by Calculated Risk on 9/10/2011 08:15:00 AM

This was a light week for economic data and the focus was mostly on the financial crisis in Europe, and also on speeches by President Obama (a new stimulus proposal) and by Fed Chairman Ben Bernanke (the Fed appears prepared to act after the two day meeting ending on Sept 21st).

There was some good news: the trade deficit declined sharply in July (and the trade deficit was revised down for earlier months). This led Goldman Sachs to upgrade their Q3 GDP forecast yesterday: "We revised up our Q3 GDP growth forecast from 1% to 2% (annual rate) on the back of better-than-expected trade and consumer spending data." The ISM non-manufacturing index was weak, but still indicated expansion in the service sector - and that was better than expected.

Next week will be busier for U.S. economic data, including a few surveys for September that will probably show improvement since August. Of course Europe - and Greece - will remain a major focus.

Here is a summary in graphs:

• Trade Deficit decreased sharply in July

Click on graph for larger image.

The Department of Commerce reported "[T]otal July exports of $178.0 billion and imports of $222.8 billion resulted in a goods and services deficit of $44.8 billion, down from $51.6 billion in June, revised. July exports were $6.2 billion more than June exports of $171.8 billion. July imports were $0.5 billion less than June imports of $223.4 billion."

Exports increased and imports decreased in July (seasonally adjusted). Exports are well above the pre-recession peak and up 15% compared to July 2010; imports are up about 13% compared to July 2010.

The trade deficit was well below the consensus forecast of $51 billion.

The second graph shows the U.S. trade deficit, with and without petroleum, through July. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The decline in the trade deficit was due to an increase in exports. Also the trade deficit for the first six months of the year was revised down - especially in Q2.

• ISM Non-Manufacturing Index indicates expansion in August

The August ISM Non-manufacturing index was at 53.5%, up from 52.7% in July. The employment index decreased in August to 51.6%, down from 52.5% in July. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 50.5% and indicates slightly faster expansion in August than in July.

• BLS: Job Openings "little changed" in July

From the BLS: Job Openings and Labor Turnover Summary "The number of job openings in July was 3.2 million, little changed from June. Although the number of job openings remained below the 4.4 million openings when the recession began in December 2007, the level in July was 1.1 million openings higher than in July 2009 (the most recent trough)."

Notice that hires (purple) and total separations (red and blue columns stacked) are pretty close each month. When the purple line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general job openings (yellow) has been trending up - and job openings increased slightly again in July - and are up about 13% year-over-year compared to July 2010.

Overall turnover is increasing too, but remains low. Quits increased slightly in July, and have been trending up - and quits are now up about 9% year-over-year.

• Weekly Initial Unemployment Claims increase to 414,000

This graph shows the 4-week moving average of weekly claims since January 2000 (longer term graph in graph gallery).

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 414,750.

Weekly claims increased slightly, and the 4-week average is still elevated - and remains above the 400,000 level.

• Mortgage Rates fall to Record Low

From Freddie Mac: Mortgage Rates Attain New All-Time Record Lows Again "Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates, fixed and adjustable, hitting all-time record lows ..."

Here is a long term graph of 30 year mortgage rate in the Freddie Mac survey. The Freddie Mac survey started in 1971. Mortgage rates are currently at a record low for the last 40 years (mortgage rates were close to this range in the '50s).

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®. Refinance activity declined a little last week, but activity was up significantly in August compared to July.

With 30 year mortgage rates now at record lows, mortgage refinance activity will probably pick up some more in September - but so far activity is lower than in '09 - and much lower than in 2003.

• Other Economic Stories ...
• Fed's Beige Book: "Economic activity continued to expand at a modest pace"
• From Chicago Fed President Charles Evans: The Fed's Dual Mandate Responsibilities and Challenges Facing U.S. Monetary Policy
• CBO: An Evaluation of Large-Scale Mortgage Refinancing Programs
• From Jon Hilsenrath at the WSJ: Fed Prepares to Act
• From Fed Chairman Ben Bernanke: The U.S. Economic Outlook
• The American Jobs Act
• AAR: Rail Traffic mixed in August
• Lawler: Early Read on Existing Home Sales in August

by Calculated Risk on 9/09/2011 09:07:00 PM

• From Kash Mansori at The Street Light: When Fear Dominates

Today's twin pieces of news out of Germany - that the ECB's most prominent German, Juergen Stark, is resigning, and the unconfirmed report that the German government is preparing a contingency plan to support its banks in the event of a Greek default - had the effect of fanning the flames of fear running through world financial markets.

• From the WSJ: Default and Dissent Threaten Greece

Greece is being buffeted on several fronts. It is in danger of missing budget-cutting targets that its euro-zone rescuers insist are the price of continued aid. Participation by banks in a crucial debt-restructuring plan may be less than planned. And euro-zone countries are mired in a debate over whether Greece must provide collateral to secure its bailout money.

