET, the NAR will release the Pending Home Sales Index for June. The consensus is for a 1.4% decrease in the index.

• At 10:30 AM, Dallas Fed Manufacturing Survey for July. This is the last of the regional manufacturing surveys for July. The consensus is a reading of 6.4, mostly unchanged from the reading of 6.5 in June (above zero is expansion).

Weekend:
• Schedule for Week of July 28th

• FOMC Preview: Economic Slowdown

More support for Dr. Janet Yellen from Professor Hamilton at Econbrowser: The case for Janet Yellen as Federal Reserve chair

I have known Governor Yellen for many years, from the days when she was a professor at Berkeley to her distinguished service within the Federal Reserve. I have had an opportunity to interact with her in a variety of settings.

Yellen is brilliant ... Yellen is one of the people I would trust most to be able to sort out what the key problems are and what needs to be done in any new situation. ...

If you examine her speeches and public statements, you will find that she has been one of the most accurate economic forecasters within the Federal Reserve, or for that matter compared with any private-sector economic analysts.

The Nikkei is down about 1.8%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up slightly and DOW futures are up 3 (fair value).

Oil prices have declined slightly with WTI futures at $104.71 per barrel and Brent at $107.35 per barrel. The spread between WTI and Brent is back (but still small).

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are starting to decline again.  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 7/28/2013 05:12:00 PM

Treasury Secretary Jack Lew was on Meet the Press today (recorded Friday). Lew said:

"The fight over the debt limit in 2011 hurt the economy, even though, in the end, we saw an extension of the debt limit. We saw confidence fall, and it hurt the economy. Congress needs to do its job. It needs to finish its work on appropriation bills. It needs to pass a debt limit."

Click on graph for larger image.

Here is a graph of consumer sentiment.  Notice the huge spike down in 2011 - that was due when Congress threatened to "not pay the bills". 

As Jack Lew notes, there is no reason to do this again. 

The following excerpts are from a post I wrote the last time Congress threatened to not pay the bills: Default Ceiling: Bluffing into the Nuts. 

I wrote several posts about the "debt ceiling" debate in 2011.  The debate clearly scared many Americans and impacted the economy.  Hopefully this time the "debt ceiling" will be raised well in advance of the deadline.

I prefer "default ceiling" because "debt ceiling" sounds like some sort of virtuous limit, when, in reality, the vote is about whether or not to the pay the bills - and voting for default is reckless and irresponsible.

Note: Several financial articles recently have used poker terms - and the title of this post is my contribution to this sad trend.  "The Nuts" is the best possible poker hand in a given situation. Bluffing into the nuts is a losing play - and that is what the Congress is trying to do with the "debt ceiling".  The sooner they fold, the better for the economy and the Congress.

From the WaPo: GOP dissension over debt-ceiling strategy

House Speaker John A. Boehner (R-Ohio) likewise insisted that Republicans hold the line, telling his members they must demand that every dollar they raise the debt limit be paired with commensurate spending cuts.

But other Republicans counseled caution, warning that pressure from the business community and the public to raise the $16.4 trillion federal borrowing limit renders untenable any threats not to do so and will weaken the GOP’s hand if their stance is perceived to be a bluff.

It is a bluff. As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

The bottom line is Congress is being silly (again), and they will raise the debt ceiling.  It is just a matter of when. Note: There is a reason Congress never threatens to default right before an election, they hope everyone will forget!

by Calculated Risk on 7/28/2013 10:19:00 AM

The Federal Open Market Committee (FOMC) is meeting on Tuesday and Wednesday, with the FOMC statement expected to be released at 2:00 PM ET on Wednesday.

Expectations are the FOMC will take no action at this meeting (the FOMC will probably not adjust the size of their purchases of agency mortgage-backed securities and Treasury securities).

Jon Hilsenrath at the WSJ wrote on Thursday: Up for Debate at Fed: A Sharper Easy-Money Message

The Federal Reserve is on track to keep its $85 billion-a-month bond-buying program in place at its policy meeting next week, but officials will debate changes to the way the central bank describes its plans for the program and for short-term interest rates.

At their July 30-31 meeting, Fed officials are likely to discuss whether to refine or revise "forward guidance," the words they use to describe their intentions for the next few years.

