by Calculated Risk on 9/15/2011 01:31:00 PM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in August on a seasonally adjusted basis ... The gasoline index rose for the 12th time in the last 14 months and led to a 1.2 percent increase in the energy index, while the food index rose 0.5 percent, its largest increase since March. ... The index for all items less food and energy increased 0.2 percent in August, the same increase as the previous month.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.6% annualized rate) in August. The 16% trimmed-mean Consumer Price Index increased 0.3% (4.0% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (4.6% annualized rate) in August. The CPI less food and energy increased 0.2% (3.0% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 2.0%, the trimmed-mean CPI rose 2.4%, the CPI rose 3.8%, and the CPI less food and energy rose 2.0%

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation. You can see the median CPI details for August here.

Click on graph for larger image in graph gallery.

On a year-over-year basis, these measures of inflation are increasing, and are near the Fed's target.

On a monthly basis, the median Consumer Price Index increased 3.6% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 4.0% annualized in July, and core CPI increased 3.0% annualized.

Earlier:
• Weekly Initial Unemployment Claims increased to 428,000
• Industrial Production increased 0.2% in August, Capacity Utilization increases slightly
• NY and Philly Fed Manufacturing surveys show contraction

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

First, from the WSJ: Central Banks Boost Dollar Liquidity

The ECB said that it will be joined by U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to conduct three U.S. dollar liquidity-providing operations.

The action addresses an acute shortage of dollar availability as U.S. lenders withheld funds [from European banks] ... The new dollar tenders, under which banks will be able to bid for unlimited funds, will have a maturity of approximately three months covering the end of the year, the ECB said.

From the Philly Fed: September 2011 Business Outlook Survey

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a very low reading of -30.7 in August to -17.5 in September. The index has been negative in three of the last four months (see Chart). The current new orders index paralleled the general activity index, increasing 16 points and remaining negative. The current shipments index fell 9 points.
...
Firms' responses suggest a slight improvement in hiring this month compared with August. The current employment index increased 11 points, after recording its first negative reading in 12 months in August. Over 22 percent of the firms reported an increase in employment, but 16 percent reported a decrease. The percentage of firms reporting a shorter workweek (23 percent) remained greater than the percentage reporting a longer one (9 percent).

This indicates contraction in September and was slightly below the consensus forecast of -15.0.

Click on graph for larger image in graph gallery.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through September. The ISM and total Fed surveys are through August.

The average of the Empire State and Philly Fed surveys rebounded in September, but is still well below zero - possibly indicating a further decline in the ISM index.

by Calculated Risk on 9/15/2011 09:25:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.2 percent in August after having advanced 0.9 percent in July. Manufacturing rose 0.5 percent in August, after a similarly sized gain in July, and the rates of change were revised down slightly in April, May, and June. In August, the output of mines moved up 1.2 percent. The output of utilities decreased 3.0 percent, as temperatures moderated somewhat from the previous month. At 94.0 percent of its 2007 average, total industrial production for August was 3.4 percent above its year-earlier level. Capacity utilization for total industry edged up to 77.4 percent, a rate 1.9 percentage points above its level from a year earlier but 3.0 percentage points below its long-run (1972--2010) average.

Click on graph for larger image in graph gallery.

This graph shows Capacity Utilization. This series is up 10.1 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.4% is still 3.0 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in Decebmer 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in August to 94.0 (although earlier months were revised down).

After the fairly rapid increase last year, increases in industrial production and capacity utilization have slowed recently.

by Calculated Risk on 9/15/2011 08:30:00 AM

• From the NY Fed: Empire State Manufacturing Survey: "The Empire State Manufacturing
Survey indicates that conditions for New York manufacturers worsened for a fourth consecutive month in September. The general business conditions index inched down one point, to -8.8." This was lower than expectations of a reading of -3.6.

• CPI increased 0.4% in August (0.2% core). I'll have more later on the Fed survey and CPI.

• The DOL reports:

In the week ending September 10, the advance figure for seasonally adjusted initial claims was 428,000, an increase of 11,000 from the previous week's revised figure of 417,000. The 4-week moving average was 419,500, an increase of 4,000 from the previous week's revised average of 415,500.

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

Click on graph for larger image 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 419,500.

The 4-week average has been increasing recently and this is the highest level since early July.

by Calculated Risk on 9/14/2011 11:41:00 PM

Tomorrow we will see if there is any improvement from the dismal August readings for both the Philly Fed and NY Fed (Empire state) manufacturing surveys. On Friday, the preliminary Reuters/University of Mich Consumer Sentiment for September will be released.

