by Calculated Risk on 3/14/2011 08:45:00 AM

From the NY Times: Second Explosion at Reactor as Technicians Try to Contain Damage

From the NY Times: Radioactive Releases in Japan Could Last Months, Experts Say

From the WSJ: Supplies Run Short for Quake Survivors

From the NY Times: In Tsunami’s Wake, Much Searching but Few Are Rescued

Libya: From McClatchy: Gadhafi's forces roll east, build pressure on U.S. to step in

Weekend on U.S. economy:
• Summary for Week ending March 11th
• Schedule for Week of March 13th
• Preview of Tuesday FOMC Meeting

by Calculated Risk on 3/13/2011 08:31:00 PM

By requests, a few links ...
From the LA Times: Japan quake toll could number in tens of thousands

From the NY Times: Death Toll Estimate in Japan Soars as Relief Efforts Intensify

From the NY Times: Partial Meltdowns Presumed at Crippled Reactors

Before and after satellite photos from the NY Times.

The Nikkei is off 5%. From the WSJ: Japan Stocks Drop 5% Early Monday

Update: From Bloomberg: Japan Adds $86 Billion to Stabilize Markets After Quake

Earlier on U.S. economy:
• Summary for Week ending March 11th
• Schedule for Week of March 13th
• Preview of Tuesday FOMC Meeting

by Calculated Risk on 3/13/2011 01:30:00 PM

My thoughts are with the Japanese ...

There will be a one day meeting of the Federal Open Market Committee (FOMC) this coming Tuesday. The FOMC statement will be released around 2:15 PM ET, and I expect no changes to the Fed Funds rate, or to the program to reinvest principal payments, or to the Large Scale Asset Purchase program (LSAP, aka "QE2").

Some questions are:
1) how will the statement differ from the January statement,
2) will there be any mention of "tapering" off QE2 purchases (as opposed to ending abruptly in June),
3) and will any members dissent?

1) Possible Statement Changes. I don't expect the key sentence "likely to warrant exceptionally low levels for the federal funds rate for an extended period" to be changed any time soon.

There might be some minor changes to the first paragraph to mention the recent improvement in economic and employment data (and possibly mention additional downside risks from higher oil prices and maybe Japan). Also the FOMC statement will continue to note that "measures of underlying inflation are somewhat low", but they might modify or remove the sentence "the measures of underlying inflation have been trending downward."

2) Tapering off of QE2 Purchases? Back in January I heard speculation that the Fed might taper off the QE2 purchases of treasury securities to "promote a smooth transition in markets". That is what the Fed did with previous purchase programs.

However Jon Hilsenrath recently noted in the WSJ that there will probably be no tapering this time (He usually has excellent sources at the Fed):

"Though the idea of tapering has received some attention on Wall Street of late, officials seem unlikely to want to follow that course this time ..."

Hilsenrath also suggested the Fed will probably take a wait and see approach after June to see "how the economy performs later in the year without [QE2]."

As I noted in When will the Fed raise rates?, this suggests a timeline for the earliest Fed funds rate increase:
• End of QE2 in June.
• End of reinvestment 0 to 2 months later.
• Drop extended period language a couple months later
• Raise rates in early 2012.

That is probably the earliest the Fed would raise rates - and it could be much later.

3) Dissent? There was some discussion last month that one or two Fed presidents might dissent (both Dallas Fed President Richard Fisher and Philly Fed President Charles Plosser have expressed reservations about QE2). However it appears both will now support the completion of the $600 billion Large Scale Asset Purchase program, but probably oppose any further expansion.

Earlier on U.S. economy:
• Summary for Week ending March 11th
• Schedule for Week of March 13th

by Calculated Risk on 3/13/2011 08:15:00 AM

Earlier on the U.S. economy: Summary for Week ending March 11th

The key releases this week will be industrial production and the consumer price index on Thursday. The Federal Reserve FOMC meets on Tuesday. For housing, the NHAB housing market index will be released on Tuesday, and housing starts on Wednesday.

----- Monday, March 14th -----

----- Tuesday, March 15th -----
8:30 AM: NY Fed Empire Manufacturing Survey for March. The consensus is for a reading of 16.0, up from the reading of 15.43 in February. The regional manufacturing surveys have been showing strong growth in activity recently.

10:00 AM: The March NAHB homebuilder survey. The consensus is for a reading of 17, up slightly from 16 in February. Any number below 50 indicates that more builders view sales conditions as poor than good. This index has been below 25 for the last 3 1/2 years.

2:15 PM: FOMC Meeting Announcement. No changes are expected to either the federal funds rate or QE2.

----- Wednesday, March 16th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through the first few months of 2011.

8:30 AM: Producer Price Index for February. The consensus is for a 0.6% increase in producer prices, and a 0.2% increase in core PPI.

8:30 AM: Housing Starts for February. After collapsing following the housing bubble, housing starts have mostly moved sideways at a very depressed level for the last two years.

This graph shows total and single unit starts since 1968.

Total housing starts were at 596 thousand (SAAR) in January, up 14.6% from the revised December rate of 520 thousand, however single-family starts decreased 1.0% to 413 thousand in January - the lowest level since early 2009.

The consensus is for a decrease to 560,000 (SAAR) in February.

----- Thursday, March 17th -----
8:30 AM: Consumer Price Index for February. The consensus is for a 0.4% increase for CPI in February - due to a surge in energy prices - but for core CPI to only show an increase of 0.1%.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 385,000 from 397,000 last week.

9:15 AM ET: The Fed will release Industrial Production and Capacity Utilization for February.

Capacity utilization at 76.1% is still far below normal - and well below the pre-recession levels of 81.2% in November 2007.

The consensus is for a 0.6% increase in Industrial Production in February, and an increase to 76.5% (from 76.1%) for Capacity Utilization.

10:00 AM: Philly Fed Survey for March. The consensus is for a reading of 32.0, down from the very strong 35.9 in February.

10:00 AM: Conference Board Leading Indicators for February. The consensus is for a 1.0% increase for this index.

----- Friday, March 18th -----
After 4:00 PM: The FDIC might have a busy Friday afternoon ...

Best wishes to All!

by Calculated Risk on 3/12/2011 07:48:00 PM

From the NY Times: Japan Pushes to Rescue Survivors as Quake Toll Rises

Entire villages in parts of Japan’s northern Pacific coast have vanished under a wall of water, many communities are cut off, and a nuclear emergency was unfolding at two stricken reactors as Japanese tried to absorb the scale of the destruction after Friday’s powerful earthquake and devastating tsunami.

... Much of the northeast was impassable, and by late Saturday rescuers had not arrived in the worst-hit areas. ... More than 300,000 people have been evacuated, including tens of thousands fleeing the zone around the nuclear plants in Fukushima Prefecture even before news that problems at one plant appeared to be escalating quickly.

Earlier on U.S. economy: Summary for Week ending March 11th