Any discussion on forward guidance will probably show up in the FOMC minutes, and not in the statement. It is possible that they could lower the unemployment rate threshold, although my guess is the guidance in the statement will remain as follows (Statement from June 19):

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

A key question for the meeting this week is how the FOMC will recognize the weaker incoming data.  Q2 GDP will be released Wednesday morning before the FOMC statement is released, and expectations are for a weak reading (consensus is for 1.1% annualized growth rate in Q2).  For growth, there will probably be some change to the first sentence in the June statement:

Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated.

Perhaps something like the following, maybe without the "considerably" (from the August 2011 statement):

Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected.

A key will be to watch the comments on inflation. At the last meeting, James Bullard dissented because he "believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings".  From the June meeting:

Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Since then, it appears inflation has fallen even more.  The recent decline in inflation is probably a growing concern for some FOMC participants.

As a reminder, here are the quarterly projections from the June meeting. If Q2 is close to consensus, GDP would have to be in the 3.3% to 3.9% range in the 2nd half to reach the FOMC projections (a sharp pickup in activity):

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2013	2014	2015
June 2013 Meeting Projections	2.3 to 2.6	3.0 to 3.5	2.9 to 3.6

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 7.6% in June, and the outlook for Q4 unemployment probably hasn't changed much (the July unemployment rate will be released on Friday).

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2013	2014	2015
June 2013 Meeting Projections	7.2 to 7.3	6.5 to 6.8	5.8 to 6.2

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

For inflation, PCE inflation was up 1.0% year-over-year in May, and only increased at a 0.4% annualized rate during the first five months of 2013.  This is below the FOMC projected range.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2013	2014	2015
June 2013 Meeting Projections	0.8 to 1.2	1.4 to 2.0	1.6 to 2.0

For core inflation, core PCE inflation was up 1.1% year-over-year in May, and only increased at a 1.1% annualized rate during the first five months of 2013.  To reach the FOMC projections, inflation will have to pickup in the 2nd half of 2013.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2013	2014	2015
June 2013 Meeting Projections	1.2 to 1.3	1.5 to 1.8	1.7 to 2.0

So a key for this statement is how the FOMC addresses the weaker incoming data.

by Calculated Risk on 7/27/2013 11:55:00 AM

This will be a very busy week for economic data.  The key reports this week are the Q2 advance GDP report on Wednesday, and the July employment report on Friday.

Other key reports include the ISM manufacturing index on Thursday, auto sales also on Tuesday, and Case-Shiller house prices for May on Tuesday.   The June Personal Income and Outlays report will be released on Friday.

Also there is an FOMC meeting on Tuesday and Wednesday.  Overseas, the ECB and BOE will hold monetary policy meetings, and China's PMI will be released.

----- Monday, July 29th -----
10:00 AM ET: Pending Home Sales Index for June. The consensus is for a 1.4% decrease in the index.

10:30 AM: Dallas Fed Manufacturing Survey for July. This is the last of the regional manufacturing surveys for July. The consensus is a reading of 6.4, mostly unchanged from the reading of 6.5 in June (above zero is expansion).

----- Tuesday, July 30th -----
9:00 AM: S&P/Case-Shiller House Price Index for May. Although this is the May report, it is really a 3 month average of March, April and May.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through April 2012 (the Composite 20 was started in January 2000).

The consensus is for a 12.3% year-over-year increase in the Composite 20 index (NSA) for May. The Zillow forecast is for the Composite 20 to increase 12.1% year-over-year, and for prices to increase 1.3% month-to-month seasonally adjusted.

10:00 AM: Conference Board's consumer confidence index for July. The consensus is for the index to decrease to 81.0 from 81.4.

10:00 AM: Q2 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track with other measures (like the decennial Census and the ACS) and this survey probably shouldn't be used to estimate the excess vacant housing supply.

----- Wednesday, July 31st -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 179,000 payroll jobs added in July, down from 188,000 in June.  

8:30 AM: Q2 GDP (advance estimate). This is the advance estimate of Q2 GDP from the BEA. The consensus is that real GDP increased 1.1% annualized in Q2.  This report will includes a Comprehensive Revision from 1929 through 1st quarter 2013.

9:45 AM: Chicago Purchasing Managers Index for July. The consensus is for an increase to 54.0, up from 51.6 in June.

2:00 PM: FOMC Meeting Announcement.  No change to interest rates or QE purchases is expected at this meeting.

----- Thursday, Aug 1st -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 345 thousand from 343 thousand last week.

All day: Light vehicle sales for July. The consensus is for light vehicle sales to decrease to 15.8 million SAAR in July (Seasonally Adjusted Annual Rate) from 15.9 million SAAR in June.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the June sales rate.

