by Calculated Risk on 7/14/2012 08:01:00 AM

This was a very light week for economic news. The only significant report was the trade deficit for May, and that was at expectations. Import oil prices will fall further in June, so the downtrend in the deficit will probably continue for another month. Interestingly, exports to the euro area were actually up year-over-year for May, but that will probably be short lived.

Weekly initial unemployment claims were down sharply last week, but that was due to onetime factors. Consumer sentiment was down – and so was small business confidence – but those are fairly minor reports.

Enjoy the weekend and rest up - next week will be very busy with several key reports and testimony from Fed Chairman Ben Bernanke. Luckily there are a few housing reports next week, so all the data will not be grim (still seems weird to be writing about the housing recovery after all those years of being a housing Grizzly bear!).

Here is a summary of last week in graphs:

• Trade Deficit declines in May to $48.7 Billion

Click on graph for larger image.

The trade deficit was at the consensus forecast of $48.7 billion.

Oil averaged $107.91 per barrel in May, down from $109.94 per barrel in April. This will decline further in June. The trade deficit with China increased to $26 billion in May, up from $24.9 billion in May 2011. Once again most of the trade deficit is due to oil and China.

Exports to the euro area were $17 billion in May, up from $16.4 billion in May 2011; so the euro area recession didn't lead to less US exports to the euro area in May.

• BLS: Job Openings increased in May

Job openings increased in May to 3.642 million, up from 3.447 million in April. The number of job openings (yellow) has generally been trending up, and openings are up about 18% year-over-year compared to May 2011.

Quits increased slightly in May, and quits are now up about 6% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs
• NFIB: Small Business Optimism Index declines in June

This graph shows the small business optimism index since 1986. The index decreased to 91.4 in June from 94.4 in May.

This index remains low, and once again, lack of demand is the biggest problem for small businesses. (In the survey, the "single most important problem" was "poor sales".

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy and that has contributed to this index remaining low.

• Weekly Initial Unemployment Claims decline to 350,000 due to onetime factors

From MarketWatch: "onetime factors such as fewer auto-sector layoffs than normal likely caused the sharp decline, the Labor Department said Thursday".

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 376,500.

The sharp decline was probably due to onetime factors, plus this included the holiday week.

This was well below the consensus forecast of 375,000. With the holiday week and onetime factors, it is difficult to tell if there is any improvement - but this is the lowest level for the four week average since May.

All current Employment Graphs
• Consumer Sentiment declines in July to 72.0

The preliminary Reuters / University of Michigan consumer sentiment index for July declined to 72.0, down from the June reading of 73.2.

This was below the consensus forecast of 73.5 and the lowest level this year. Overall sentiment is still weak - probably due to a combination of the high unemployment rate and the sluggish economy.

• Other Economic Stories ...
• CoreLogic: Negative Equity Decreases in Q1 2012
• WSJ: The U.S. Housing Bust Is Over
• Q1 2012: Mortgage Equity Withdrawal strongly negative
• LPS: Mortgages in Foreclosure still near record high, Much higher in Judicial States

by Calculated Risk on 7/13/2012 11:13:00 PM

First, from the NY Times today: New York Fed Was Aware of False Reporting on Rates

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that “we know that we’re not posting um, an honest” rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to “fit in with the rest of the crowd.”

Oh my. Really? In April 2008? We were discussing this in 2007! Here are a few of the articles I linked to years ago ...

From the Financial Times in September 2007:

“The Libor rates are a bit of a fiction. The number on the screen doesn’t always match what we see now,” complains the treasurer of one of the largest City banks.
...
The screen will say one thing but people are actually quoting a different level, if they are quoting at all,” says one senior banker.

From the WSJ in April 2008: Bankers Cast Doubt On Key Rate Amid Crisis

The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.

From Bloomberg in May 2008: Libor Set for Overhaul as Credibility Is Doubted

"The Libor numbers that banks reported to the BBA were a lie," said Tim Bond, head of global asset allocation at Barclays Capital in London. "They had been all the way along. The BBA has been trying to investigate them and that's why banks have started to report the right numbers."

The only new news is that the banks are finally paying fines ...

by Calculated Risk on 7/13/2012 05:44:00 PM

Thrifty bunch, the Scots
Not so with Clan Missouri
Penny, pound foolish
by Soylent Green is People
From the FDIC: Regional Missouri Bank, Marceline, Missouri, Assumes All of the Deposits of Glasgow Savings Bank, Glasgow, Missouri

As of March 31, 2012, Glasgow Savings Bank had approximately $24.8 million in total assets and $24.2 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $0.1 million. ... Glasgow Savings Bank is the 33rd FDIC-insured institution to fail in the nation this year, and the first in Missouri.

A small one ... but it is Friday!  On pace for around 60 bank failures this year, the fewest since 25 banks failed in 2008.

by Calculated Risk on 7/13/2012 04:23:00 PM

Click on graph for larger image.

I haven't posted these graphs in a few months. The first graph shows the S&P 500 since 1990 (this excludes dividends).

The dashed line is the closing price today. The S&P 500 was first at this level in April 1999; over 13 years ago.

The second graph (click on graph for larger image) from Doug Short shows the S&P 500 since the 2007 high ...

by Calculated Risk on 7/13/2012 01:05:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 7 July

In year-over-year comparisons for the week, occupancy ended the week with a 3.7-percent decrease to 61.4 percent, average daily rate increased 3.0 percent to US$101.67 and revenue per available room ended the week virtually flat with a 0.8-percent decrease to US$62.37.

The decline in occupancy last week was due to the timing of July 4th (and probably impacted by the mid-week holiday). The 4-week average is still above last year, and is close to the pre-recession levels.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average.

Click on graph for larger image.

The red line is for 2012, yellow is for 2011, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels.

Looking forward, leisure travel usually increases over the summer months, and occupancy rates will probably average 70% for the next couple of months. It looks like 2012 will have higher occupancy than 2011, and be close to the pre-recession median. But it will be sometime before investment increases again.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com