There is little room for anything to go wrong. Without more aid, Greece will run out of cash within weeks, senior Greek government officials say.

Meanwhile, popular dissent in Greece is seething. Mass protests are expected to greet Prime Minister George Papandreou in Thessaloniki, Greece's second city, where he is slated to give a speech Saturday at the international trade fair, defending the harsh fiscal cuts his government has pledged.

• From the Financial Times: Greek PM to give key speech amid hostility

The Greek prime minister will face a hostile audience on Saturday when he makes a key economic policy speech ... his finance minister was on Friday forced to dismiss market speculation that the country might default over the weekend [calling] the rumours “a game in bad taste; an organised piece of speculation against the euro and the eurozone countries”.
excerpt with permission

by Calculated Risk on 9/09/2011 06:34:00 PM

F. N. B. O. F.
F. D. I. C. 9. 1. 1.
F. U. B. A. R.
by Soylent Green is People
From the FDIC: CharterBank, West Point, Georgia, Assumes All of the Deposits of The First National Bank of Florida, Milton, Florida

As of June 30, 2011, The First National Bank of Florida had approximately $296.8 million in total assets and $280.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $46.9 million. ... The First National Bank of Florida is the 71st FDIC-insured institution to fail in the nation this year, and the eleventh in Florida.

It is Friday!

by Calculated Risk on 9/09/2011 06:18:00 PM

From the Telegraph: G7 communique: in full (ht jb)

Agreed terms of reference by G7 Finance Ministers and Central Bank Governors

We met at a time of new challenges to global economic recovery, with significant challenges to growth, fiscal deficits and sovereign debt, stemming from past accumulated imbalances. This is reflected in heightened tensions in financial markets. There are now clear signs of a slowdown in global growth. We are committed to a strong and coordinated international response to these challenges.

We are taking strong actions to maintain financial stability, restore confidence and support growth. In the US, President Obama has put forward a significant package to strengthen growth and employment through public investments, tax incentives, and targeted jobs measures, combined with fiscal reforms designed to restore fiscal sustainability over the medium term. Euro area countries are implementing the decisions taken on July 21 to address financial tensions, notably through the flexibilisation of the EFSF, reaffirming their inflexible determination to honor fully their own individual sovereign signatures and their commitments to sustainable fiscal conditions and structural reforms. Japan is implementing substantial fiscal measures for reconstruction from the earthquake while ensuring the commitment to medium-term fiscal consolidation.

Concerns over the pace and future of the recovery underscore the need for a concerted effort at a global level in support of strong, sustainable and balanced growth. We must all set out and implement ambitious and growth-friendly fiscal consolidation plans rooted within credible fiscal frameworks. Fiscal policy faces a delicate balancing act. Given the still fragile nature of the recovery, we must tread the difficult path of achieving fiscal adjustment plans while supporting economic activity, taking into account different national circumstances.

Monetary policies will maintain price stability and continue to support economic recovery. Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets. In this context we reaffirm our commitment to implement fully Basel III.

by Calculated Risk on 9/09/2011 04:07:00 PM

• S&P off 31+, Dow off 300+. Graph below ...

• From economist Tom Lawler: "[Based on incoming data] I’m upping my estimate for August existing home sales (as estimated by the NAR) to a SAAR of 4.91 million."

• From the WSJ: Economic, Debt Worries Mount in Euro Zone

The unexpected departure of European Central Bank chief economist Jürgen Stark intensified investors' worries about the euro-zone financial crisis Friday and unleashed a broad pullback from risk in European financial markets, sinking the euro to its lowest level in more than six months.

Stark was an inflation hawk and opposed all EU bailouts and ECB bond buying.

• Another MERS court victory, this time at the 9th Circuit Court of Appeals (ht Mish). From the opinion:

The district court properly dismissed the plaintiffs’ First Amended Complaint without leave to amend. The plaintiffs’ claims that focus on the operation of the MERS system ultimately fail because the plaintiffs have not shown that the alleged illegalities associated with the MERS system injured them or violated state law. As part of their fraud claim, the plaintiffs have not shown that they detrimentally relied upon any misrepresentations about MERS’s role in their loans. Further, even if we were to accept the plaintiffs’ contention that MERS is a sham beneficiary and the note is split from the deed in the MERS system, it does not follow that any attempt to foreclose after the plaintiffs defaulted on their loans is necessarily “wrongful.” The plaintiffs’ claims against their original lenders fail because they have not stated a basis for equitable tolling or estoppel of the statutes of limitations on their TILA and Arizona Consumer Fraud Act claims, and have not identified extreme and outrageous conduct in support of their claim for intentional infliction of emotional distress.

Thus, we AFFIRM the decision of the district court.

MERS is the Mortgage Electronic Registration System, and some people argued that MERS would lead to the total collapse of Western Civilization or something ... I've argued for years that those fear were way overblown.

• This graph (click on graph for larger image) from Doug Short shows the wild market swings over the last few weeks.