Bhr Econ Updates

SDI 2008 Econ Updates

INDEX INDEX.................................................................................................................................1 Confidence Low...................................................................................................................2 General Econ Low ..............................................................................................................4 General Econ Good- Avoid Recession.................................................................................5 General Econ Good- Avoid Recession.................................................................................6 General Econ Good- Avoid Recession.................................................................................7 US Key To Global- US Hurting Global Now......................................................................8 Investor Confidence Low.....................................................................................................9 Investor Confidence High..................................................................................................10 They Say Alt Causes Hurt Economy Now—....................................................................11 They Say: Housing Market................................................................................................12 Housing Market Failing.....................................................................................................13 No Fiscal Discipline ..........................................................................................................14 US Dollar Stable................................................................................................................15

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SDI 2008 Econ Updates

Confidence Low Consumer Confidence Plummeting and Will Continue To Do So LA Times, 7/25/08 (“Feeling more upbeat on the economy? Nobody believes you”, http://latimesblogs.latimes.com/money_co/2008/07/wall-street-des.html) Wall Street desperately wants American consumers to be feeling better. And they are this month, according to the latest national consumer-confidence survey by Reuters and the University of Michigan. But the survey's overseers are advising the rest of us to pretty much ignore the upturn in confidence, saying it most likely is the proverbial "dead cat bounce." In other words, there's no confidence in the confidence number. The Reuters/UofM consumer sentiment index rose to 61.2 this month from the June reading of 56.4, which was a 28-year low. The survey's index of consumer expectations also rose, to 53.5 from 49.2 in June. "Even after the small July gain, the overall level of consumer confidence is dismal and still points toward declines in the pace of spending in late 2008 and early 2009," said Richard Curtin, director of the survey. Despite Small Gains In Confidence It will Continue to Decline LA Times, 7/25/08 (“Feeling more upbeat on the economy? Nobody believes you”, http://latimesblogs.latimes.com/money_co/2008/07/wall-street-des.html) Although it's possible that the uptick indicates that consumers had "overestimated the extent of the economic damage," don't bet on it, Curtin said. "It is more likely that the gains reflect a 'dead-cat bounce,' a phenomena that has been repeatedly observed over the past 50 years: Following a steep decline in confidence, a small gain is recorded before confidence resumes its downward slide," he said. (ASPCA warning: Do not try this on cats at home.)

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SDI 2008 Econ Updates Consumer Confidence Improved- Stimulus Checks Bloomberg, 7/25/08 (“U.S. Michigan Consumer Index Unexpectedly Increased (Update2)”, http://www.bloomberg.com/apps/news?pid=20601087&sid=aevmxehX2OUQ&refer=ho me) Confidence among U.S. consumers unexpectedly rose in July from the lowest level since 1980, a sign that tax rebates and a rally in the stock market may have improved Americans' moods. The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 in July from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July. The tax rebates are putting extra cash in Americans' pockets, helping their budgets overcome the drag from gasoline at more than $4 a gallon, lower home values, fewer jobs and less access to credit. Consumer spending may falter after the lift from the stimulus fades.

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SDI 2008 Econ Updates

General Econ Low Overall Econ Low- Been Declining for a Year- Effecting Global Econ Reuters, 7/25/08 (“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”, http://www.reuters.com/article/bondsNews/idUSN2534246520080725) U.S. consumer sentiment rebounded from a 28-year low but new home sales extended their three-year slide, cementing a weak outlook for growth that was mirrored overseas. Britain's economy edged forward at its weakest pace in three years in the second quarter, dashing hopes that the rest of the world economy would be able to withstand a U.S. slowdown. The mood of American consumers did improve unexpectedly, but remained at levels that in the past were consistent with recession. The Reuters/University of Michigan Surveys of Consumers said on Friday its final July reading of its index of confidence rose to 61.2 from 56.4 in June. "The data still indicate an ongoing downturn in spending that will last well into 2009," the report said. The U.S. economy has been battered over the past year by a crisis that began in the mortgage sector but then spread to banking, infecting financial markets with a deep sense of mistrust that has curtailed lending in various sectors.

