by Calculated Risk on 7/16/2011 11:09:00 AM

Last week was filled with disappointing data. So much so that Goldman Sachs downgraded their forecast last night:

Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012.

The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations.
...
One key question in coming months is whether final demand recovers to the 2%-2½% pace that is probably necessary to keep GDP growth near trend and prevent the unemployment rate from rising more noticeably.

Before we get to the data, there were a couple other key stories last week: 1) the European bank stress tests disappointed most analysts (only a few banks were required to raise capital, see from the Financial Times: Banks’ stress test pass rate under fire), and 2) the debt ceiling negotiations continued, although this appears to be almost over (see: Debt Ceiling Charade: Almost Over).

• Retail Sales increased 0.1% in June

On a monthly basis, retail sales increased 0.1% from May to June (seasonally adjusted, after revisions), and sales were up 8.1% from June 2010.

Click on graph for larger image in graph gallery.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales have been mostly moving sidways since March.

Retail sales are up 16.6% from the bottom, and now 2.5% above the pre-recession peak.

This was about at expectations for no change in retail sales. Retail sales ex-autos were unchanged, and gas station sales declined 1.3% last month as prices fell. Another weak retail sales report ...

• Trade Deficit increased sharply in May to $50.2 billion

The Department of Commerce reports:

[T]otal May exports of $174.9 billion and imports of $225.1 billion resulted in a goods and services deficit of $50.2 billion, up from $43.6 billion in April, revised. May exports were $1.0 billion less than April exports of $175.8 billion. May imports were $5.6 billion more than April imports of $219.4 billion.

Exports decreased in May and imports increased (seasonally adjusted). Exports are well above the pre-recession peak and up 15% compared to May 2010; imports are almost back to the pre-recession peak, and up about 16% compared to May 2010.

The petroleum deficit increased in May as both prices and the quantity of oil imported increased. Oil averaged $108.70 per barrel in May, up from $103.18 per barrel in April, and up from $76.95 in May 2010. There is a bit of a lag with prices, and import prices will probably be a little lower in June.

The trade deficit with China increased to $24.96 billion (NSA), so once again the deficit is mostly oil and China.

• Industrial Production increased 0.2% in June, Capacity Utilization unchanged

From the Fed: Industrial production and Capacity Utilization

This graph shows Capacity Utilization. This series is up 9.4 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 76.7% is still "3.7 percentage points below its average from 1972 to 2010" - and below the pre-recession levels of 81.2% in November 2007.

Industrial production increased in June to 93.1.

Both industrial production and capacity utilization have been moving sideways recently. This was below the consensus forecast of a 0.4% increase in Industrial Production in June, and an increase to 76.9% for Capacity Utilization.

The suggests there is still significant excess industrial capacity.

• NFIB: Small Business Optimism Index "basically unchanged" in June

From the National Federation of Independent Business (NFIB): Small Business Optimism Stagnates

This graph shows the small business optimism index since 1986. The index decreased to 90.8 in June from 90.9 in May.

This index is still very low - and had been trending up - but optimism has declined for four consecutive months now.

This graph shows the net hiring plans for the next three months.

Hiring plans increased in June and this is the highest level since February.

According to NFIB: “Although June’s employment growth was weak, 15 percent (seasonally adjusted) of small firms reported unfilled job openings, a 3 point increase and an indication that the unemployment rate will ease back below 9 percent in the coming months. "

Weak sales is still the top business problem with 24 percent of the owners reporting that weak sales continued to be their top business problem in June.

• Ceridian-UCLA: Diesel Fuel index increased in June

Press Release: Pulse of Commerce Index Rebounds – Up 1.0 Percent In June

This graph shows the index since January 2000.

This index has mostly been moving sideways all year. As Leamer noted, this "could be the start of a positive trend, but a one month spike does not make a trend, particularly in light of the many false starts experienced over the last year."

• Consumer Sentiment declines sharply in July

The preliminary July Reuters / University of Michigan consumer sentiment index declined sharply to 63.8 from 71.5 in June.

In general consumer sentiment is a coincident indicator and is usually impacted by employment (and the unemployment rate) and gasoline prices. However, even with lower gasoline prices, consumer sentiment declined sharply - possible because of the heavy coverage of the debt ceiling charade.

This was well below the consensus forecast of 71.0 and definitely in the recession range.

• Other Economic Stories ...
• AAR: Rail Traffic soft in June
• BLS: Job Openings unchanged in May
• NY Fed: Empire State Survey indicates contraction
• Key Measures of Inflation ease in June
• Eight Banks Fail European Stress Tests

Have a great weekend!

by Calculated Risk on 7/16/2011 08:27:00 AM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

There is the unofficial problem bank list for July 15, 2011.