9:00 AM: The Markit US PMI Manufacturing Index for July. The consensus is for the index to increase to 53.1 from 51.9 in June.

10:00 AM ET: ISM Manufacturing Index for July. The consensus is for an increase to 53.1 from 50.9 in June.  Based on the regional surveys, an increase in July seems likely.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in June at 50.9%. The employment index was at 48.7%, and the new orders index was at 51.9%.

10:00 AM: Construction Spending for June. The consensus is for a 0.4% increase in construction spending.

----- Friday, Aug 2nd -----
8:30 AM: Employment Report for July. The consensus is for an increase of 175,000 non-farm payroll jobs in July; the economy added 195,000 non-farm payroll jobs in June.

The consensus is for the unemployment rate to decrease to 7.5% in July from 7.6% in June.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through June.

The economy has added 7.2 million private sector jobs since employment bottomed in February 2010 (6.6 million total jobs added including all the public sector layoffs).

There are still 1.6 million fewer private sector jobs now than when the recession started in 2007.

8:30 AM ET: Personal Income and Outlays for June. The consensus is for a 0.4% increase in personal income in June, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for June. The consensus is for a 2.3% increase in orders.

by Calculated Risk on 7/27/2013 09:50:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for July 26, 2013.

Changes and comments from surferdude808:

The FDIC released its enforcement actions through June 2013 on Friday. This release led to many changes to the Unofficial Problem Bank List. For the week, there were eight removals and three additions that leave the list holding 729 institutions with assets of $260.9 billion. A year ago, the list held 900 institutions with assets of $349.5 billion. For the month, the list declined by 20 institutions after 19 action terminations, seven unassisted mergers, and six additions. The monthly net decline of 20 institutions is the highest since publication of the list.

Actions were terminated against Amalgamated Bank, New York, NY ($3.6 billion); Parkway Bank and Trust Company, Harwood Heights, IL ($2.0 billion); Alliance Bank, Lake City, MN ($579 million); ISB Community Bank, Ixonia, WI ($285 million); First Trust and Savings Bank, Oneida, TN ($149 million); First Pryority Bank, Pryor, OK ($116 million); The Citizens Bank, Enterprise, AL ($95 million); and Bancroft State Bank, Bancroft, WI ($70 million).

The three additions this week were The Bank of Union, El Reno, OK ($388 million); First Security Trust Bank, Inc., Florence, KY ($93 million); and The Citizens State Bank and Trust Company, Woodbine, KS ($16 million). Also, the FDIC issued a Prompt Corrective Action order against Securant Bank & Trust, Menomonee Falls, WI ($202 million), which has been under a formal enforcement action since 2010.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining since then.

by Calculated Risk on 7/26/2013 05:39:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in June to 2.79% from 2.85% in May. Freddie's rate is down from 3.45% in June 2012, and this is the lowest level since May 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Earlier this week, LPS reported that total delinquencies increased in June - but that was mostly due to an increase in short term delinquencies (seasonally delinquencies increase every June). Freddie Mac is reporting serious delinquencies only.

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for June next week.

Click on graph for larger image

Although this indicates some progress, the "normal" serious delinquency rate is under 1%. 

At the recent rate of improvement, the serious delinquency rate will not be under 1% until 2016 or so.

by Calculated Risk on 7/26/2013 02:04:00 PM

From housing economist Tom Lawler:

Several large, publicly-traded home builders have released earnings for the quarter ended June 30th, 2013, and the operating results varied wildly.  Below are some stats for net orders, settlements, and average sales prices on settlements.

All results in the table below include “discontinued operations,” and Standard Pacific’s results exclude JVs.

Ryland’s results included 177 net orders and 17 settlements associated with its June acquisitions of the Dallas operation of LionsGate homes. Standard Pacific completed its acquisitions of “select homebuilding assets” from Centerline Homes and affiliates in June, which included about 30 current and future communities, five of which are active with 119 homes under contract.

