Economic Data

Boockvar:

• The 1st look at July UoM confidence was awful, falling to 63.8 from 71.5 and was well below expectations of 72.2. It’s the lowest since March ’09.
• Any benefit thought to be seen from the decline in gasoline prices, where one year inflation expectations fell to 3.4% from 3.8% (a 5 month low) was more than offset by a still very tough labor market and maybe, but not quantified, only speculated, the circus with our government.
• While the market obviously responded lower after this very disappointing number, the info is really only anecdotal and a symptom of other hard data we’ve been seeing as consumers don’t always behave in line with how they feel.
• For the 2nd straight month, the NY manufacturing Fed survey was negative. This time by -3.8, an improvement from -7.8 in June but well below expectations of +5.0 and vs +11.9 in May.
• New Orders fell 2 pts to -5.5 and Backlogs were down by 12 pts to -12.2.
• Employment softened to 1.1 from 10.2, the lowest since Dec and the Average Workweek fell to -15.6 from -2.0.
• Prices Paid fell 13 pts to the lowest since Jan and Prices Received fell by 6 pts to the weakest since Dec.
• Bottom line, while weak for a 2nd month, we need to see other regional surveys to gauge a national trend as June saw weakness in the NY and Philly areas only to be trumped by strength elsewhere that resulted in a better than expected national ISM.
• Headline CPI did fall .2%, a touch more than expectations of a drop of .1% but the core rate was up .3%, above the estimate of up .2%. It’s the 2nd .3% gain in a row for the 1st time since ’08.
• the key factor in the higher than expected core rate was a .2% rise in Owners Equivalent Rent, the biggest gain since March ’09. This figure is important because it makes up 25% of CPI and 40% of the core.
• Apartment landlords are gaining pricing power as vacancies fall as the homeownership continues its decline. This is a secular trend and will result in a further lift in core inflation going forward.
• Bottom line, June headline inflation, while matching the 3.6% level of May, is at the highest since Oct ’08 with the absolute level of the index at another record high at the same time the US economic remains sluggish. [Bill: But note Rosenberg, below]