NEW$ & VIEW$ (9 JULY 2013)

Small Business Sentiment: A Decline After Two Months of Increase

Small-business optimism remained in tepid territory in June, as NFIB’s monthly economic Index dropped just under a point (0.9) and landed at 93.5, effectively ending any hope of a revival in confidence among job creators. Six of the ten Index components fell, two rose and two were unchanged. While job creation plans increased slightly in June, expectations for improved business conditions remained negative. The Index—which was 12 points higher in June than at its lowest reading during the Great Recession but 7 points below the pre-2008 average and 14 points below the peak for the expansion—has been teetering between modest increases and declines for months.

Click to View(Doug Short)

Completed U.S. foreclosures decline in May from year ago: CoreLogic

There were 52,000 foreclosures completed, well below the 71,000 in May last year, CoreLogic  said. Even so, that was up from 50,000 in April 2013.

Prior to the housing market’s collapse, completed foreclosures averaged 21,000 a month between 2000 and 2006. There have been approximately 4.4 million foreclosures finished since the start of the financial crisis in September 2008, the report said.

About 1 million homes were in some stage of foreclosure as of May, down from 1.4 million a year earlier. The foreclosure inventory accounts for 2.6 percent of all homes with a mortgage.

Florida had the largest number of foreclosures in the 12 months ending in May, followed by California, Michigan, Texas and Georgia. Those five states accounted for almost half of all completed foreclosures.

Apartment Rents Rise, Pace Slows

Nationwide, landlords increased rents an average of 0.7% to $1,062 in the second quarter, according to a report to be released Tuesday by Reis Inc.,  a real-estate research firm. While that is a hair above the 0.6% increase notched in the first quarter, it is well below the 1.3% rise achieved a year earlier.

“The weak labor market and income growth continue to hold rent growth in check,” Reis wrote in its report.

The vacancy rate, meanwhile, held steady at 4.3% in the second quarter, unchanged from the first quarter and marking the first time the rate didn’t decline since early 2010. (…)

Developers are expected to complete the construction of 160,000 new apartment units in the top 54 metropolitan areas this year, more than double the amount added to the market last year, according to CoStar Group. A further 350,000 could be finished by 2015. (…)

New York City remains hot: Its rental rates jumped 2.6% to $3,017—the nation’s highest—while its vacancy rate fell to 2%. “The demand is so high, we have two to three potential tenants for every available apartment,” said Ed Azrilyan, owner of brokerage Chartwell F.H. Realty. “Last summer, we were showing 10 apartments to somebody. [But] people can’t be picky right now.” (…)

Consumers Boost Borrowing

Consumer credit, a measure of borrowing that does not include home mortgages, rose by $19.6 billion in May to a seasonally adjusted $2.84 trillion, the Federal Reserve said Monday.

Revolving credit, which is mostly credit-card debt, rose at a 9.3% annual rate. It was up by $6.6 billion to $856.5 billion, which was the highest level since September 2010. Outstanding credit-card debt bottomed out two years ago and in May saw the largest jump in a year.

Nonrevolving credit, which includes student loans and auto financing, rose by $13 billion in May to $1.98 trillion on a seasonally adjusted basis, the Fed said. The figure rose at a 7.9% annual pace and also marks the 21st straight monthly increase, matching gains from late 2006 through mid-2008.

Credit-Card Delinquency Falls to Lowest Rate Since 1990 Americans are keeping up with their credit card bills better than any time in the past two decades, a reflection of both an improving economy and lingering caution among banks and consumers.

Nearly 1 in 6 Americans Receives Food Stamps

Food-stamp use rose 2.8% in the U.S. in April from a year earlier, with more than 15% of the U.S. population receiving benefits. (See an interactive map with data on use since 1990.)

Food stamp rolls increased on a year-over-year basis, but were 0.4% lower from the prior month, the U.S. Department of Agriculture reported. Though annual growth continues, the pace has slowed since the depths of the recession.

The number of recipients in the food stamp program, formally known as the Supplemental Nutrition Assistance Program (SNAP), is at 47.5 million, or nearly one in six Americans.

Chinese inflation rebounds in June

Credit surge adds to consumer price rise of 2.7%

Consumer prices rose 2.7 per cent year on year in June, up from 2.1 per cent in May, the highest rate since February. Higher pork prices, a major component of China’s consumer price basket, were the biggest contributor to the jump. Rental costs also edged higher, a reflection of how Chinese property inflation has accelerated this year.

But for producers, price trends left little doubt about the economy’s underlying weakness. The producer price index fell 2.7 per cent year on year in June. It was its 16th straight month in deflationary territory, dragged down by falling commodity prices as well as sluggish domestic demand.

China forecasts are being cut ahead of Q2 release

From Bloomberg Briefs’ Michael McDonough via FTAlphaville:

China Q2 GDP growth forecast revisions - Michael McDonough, Bloomberg Briefs

 

Europe Keeps Greek Aid Flowing

The decision came even though Greece’s international creditors reported that all isn’t well with the country’s mammoth bailout program.

Greek outlook bleaker than lenders think, local think tank calculates

Greece’s economy could shrink by as much as 5 percent this year, the Athens-based IOBE think tank said on Tuesday, revising down its previous projection and offering a more pessimistic forecast than the country’s foreign lenders.

Just kidding  An end to austerity will not boost Europe, writes Martin Feldstein

The eurozone periphery is on a risky path to end fiscal austerity and accept larger budget deficits. Portugal is the most recent dramatic shift in that direction; Italy, Spain and even France are also abandoning plans to cut spending and raise taxes.

This move away from budget discipline reflects a combination of popular political pressure, more accommodating bond markets and encouragement from the International Monetary Fund.

But ending fiscal austerity is not a strategy for achieving growth. It will reduce downward pressure on aggregate spending but will not lift growth and employment. Instead, it will raise interest rates and threaten a new fiscal crisis.

Europe needs three things: structural changes to boost long-run potential gross domestic product, a short-term stimulus to increase employment, and a commitment to longer-term spending reductions to shrink the national debt.

(…) governments must combine long-run deficit reductions with short-run fiscal stimulus. Slowing the growth of pensions and other transfers would reduce future debt and prevent near-term increases in interest rates. To make these changes politically acceptable, governments should combine them with an immediate programme of infrastructure investment and manpower training. This would not only raise current GDP but would also strengthen long-run productivity and real incomes.

The slower growth of transfer programmes would also permit lower payroll tax rates, cutting the cost of labour and increasing employment. Lower labour cost would also raise the competitiveness of European products in international markets.

A lower value of the euro could provide a further boost, making it possible to lift employment while shrinking the short-term fiscal deficits. Although a lower euro would not change the exchange rate within the eurozone, countries outside the eurozone account for roughly 50 per cent of the peripheral countries’ trade. (…)

The bond fund outflow, charted

(Credit Suisse via FT Alphaville)

EARNINGS WATCH

Here Is Why Alcoa Just “Beat” Earnings

Alcoa reported adjusted earnings (because the unadjusted earnings were a disaster) of $76 million, or $0.07, on consensus expectations of a $0.06 print. In other words, a beat. So just how did the company beat its forecast?

 
 
China smog cuts life expectancy by 5.5 years
Study shows health risks far greater than feared

 

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