by Calculated Risk on 7/23/2012 01:55:00 PM

Here is a series I'm looking forward to reading ... from David Leonhardt at the NY Times: A Closer Look at Middle-Class Decline

Arguably no question is more central to the country’s global standing than whether the economy will perform better in the future than it has in the recent past.

Over the next few months on this blog, several colleagues and I will look in some detail at the challenge and at possible ways forward, and we’ll encourage you to weigh in with questions, ideas and other feedback.

Leonhardt starts with:

Since median inflation-adjusted family income peaked in 2000 at $64,232, it has fallen roughly 6 percent. You won’t find another 12-year period with an income decline since the aftermath of the Depression.

This unhappy phenomenon has two major sources. First, economic growth in this country has been relatively slow in recent years, which means the total bounty that the American economy produces, to be shared by all of its citizens, has not been growing very rapidly. Even before the financial crisis began in 2008, economic growth in the decade that started in 2001 was on pace to be slower than growth in any decade since World War II.

Then of course came a deep recession that caused the economy to shrink.
...
In addition to the slow growth in overall size of the pie, the share that has been going to anyone but the richest Americans has been declining. ... In the simplest terms, the relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards.

A very important topic.

by Calculated Risk on 7/23/2012 10:27:00 AM

Always a sign of desperation ...

From the Financial Times Alphaville: Spain and Italy take gold for flailing, banning short-selling

From Reuters: Spain Bans Short-Selling for 3 Months

Spain's stock market regulators banned short-selling on all Spanish securities on Monday for three months and said it may extend the ban beyond October 23.

Earlier on Monday, Italy reintroduced a temporary ban on the short selling of financial stocks ...

The yield on Spanish 10 year bonds is up to 7.5%; the yield on Italian 10 year bonds is up to 6.33%.

Some related articles from the WSJ: Treasury Yields Hit New Record Lows, Oil Prices Plunge 4%, and Euro Hits New Multiyear Lows. The US 10 year treasury yield has fallen to 1.42%, Brent oil prices are down to $103.43, and the euro is down $1.21.

by Calculated Risk on 7/23/2012 08:40:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic activity increased in June

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.15 in June from –0.48 in May. ...

The index’s three-month moving average, CFNAI-MA3, increased from –0.38 in May to –0.20 in June—its fourth consecutive reading below zero. June’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests growth was below trend in June.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 7/22/2012 10:15:00 PM

First, from the Financial Times on "open-ended QE": Bleak jobs outlook raises heat on Fed

In an interview with the Financial Times, [San Francisco Fed President John Williams] forecast that unless “further action” was taken, there would be a lack of progress in boosting the jobs market ...

He added that there would also be benefits in having an open-ended programme of QE, where the ultimate amount of purchases was not fixed in advance ... “The main benefit from my point of view is it will get the markets to stop focusing on the terminal date [when a programme of purchases ends] and also focusing on, ‘Oh, are they going to do QE3?’” he said. Instead, markets would adjust their expectation of Fed purchases as economic conditions changed.
excerpt with permission

The key releases this week are the new home sales report on Wednesday and the advance Q2 GDP report on Friday.

• On Monday, at 8:30 AM ET, the Chicago Fed is schedule to release the National Activity Index for June. This is a composite index of other data and will probably be fairly weak.

The Asian markets are red tonight, with the Nikkei down 1.3% and the Shanghai Composite down 1.1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down about 6, and the DOW futures down about 50.

Oil: WTI futures are at $91.12 (this is down from $109.77 in February, but up last week) and Brent is at $106.17 per barrel.

Yesterday:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

Two more questions this week for the July contest:

by Calculated Risk on 7/22/2012 08:34:00 PM

As residential investment increases, there will be positive spillover effects ... usually it is "As housing goes, so goes the economy!"

From Mike Ramsey at the WSJ: As Homes Go, So Do Pickups (ht Joe)

[I]n the past few months, more lots have been cleared for construction and [Hardwood's] phone has been ringing more frequently. So in June he went out and bought a new Chevrolet 2500 diesel truck with a backup camera and a hands-free Bluetooth phone link.

"There is a lot more steady and consistent work," said the 30-year-old Mr. Harwood, whose company Broadleaf Landscape, in Damascus, Md., does a lot of work at new homes. "I was more comfortable with buying a new truck at this point in time because of the market change."
...
In the first half of this year, sales of full-size pickups made by the Detroit Three increased 13%, to 707,175 vehicles.

Yesterday:
• Summary for Week Ending July 20th
• Schedule for Week of July 22nd