Thursday at 8:30 AM ET: NY Fed Empire Manufacturing Survey for September. The consensus is for a reading of -3.6, up from -7.7 in August (above zero is expansion).

10:00 AM: Philly Fed Survey for September. This index fell off a cliff in August. The consensus is for a reading of -15.0 (above zero indicates expansion), up from -30.7 last month.

Friday at 9:55 AM: Reuters/University of Mich Consumer Sentiment preliminary for September. The consensus is for a slight increase to 56.0 from 55.7 in August.

Last month I argued the sharp decline in sentiment - from an already low level - might be due to the debt ceiling debate. I looked at some of the previous spikes down in sentiment due to fairly short term events - and those events suggested sentiment should recover in 2 to 4 months. So maybe in October or November - but it is too early in September.

Of course sentiment - and the manufacturing surveys - could have declined because of other factors (weak labor market, European financial crisis, etc), and then the surveys might remain weak. We will get our first look tomorrow.

by Calculated Risk on 9/14/2011 06:30:00 PM

The first of two key meetings this week was held earlier today via video conference with German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek prime minister George Papandreou. On Friday, the European finance ministers will meet with Timothy Geithner making an appearance.

From the WSJ: Greece's Future Is With Euro Zone, Say Merkel and Sarkozy

German Chancellor Angela Merkel and French President Nicolas Sarkozy are convinced that Greece's future is within the euro zone, Mrs. Merkel's spokesman said after the two leaders held a three-way conference call with Greek Prime Minister George Papandreou.

But Mrs. Merkel and Mr. Sarkozy also stressed during the call the need for Greece to put into practice in a strict and effective way the already-agreed measures of its austerity program under a current bailout package, the spokesman, Steffen Seibert, said.

From the NY Times: Germany and France Back Greece on Austerity Effort

The Greek prime minister vowed to abide by austere cuts in the struggling country’s budget, and the leaders of France and Germany promised to support Greece as a central part of the euro zone, the three officials said Wednesday in a statement after a joint conference call.
...
Together, they are pushing all euro zone states to ratify as soon as possible decisions made on July 21, which would expand the European Financial Stability Facility and allow it increased flexibility to protect Greece and other heavily indebted members ...

From the Irish Times: Commission prepares plans to introduce euro area bonds

European Commission president José Manuel Barroso said he is close to proposing options on joint euro-area bond sales, putting officials in Brussels on a collision course with Germany.

Speaking this morning, Mr Barroso said the commission is preparing options for the introduction of eurobonds. He called for much closer political integration and said the EU needed a "new federalist moment" to confront the most serious challenge for the union in a generation.

From Reuters: EU warned of credit crunch threat, French banks hit (ht mp)

In a report prepared for ministers meeting in Poland on Friday and Saturday, senior EU officials said the 17-nation currency area faces a "risk of a vicious circle between sovereign debt, bank funding and negative growth."

"While tensions in sovereign debt markets have intensified and bank funding risks have increased over the summer, contagion has spread across markets and countries and the crisis has become systemic," the influential Economic and Financial Committee said.

"A further reinforcement of bank resources is advisable," ministers were told ...

From the Economic Times: Dutch Finance Minister says has not given up on Greece (ht ghostfaceinvestah)

The Dutch government has not given up on the rescue of Greece and is determined to do everything possible to save the euro zone, the Dutch finance minister told members of parliament on Wednesday.

"To be clear ... this Cabinet has the firm will to do everything possible to save the euro or the euro zone," Finance Minister Jan Kees de Jager told members of parliament.

He strongly denied Dutch media reports that the government expected Greece to default ...

From Bloomberg: Credit Agricole Debt Ratings Cut by Moody’s Along With Societe Generale’s

And from Bloomberg: ECB Will Lend Dollars to Two Euro-Region Banks as Market Funding Tightens

The European Central Bank said it will lend dollars to two euro-area banks tomorrow, a sign they are finding it difficult to borrow the U.S. currency in markets.

The ECB allotted $575 million in a regular seven-day liquidity-providing operation at a fixed rate of 1.1 percent. It’s the first time since Aug. 17 that a lender requested dollars from the ECB.

The Greek 2 year yield declined slightly to 74.5%. The Greek 1 year yield is at 142%.

The Portuguese 2 year yield is up to 16.1% and the Irish 2 year yield is at 9.5%.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year