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SDI 2008 Econ Updates

General Econ Good- Avoid Recession Econ Recovering- Avoiding Recession Now The Press Enterprise, 7/25/08 (“Worry about economy eases”, http://www.pe.com/business/local/stories/PE_Biz_S_economy26.3d65a81.html) Orders for U.S. durable goods unexpectedly rose in June, and sales of new homes were higher than forecast, easing concern that the economic slowdown will worsen. Factory orders for goods made to last several years gained 0.8 percent and posted the first consecutive monthly rise since July 2007, the Commerce Department said Friday. New homes sold at an annualized pace of 530,000, exceeding the median forecast of 503,000. A private report showed consumer sentiment rose from a 28-year low. Stocks rose and Treasuries fell after the reports indicated the economy accelerated in the second quarter from the weakest pace of growth in five years. Economists had forecast the slowdown would worsen by the end of the year as the effect of tax rebates fades and job losses and rising prices force households to cut spending. "At the end of the day, we are going to avoid a severe recession," said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Conn. The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 in July from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July. But some housing analysts said they saw cause for optimism that the worst of the decline could be drawing to a close, especially if a sweeping housing rescue package now pending in Congress can slow a flood of foreclosures and spur sales to first-time homebuyers. Exports Helping US Econ Reuters, 7/25/08 (“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”, http://www.reuters.com/article/bondsNews/idUSN2534246520080725) Moreover, the weak dollar helped boost durable goods orders 0.8 percent in June. A proxy for business investment in that report also rose 1.4 percent, following a 0.4 percent decline in the previous month. "Healthy demand for U.S. goods abroad has likely offset the drag from tight credit and a weak domestic economy, sustaining business investment," said Ethan Harris, chief U.S. economist at Lehman Brothers.

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SDI 2008 Econ Updates

General Econ Good- Avoid Recession US Econ Recovering IB Times, 7/25/08 (“Dollar strengthen against the Japanese yen on better-than-expected U.S. economic data - Jul 25”, http://www.ibtimes.com/articles/20080725/dollar-strengthen-against-thejapanese-yen-on-better-than-expected-u-s-economic-data-jul-25.htm) The U.S. greenback rose against the Japanese yen on Friday after release of unexpected robust U.S. economic data which injected a dose of optimism about the U.S. economy. This bolstered investors to shift back their assets to higher-yielding countries from Japan and the dollar rebounded strongly from intra-day low of 106.58 (Europe) and ended firmly to 107.85 at New York closing, near to a one month high of 107.99 set on Thursday. The U.S. durable goods orders were up 0.8 percent in June, after a revised 0.1 percent gain in May and separate data showed sales of new homes in the United States fell to a 530,000 annual pace last month, against market expectations for a drop to a 500,000 rate, while consumer sentiment, University of Michigan survey, recovered unexpectedly in July (61.2) after falling in June (56.4) to the lowest level since the early 1980s. The stronger-than-expected U.S. economic data and continuing drop in oil prices (last traded at $123.37 per barrel, its seven-week low) gave a boost for the U.S. dollar and the single currency fell to as low as 1.5667 while British pound dropped to session low of 1.9870 before rebounding on carry trade demand versus the Japanese yen. Economic Decline Wouldn’t Be As Bad Now NYT, 7/27/08 (“It’s Bad, but Remember We’re Dodging the Worst”, http://www.nytimes.com/2008/07/27/business/27every.html?em&ex=1217304000&en=2 c6c1f5053394f5d&ei=5087%0A) There would probably not be a recession, said I. If there were, it would not be long or deep. All that was required was for the Federal Reserve to stand by with oceans of liquidity and assurances that it would not let anything big fail. Time has passed. The news media are full of shrieking and wailing about the economy. But how bad is it, really? The economy isn’t at its best. Oil prices are painfully high, foreclosures are really hurtfully high, job growth in many areas is sluggish or worse, and a sector of the credit markets is extremely weak. But over all, it’s not all that bad. According to the June 2008 economic indicators from the White House Council of Economic Advisers, here is where we stood at the end of June: There has not been one down year for the G.D.P. in this decade. There has not been one down quarter, in inflation-adjusted terms, since 2001. It’s possible that the G.D.P. will not show growth in the second quarter. So, by the old definition — two straight downward quarters of G.D.P. — we cannot know if we have just entered a recession. We’ll get to the new definition in a moment.

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SDI 2008 Econ Updates

General Econ Good- Avoid Recession US Will Avoid Recession- Multiple Reasons Bloomberg, 7/25/08 (“U.S. Economy: Orders Up, Home Sales Beat Forecasts”, http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom e) Orders for U.S. durable goods unexpectedly rose in June, and sales of new homes were higher than forecast, easing concern that the economic slowdown will worsen. Bookings for goods made to last several years gained 0.8 percent and posted the first consecutive monthly rise since July 2007, the Commerce Department said today in Washington. New homes sold at an annualized pace of 530,000, exceeding the median forecast of 503,000 in a Bloomberg News survey. A private report showed consumer sentiment rose from a 28-year low. Stocks rose and Treasuries fell after the reports indicated the economy accelerated in the second quarter from the weakest pace of growth in five years. Economists had forecast that the slowdown would worsen by year-end as the impact of tax rebates fades and as job losses and rising consumer prices force households to cut spending. ``At the end of the day, we are going to avoid a severe recession,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.