Of the results released so far, “most surprising” was the weakness in net order growth at the two largest US home builders, D.R. Horton (up just 12.2% YOY) and PulteGroup (DOWN 12.4% YOY). D.R. Horton’s sales cancellation rate was 24%, up from 19% in the previous quarter and 23% a year ago. An official cited rising mortgage rates as contributing to the rise in cancellations. Last quarter’s sales cancellation rate was down from a year ago, however, at Meritage, M/I, NVR, and Ryland. D.R. Horton, of course, relies more on the first-time home buyer market than these other builders. Pulte does not report its sales cancellation rate in its press release, though an official said that cancellation rates were “little changed.” In Pulte’s press release the company said that “the recent rise in interest rates has had little effect on overall activity,” despite its incredibly disappointing orders. Pulte attributed the slowdown in net home orders to a 16% reduction in community count, as well as “the company’s decision to purposely slow sales in a number of communities,” particularly in Arizona, Nevada, and Southern California, where an official said Pulte had sold homes “too quickly” (presumably meaning at “too low” a price) in 2012. Stated another way, Pulte increased prices in a fashion that slowed sales.

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	3/31/13	3/31/12	% Chg	3/31/13	3/31/12	% Chg	3/31/13	3/31/12	% Chg
D.R. Horton	6,822	6,079	12.2%	6,464	4,957	30.4%	$252,290	$224,975	12.1%
Pulte Group	4,885	5,578	-12.4%	4,152	3,816	8.8%	$294,000	$268,000	9.7%
NVR	3,278	2,614	25.4%	2,878	2,475	16.3%	$344,700	$305,100	13.0%
The Ryland Group	2,191	1,415	54.8%	1,659	1,149	44.4%	$287,000	$253,000	13.4%
Standard Pacific	1,516	1,108	36.8%	1,095	815	34.4%	$397,000	$337,000	17.8%
Meritage Homes	1,637	1,353	21.0%	1,321	1,042	26.8%	$330,000	$270,000	22.2%
M/I Homes	1,078	826	30.5%	788	625	26.1%	$281,000	$259,000	8.5%
Total	21,407	18,973	12.8%	18,357	14,879	23.4%	$294,805	$262,220	12.4%

On the pricing front, all builders reported significant increases in average sales prices, with the increases generally attributed both to overall price increases and a shift in mix, with several builders saying there were focused more on the “move-up” market. Demand from first-time home buyers was perceived at many builders as being “weak.”

While overall results varied a lot, net home orders for the above seven home builders combined were up just 12.8% from a year ago – and a bit less after adjusting for acquisitions – which combined was SUBSTANTIALLY below consensus. In the quarter ended March 31, 2013, net orders for these seven builders combined were up 24.0% from the comparable quarter of 2012.

Given the net home orders reported so far by publicly-traded builders, the Census estimates for new SF home sales for Q2/2013 seem surprisingly strong – 134,000 on an unadjusted basis, up over 30% from the second quarter of 2012. The estimated YOY gain in sales Q1/2013 was about 25% .

Of course, comparing home builder reports with Census SF home sales estimates is “challenging.” First, Census does not treat sales cancellations the same as do home builders. Second, historical data suggest that the timing of the recognition of a “sale” by Census lags that of home builders. Third, there can be substantial quarterly swings in market share. And fourth, preliminary Census estimates are subject to substantial revisions, partly because preliminary estimates include “imputed” data, because the survey data used to estimate sales are based on a permit being issued. Many homes may have a sales contract signed prior to a permit being issued, and Census must “guesstimate” such sales using some “historical trends” model (that has often been changed).

Nevertheless, I have found builder reports to be somewhat useful in projecting revisions in Census’ estimates of new SF home sales. Based on the builder reports so far, there is a better than even chance that Census’ new SF home sales estimates for last quarter will be revised downward, and I’d guess that the bulk of the downward revision will be in June sales. It’s worth noting that while Census’ estimated new SF home sales last quarter were up by over 30% YOY (on an unadjusted basis), estimated sales of homes not yet started were up 53%, compared to 24% for sales of homes under construction, and 20% for sales of completed homes. For June Census estimated that there were 18,000 sales of new SF homes not yet started, up from 11,000 last June, and the highest level since June 2007.

by Calculated Risk on 7/26/2013 11:59:00 AM

Note: The automakers will report July vehicle sales on Thursday, August 1st. 

According the Bureau of Economic Analysis (BEA), light vehicle sales in June were at a 15.9 million rate, on a seasonally adjusted annual rate (SAAR) basis.  It looks like July sales will be in the same range.

Here are a few forecasts:

From Kelley Blue Book: Pickup Trucks, Compact Cars And Crossovers Drive July New-Car Sales Up 16 Percent

In July 2013, new light-vehicle sales, including fleet, are expected to be 1,340,000 units, up 16.1 percent from July 2012 and down 4.4 percent from June 2013. The seasonally adjusted annual rate (SAAR) for July 2013 is estimated to be 15.8 million, up from 14.0 million in July 2012 and down from 15.9 million in June 2013.
...
While the overall economy continues to improve at a slow pace, demand for new vehicles is rapidly approaching pre-recession levels. Due to economic improvement during the first half of the year, Kelley Blue Book is raising its sales forecast from 15.3 million to 15.6 million for 2013.

