NEW$ & VIEW$ (1 March 2012)

Big week on stats. The PMIs for China and Europe were not great as new orders keep falling. The US PMI should be better.

Smile   Initial Jobless Claims Lowest Since March ’08

Applications for unemployment insurance decreased 2,000 in the week ended Feb. 25 to 351,000, Labor Department figures showed today.  The Labor Department revised the prior week’s applications to 353,000 from the initially reported 351,000.

The four-week moving average, a less-volatile measure, fell to 354,000, also the lowest since March 2008, from 359,500.

U.S. January Consumer Spending Rises 0.2%

Purchases climbed 0.2 percent, while incomes increased 0.3 percent.

Incomes climbed less in January than the previous month, when they rose 0.5 percent. Wages and salaries increased 0.4 percent in January for a second month. Smile

Income after taxes and adjusted for inflation declined 0.1 percent in January after a 0.3 percent rise. It was the second decrease in the last three months. The drop in income helped push the savings rate down to 4.6 percent in January from 4.7 percent.

Pointing up   Adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending was little changed for a third month, today’s report showed.

Spending on services adjusted for changes in prices fell 0.1 percent in January after no change the previous two months. Purchases of durable goods climbed 0.9 percent after a 0.7 percent gain.

Note that the prior six months of personal income were revised higher.

Smile   Income Revisions Suggest Consumers Have More Cash

(…) the GDP report contained two even more important pieces of new information that are positive for early 2012. One, the mix of GDP sectors now more favors future production gains and, two, consumers had more income than originally thought.(…)

While the changes were small, the mix means inventories and sales are better balanced. Instead of satisfying customers by pulling goods out of warehouses, businesses will be ordering new merchandise and supplies, supporting further production and hiring gains. (…)

[SAVINGHERD]Personal income in the third and fourth quarters were revised up so that income at the end of 2011 was almost $100 billion higher than first thought. The new-found money went both to increased spending and higher savings.

Because most of the income gain came from wages and salaries, the implication is that nonfarm payrolls were stronger and/or pay raises were bigger than the data now suggest.

The stats, courtesy of Haver Analytics.

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Pizza    Restaurant Industry Outlook Remains Positive Despite Slight Dip in Restaurant Performance Index

The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.3 in January, down from December’s strong level of 102.2. Despite the decline, January represented the third consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

National Restaurant Association’s Restaurant Performance Index
Values Greater than 100 = Expansion; Values Less than 100 = Contraction

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CONSUMER DELEVERAGING: Wow!

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LET’S TWIST AGAIN!  Good thing the Fed bought virtually all Treasury debt issued since last summer …

 

Storm cloud   China Slashes Dollar Assets

China has made a sharp shift away from purchases of U.S. securities, slashing the dollar’s share of the country’s foreign reserves in what may signal a change in strategy for managing the massive cash pile.

[CHINAHERD]The portion of China’s reserves parked in the U.S. appears to have sunk to a decade-low 54% as of end-June from 65% in 2010 and 74% in 2006, according to the Dow Jones calculations. (…)

The U.S. data show China’s holdings of U.S securities edged up $115 billion on-year to $1.726 billion at the end of June, but this equates to a much smaller share of the total, as China’s reserves were growing rapidly during the period. The purchases of U.S. securities equaled just 15% of the growth in China’s reserves, a substantial fall from 45% in 2010 and an average of 63% over the last five years.

 

 

JUST IN: Greek bailout deal won’t trigger payouts on credit-default swaps as no credit event has occurred, International Swaps and Derivatives Association rules.

No insurance pay-out on Greek debt
ISDA leaves door open to reversal of rule  Confused smile

 

 

Red heart   TheWSJ:  Everyone Loves Mario …  Round II of Europe’s back-door bank bailout.

And there’s no doubt that Mr. Draghi’s lending has taken the risk of a systemic European bank failure off the table in the near to medium term. This has contributed to generally calmer global financial markets and the decline in sovereign borrowing rates. No wonder he’s the toast of the Continent. He seems to have conjured a free lunch.

…Well, not quite everybody:
 
Broken heart   Bundesbank at odds with ECB over loans
€530bn cash to banks prompts German criticism of crisis handling

The head of Germany’s Bundesbank has launched a powerful attack on Mario Draghi, president of the European Central Bank, in a sign of mounting concern in Europe’s biggest economy at measures being taken to try to contain the eurozone financial crisis. (…)

Mr Weidmann, who has an influential voice on the ECB’s governing council, said the central bank risked endangering its reputation and called for a quick return to stricter rules on the collateral that the ECB accepts from banks in return for central bank funds. The criticism in a letter to Mr Draghi was revealed on Wednesday by Germany’s Frankfurter Allgemeine Zeitung.

Cheap loans push Italian yields lower
10-year bond yield falls below 5% for first time since August

 

Europe’s smaller banks approach ECB
Some 800 banks bid for funds – half as many again as in December

About 800 banks bid for funds – half as many again as in December. Most of these were from “core” eurozone countries led by Germany, not imagethe peripheral nations where funding problems are presumed to be most acute. Talk from some banks of a possible stigma in using the longer-term refinancing operation (LTRO) does not seem to have been a factor.

Greater participation by smaller banks, including carmakers’ financing arms, was, in effect, invited this time by the ECB, which re­laxed requirements on col­lateral compared with Dec­ember. The take-up is seen as potentially good news for the supply of credit, since smaller banks are often those with the closest relationships to the continent’s host of small and medium-sized companies.

 

Lightning   EUROZONE UNEMPLOYMENT RISE FURTHER

The euro area (EA17) seasonally-adjusted unemployment rate was 10.7% in January 2012, compared with 10.6% in December 2011. The EU27 unemployment rate was 10.1% in January 2012, compared with 10.0% in December 2011. (Eurostat)

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Behind the rate, there are people: the number of unemployed in the Eurozone rose 7.8% YoY, 5.5% since August and 1.1% just in the last month!

Storm cloud   Euro area inflation estimated at 2.7%

Well, this is Europe. Yesterday they released the official January inflation rate (2.6% YoY). The next day, they give us February’s flash estimate (+2.7%).

Storm cloud   U.K. Manufacturing Expansion Slows

The pace of expansion in the U.K.’s manufacturing sector slowed in February as new orders both domestically and from overseas were little changed from January while costs increased unexpectedly.

Storm cloud   China Housing Prices Fall Again

Housing prices in 100 major cities in China fell for a sixth consecutive month in February on a sequential basis, and analysts say prices could slip further as Beijing’s property tightening policy remains in place.

Pointing up   The decline in prices picked up pace in February.

The average home price in February dropped 0.3% to 8,767 yuan ($1,392) a square meter in February, compared with 8,793 yuan in January, when prices fell 0.18% from December, China Real Estate Index System said Thursday. The data provider said that in the past year, average home prices have risen 0.93% from February 2011, more slowly compared to January’s 1.71% rise.

Data from China Real Estate Index System showed that property prices in 72 cities posted a decline in February compared with January, whereas prices in 27 cities rose.

 
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