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SDI 2008 Econ Updates

US Key To Global- US Hurting Global Now US Downturn Hurting Global Econ Reuters, 7/25/08 (“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”, http://www.reuters.com/article/bondsNews/idUSN2534246520080725) The latest news suggests the pain will not be limited to the United States. Germany's closely watched Ifo survey of business sentiment hit a three-year-low in July. In England, which has exhibited housing troubles of its own, the damage also had a broad impact. Gross domestic product rose by 0.2 percent last quarter, bringing the annual rate down to 1.6 percent from 2.3 percent in the first quarter. Euro-zone loan growth, meanwhile, fell in June to its slowest pace since January 2006 after the economic downturn took a heavier-than-expected toll on bank lending, European Central Bank data showed.

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SDI 2008 Econ Updates

Investor Confidence Low Week Dollar Hurting Investor Confidence CNN Money, 7/25/08 (“Dollar mixed as market mulls economy”, http://money.cnn.com/2008/07/25/markets/dollar/?postversion=2008072513) The dollar was mixed Friday as two days worth of housing market data showed continued economic instability. The 15-nation euro bought $1.5697, up slightly from $1.5677 late in the day on Thursday. The dollar traded at ¥107.89, up from ¥107.34. While most banks reported second-quarter earnings that were not quite as weak as expected, there is still concern about the strength of the financial sector. "There is still a lingering negative sentiment regarding U.S. financials, and that is weighing heavily on investor confidence," said Gareth Sylvester, senior currency strategist at HIFX San Francisco. Analysts said stock market moves also weighed on dollar sentiment. On Thursday, the Dow lost 283 points, or 2.4%, but then opened higher on Friday after news of surprise strength in June durable goods orders. "The equity market is a barometer for the U.S. economy," explained Sylvester. "It is representative of the U.S. market psyche," he said, so when the equity markets take a beating, that leads to weakness for the greenback.

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SDI 2008 Econ Updates

Investor Confidence High Investor Confidence Increase- Oil Prices, Dollar Value The Guardian, 7/25/08 Stocks gained in jittery trading on Friday as nagging worries about the credit crisis shaded optimism over stronger economic data, taking much of the steam out of a U.S. stock rally and spurring a renewed flight to save-haven debt. The dollar rose against the yen after better-than-expected economic news and declining oil prices bolstered investor confidence early in the session.

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SDI 2008 Econ Updates

They Say Alt Causes Hurt Economy Now— Econ Stable Despite Multiple Problems NYT, 7/27/08 (“It’s Bad, but Remember We’re Dodging the Worst”, http://www.nytimes.com/2008/07/27/business/27every.html?em&ex=1217304000&en=2 c6c1f5053394f5d&ei=5087%0A) The real question is, why are we not in worse shape, considering the blows from fuel prices, the housing collapse, food prices and the credit crisis on Wall Street, such as it is? (It’s confined mostly to lower-quality debt.) As far as I can tell, there are several reasons. One is the immense size of government expenditures. Federal outlays alone are roughly $3 trillion in a $14 trillion economy. If you add in consumption expenditures by state and local governments, the number comes in above $4 trillion. Second is the very large federal deficit, on the order of $400 billion. This is highly stimulative, as was the federal stimulus package itself. Third is the truth that the blows to the economy, while painful, are simply not enormous on a national scale.

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SDI 2008 Econ Updates

They Say: Housing Market Moderate Economic Growth Despite Housing Slump Bloomberg, 7/25/08 (“U.S. Economy: Orders Up, Home Sales Beat Forecasts”, http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom e) The Standard & Poor's 500 Stock Index gained 0.4 percent to close at 1,257.76 at 11:24 a.m. in New York. Benchmark 10-year note yields rose to 4.10 percent at 4:45 p.m. in New York from 4 percent late yesterday. The rise in durable-goods orders compared with the median forecast for a 0.3 percent drop in a Bloomberg News survey of 78 economists. ``It's consistent with modest economic growth,'' Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Radio interview. ``It does support the notion that GDP growth in the second quarter was pretty solid,'' he said, referring to gross domestic product. Record exports, fueled by a weakening dollar and economic expansions abroad, are helping U.S. factories withstand the housing slump and slowing demand at home.