Changes and comments from surferdude808:

It was an active week for the Unofficial Problem Bank List with 11 removals and two additions. The net result of the changes leave the list at 995 institutions with assets of $416.2 billion, down from 1,004 institutions and assets of $418.8 billion last week.

Among the removals are five cures, four failures, and two unassisted mergers. Actions were terminated against Intercredit Bank, National Association, Miami, FL ($258 million); Heritage Bank National Association, Spicer, MN ($170 million); The American National Bank of Beaver Dam, Beaver Dam, WI ($110 million); Gibraltar Bank, Oak Ridge, NJ ($95 million); and The First National Bank of Cold Spring, Cold Spring, MN ($74 million). The four failures are First Peoples Bank, Port Saint Lucie ($228 million Ticker: FPBI); High Trust Bank, Stockbridge, GA ($193 million); One Georgia Bank, Atlanta, GA ($186 million); and Summit Bank, Prescott, AZ ($72 million). The removals from unassisted merger are Cascade Bank, Everett, WA ($1.5 billion); and Bank of Greensburg, Greensburg, LA ($92 million). Long time readers may remember the less than forthright conversations we had with Cascade Bank about it becoming subject to an enforcement action. Still we are happy to see them migrate off the list without failing.

The two additions this week are Mission National Bank, San Francisco, CA ($1984 million Ticker: MNBO); and Traders National Bank, Tullahoma, TN ($156 million).

This message was posted on the OTS enforcement web page "On July 21, 2011, the Office of Thrift Supervision will become part of the Office of the Comptroller of the Currency. Check back on July 21 for more information." We anticipate for the OTS website to be taken down and their practice of timely disclosures of enforcement actions to stop. Actions against thrifts will likely be disclosed on a monthly basis in the same manner the OCC uses for national banks.

by Calculated Risk on 7/15/2011 11:27:00 PM

I've been hearing from more and more people that they are concerned about the debt ceiling negotiations. Many of these people are busy with their daily lives, and they don't usually pay close attention to politics or budget issues.

This concern is probably why consumer sentiment fell sharply in the Reuters / University of Michigan preliminary July survey.

No worries.

The debt ceiling is about paying the bills, not the deficit. However it is not uncommon for the party in control of Congress to try to use the debt ceiling as a tool to try to negotiate on budget priorities. That is what has been happening.

But at any time Congress can agree to pay the bills, and they will this time too. As Senator McConnell (R) noted this week, if the U.S. defaults, the American people would blame the party in control of Congress - the Republican party - and the "Republican brand" would be forever toxic. The leaders of the party can't allow that to happen, and the are now looking for the exit.

From Lisa Mascaro and Kathleen Hennessey at the LA Times: House Republicans brace for compromise on debt

Republican leaders in the House have begun to prepare their troops for politically painful votes to raise the nation's debt limit ... Republican leaders orchestrated a series of public moves intended to soften the blow for conservatives. They agreed to give the House an opportunity to vote on two top conservative priorities: a so-called cut-cap-and-balance bill, which would order $111 billion in cuts in federal programs for 2012 and impose a cap on future spending, and a constitutional amendment that would require a balanced federal budget.

The Democratic leadership in the Senate is also expected to allow votes on one, and perhaps both, measures. Neither is expected to become law ... Congress is likely to spend much of next week on those measures, then could take up a debt ceiling measure in the Senate toward the end of next week.

Ignore the votes this coming week. These bills will not pass the Senate, and no Republican or Democratic President would sign them anyway - they are just for show. The real votes start the following week, and the debt ceiling will be increased.

This is almost over.

by Calculated Risk on 7/15/2011 09:18:00 PM

Standstill savings skid
Setback Summit soon shutdown
Shambled shipwreck sunk!
by Soylent Green is People
From the FDIC: The Foothills Bank, Yuma, Arizona, Assumes All of the Deposits of Summit Bank, Prescott, Arizona

As of March 31, 2011, Summit Bank had approximately $72.0 million in total assets and $66.4 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $11.3 million. ... Summit Bank is the 55th FDIC-insured institution to fail in the nation this year, and the second in Arizona.

That makes four today.

Earlier:
• From the NY Fed: Empire State Manufacturing Survey indicates conditions deteriorated in July
• Consumer Sentiment declines sharply in July
• Industrial Production increased 0.2% in June, Capacity Utilization unchanged
• Eight Banks Fail European Stress Tests
• Key Measures of Inflation ease in June

by Calculated Risk on 7/15/2011 07:15:00 PM

Here is a new routine from stand-up economist Yoram Bauman on YouTube ...

Earlier:
• From the NY Fed: Empire State Manufacturing Survey indicates conditions deteriorated in July
• Consumer Sentiment declines sharply in July
• Industrial Production increased 0.2% in June, Capacity Utilization unchanged
• Eight Banks Fail European Stress Tests
• Key Measures of Inflation ease in June