Press Release: J.D. Power and LMC Automotive Report: July New-Vehicle Retail Sales -- Let the Good Times Roll

Total light-vehicle sales in July 2013 are expected to grow to 1,336,700, an 11 percent increase from July 2012 [15.9 million SAAR] ...

LMC Automotive is raising its forecast for both retail and total light-vehicle sales in 2013. The outlook for total light-vehicles is now at 15.6 million units—previously 15.4 million units—while the retail light-vehicle sales forecast increases to 12.8 million units from 12.6 million units.

From TrueCar: July 2013 New Car Sales Expected to Be Up 15.3 Percent According to TrueCar; July 2013 SAAR at 15.8M, Highest July SAAR since 2006

For July 2013, new light vehicle sales in the U.S. (including fleet) is expected to be 1,326,035 units, up 15.3 percent from July 2012 and down 5.1% percent from June 2013 (on an unadjusted basis).

The [July] 2013 forecast translates into a Seasonally Adjusted Annualized Rate ("SAAR") of 15.8 million new car sales, [down] from 15.9 million in June 2013 and up from 14.1 million in July 2012.

"July delivered the highest year-over-year increase so far in 2013," said [Jesse Toprak, senior analyst for TrueCar.com]

Two key points: 1) sales growth will slow in 2013, and 2) it appears auto sales were solid in July.

Analysts are upping their 2013 projections, but it appears sales will not increase at a double digit rate like the last few years - but this will be another strong growth year for auto sales.

Light Vehicle Sales
	Sales (millions)	Annual Change
2005	16.9	0.5%
2006	16.5	-2.6%
2007	16.1	-2.5%
2008	13.2	-18.0%
2009	10.4	-21.2%
2010	11.6	11.1%
2011	12.7	10.2%
2012	14.4	13.4%
20131	15.6	8.3%
1Projections from Kelley Blue Book and J.D. Power / LMC .

by Calculated Risk on 7/26/2013 10:01:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for July increased to 85.1, up from the June reading of 84.1, and up from the preliminary July reading of 83.9.

This was above the consensus forecast of 84.0 and is the highest since July 2007 (pre-recession). Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011. 

by Calculated Risk on 7/25/2013 09:02:00 PM

Next week the BEA will release comprehensive revisions to GDP for prior years. From Merrill Lynch on the GDP revisions next week:

The release of 2Q GDP on July 31 will be anything but a typical report. The Bureau of Economic Analysis (BEA) will be announcing the results of its comprehensive benchmark revision which we believe will reveal significant adjustments to GDP, personal income, the savings rate and corporate profits. Here are the main takeaways ...

• The level of GDP will be revised higher over the history of the sample, likely in the order of 3.0pp. We believe the revision will be pro-cyclical and therefore make the recessions look modestly deeper and the recoveries appear stronger. In particular, already-released revisions to source data imply an upward revision to 2012.

• Personal income will also be revised higher. However, it will likely be adjusted to be less volatile, likely smoothing the most recent business cycles.

• The saving rate will be revised higher, likely in the order of 2 to 3pp. This could boost the current rate from 3.2% to as high as 6%. We think the revision will be notable over the past cycle, showing greater precautionary saving in response to the financial crisis. The revisions will make the data more comparable to the Flow of Funds (FOF) accounts and help to align the savings rate measured by the FOF and NIPA.

• An upward revision to GDP growth will bring the trend in GDP more in line with the recovery in jobs. It therefore implies an upward revision to the level of productivity, but in particular we look for an upward revision to productivity growth in 2012.

• Corporate profits are likely to be little changed (with a risk of a small downward revision), but the revised series should be less volatile.

• The PCE deflator will be subject to revisions as well, but we have little information regarding the direction or the magnitude. In past benchmarks, the revisions to the deflator have been marginal.

Overall, the revisions will reveal a stronger household sector, which is wealthier and thriftier than previously believed. It will also show that the economy fared better over the past year than was initially reported, implying greater momentum heading into this year.

Friday:
• At 9:55 AM ET, the Reuter's/University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 84.0, up from the preliminary reading of 83.9, but down from the June reading of 84.1.