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SDI 2008 Econ Updates

Housing Market Failing Housing Market Failing Bloomberg, 7/25/08 (“U.S. Economy: Orders Up, Home Sales Beat Forecasts”, http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom e) The supply of homes at the current sales rate fell to 10 months' worth from 10.4 months in May. There were 426,000 homes for sale at the end of June at an annual pace, the fewest since December 2004. The figure was down 5.3 percent from the prior month, the biggest decline since November 1963. A report yesterday from the National Association of Realtors showed existing home sales fell 2.6 percent to a 4.86 million annual rate, the lowest level in a decade. The median home price dropped 6.1 percent from June of last year. Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to survive the meltdown in subprime lending has heightened the credit crisis and may push up mortgage rates and further curtail access to loans. U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth. Manufacturing and Housing Continuing to Fail Bloomberg, 7/25/08 (“U.S. Economy: Orders Up, Home Sales Beat Forecasts”, http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom e) Pulte Homes Inc., the third-largest U.S. homebuilder, this week reported a second-quarter loss of $158.4 million. ``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive Officer Richard Dugas said yesterday on a conference call with analysts. The gains in today's durable-goods report reflected increasing demand for machinery, metals, autos and defense gear. The figures countered regional reports, which indicated manufacturing was weakening. The Federal Reserve said on July 23 that manufacturing declined in ``many'' of its 12 districts in June and July. The Fed also said the economy ``slowed somewhat'' and that all of its bank districts reported ``elevated or increasing'' price pressures. ``Manufacturers in several districts anticipated further factory weakness in the near future,'' the central bank said in its regional economic survey, known as the Beige Book for the color of its cover. ``While most districts expected stable capital spending heading forward, a few noted manufacturers' plans to reevaluate based on current economic conditions.''

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SDI 2008 Econ Updates

No Fiscal Discipline No Fiscal Discipline Now Tony Phyrillas 7/23/08 (Taxpayer group: No fiscal discipline in Congress, Newstex, Nexis) Spending other people's money continues to be the favorite activity of members of Congress, according to a new study by the National Taxpayers Union Foundation.For every single bill introduced to save money, the House of Representatives introduced 22 bills to spend more money and the Senate introduced 30 bills to increase spending, according to the NTUF.The study compared spending under the 109th Congress to the Nancy Pelosi/Harry Reid-led 110th Congress.The number of House spending bills (1,078) rose by over one-third since the last Congress, while Senate spending bills grew by nearly 25 percent (to 745), according to the study.These people are addicted to spending your money. They have to be stopped. You can't go wrong by voting out an incumbent, especially the hypocritical Democrats who fooled you into voting for them in 2006.Follow the link below for more highlights from the study. No fiscal discipline now John Stephen 7/27/08 (“Congress fails on energy front” http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080727/OPINION/807270 356&sfad=1) Extending the tax credits would mean that individuals and businesses would keep $19 billion more of their money, instead of sending it to Washington. Under the House rules, that money "loss" would have to be offset by new taxes or spending cuts. Now, no Congress in their right mind would hike taxes in an election year, so that means that to keep these incentives for renewable energy in place, Washington would have to do what the rest of America is doing to meet the rising costs of energy prices — roll up our sleeves and make tough decisions on spending. A good place to start finding savings is the $20 billion in wasteful earmark spending stuffed into the last Omnibus spending bill. However, instead of trying to help ease the energy crisis we are facing today, the House would rather spend $212,000 for fruit fly research in France and nearly $2 million for Rep. Charlie Rangel's monument to himself in New York than to support renewable energy incentives. The message that the House is sending is unmistakable. No new domestic oil or gas, and no more renewable energy either. Americans will just have to get used to high energy prices, because Washington will do nothing to increase supply, and the need for Congress to waste more taxpayer dollars is greater than finding energy solutions. Forget about Congress helping Americans cut their energy bills or helping businesses cut costs by seeking sound renewable energy alternatives. The folks in Washington have got spending to do. That's why it's time for change in Congress right now.

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SDI 2008 Econ Updates

US Dollar Stable Dollar Stabilizing Daily FX, 7/27/08 (“Can Dollar Rally Continue?”, http://www.dailyfx.com/story/strategy_pieces/trade_or_fade/Can_Dollar_Rally_Continue __1217192251506.html) “Is the worst behind us?” we asked last week. “If crude continues to drip lower, “ we concluded ,”it could provide yet another reason for a dollar counter trend rally.” With oil falling below $125/bbl by end of trade Friday, the massive sigh of relief from dollar bulls could be heard around the world. As a result, the greenback picked up more than 100 points on the euro by end of the week although the US economic data was mixed at best. Housing continued to be a problem as Existing Homes plunged -2.6% versus -0.1% projected and LEI data printed negative for 7th out of the past 9 months. However by Friday US economic data actually proved supportive with U of M survey jumping back to the 60 level and Durable Goods registering a surprise increase 0.8% versus forecasts of a -0.3% decline. Furthermore as we noted in our Friday note, ”with markets already so preconditioned to bad economic news from the U.S., the greenback may not weaken much further unless the data shows substantial deterioration from the prior month."

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