Oldcoin
Analyst
- Reaction score
- 12
Amazing isn’t it, I sure didn’t see this action coming today.
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Or you can now use TapaTalk again!Economic News
- Thread starter Spaf
- Start date
Amazing isn’t it, I sure didn’t see this action coming today.
I was wondering the same thing. Anyone got some insights into the correlation between PPI and CPI values?
The_Technician
Market Veteran
- Reaction score
- 15
chemmie, the high ppi means that consumers will pay more.....but of late, consumers spending is starting to lighten up......sales are going down.
The_Technician
Market Veteran
- Reaction score
- 15
Since fuel prices have been up last month, I'm fully expecting a high CPI..not good for the economy....
Oldcoin
Analyst
- Reaction score
- 12
Looking Ahead
CPI Preview
Last Update: 15-Mar-07 08:40 ET
The consumer price index (CPI) is a key measure of inflation and may be able temporarily to divert attention back to the economy Friday morning. Core CPI, the component which excludes volatile food and energy prices, is of more interest to the markets given its lead on the inflation forces directing Fed policy.
Core CPI edged higher to a 2.7% annual rate in January from a weaker 2.6% pace in late 2006. The Fed policy makers prefer a core growth pace of 2.5% or lower.
Briefing.com looks for benign 0.2% growth in both the core component and overall February CPI. The market looks for a slightly stronger 0.3% rise in CPI, but an expected 0.2% gain in core CPI matches our estimate to leave an unchanged 2.7% annual growth pace.
As an aside, the growth is detailed down to a thousandth of a decimal point as rounding risks a lower rate after January's 2.670%. Overall CPI is expected to rise to a 2.2% annual growth rate.
Surprises in the core component are the swing factor for the market given the far stronger effect on inflation expectations and Fed policy direction. February core growth came in at 0.2% last year.
Over the last two years there has been a strong deceleration in CPI due to lower energy prices. CPI reached a 14-year peak of 4.70% in late 2005 and fell to 2.10% in January. The key core component seems to have peaked just a few months ago in September at a decade high 2.90% after showing a marked softening in late 2006.
A downward surprise to 0.1% in February core growth would help confirm weaker inflationary pressures and lessen the chance that the Fed would be forced to tighten policy in 2007. A 0.1% gain would be the fourth over the last five months.
A gain of 0.3% or more would follow the upward surprise in January of a 0.3% gain and would force the policy makers to reevaluate the underlying forces providing the upward lift and possibly set a harder line on policy and the interest rate outlook.
The next few months will provide a clearer read on trends as core growth rose 0.3% in March, April and June of last year. Replacing those with smaller 2007 gains will bring the core growth rate below 2.5% and into the Fed's "comfort zone."
The Fed's policy outlook remains dependent on the coming inflation and growth reports. Core consumer prices are the best forward indicator on the direction of Fed policy and short term interest rates.
Briefing.com expects core inflation to continue lower and to hold off further Fed tightening in 2007.
http://tinyurl.com/32ma7c
-- Tim Rogers, Briefing.com
Oldcoin
Analyst
- Reaction score
- 12
http://www.briefing.com/Investor/Public/OurView/EconomicView.htm
Tame Economic Growth to Continue
Last Update: 28-Feb-07 14:52 ET
The sharp downward revision to fourth quarter GDP was expected given the assumptions Commerce used in the advanced release. The weaker 2.2% growth (from 3.5%) leaves the last three quarters at just a 2.3% average. While weak from an historical perspective the pace is below the 3% rate which the Fed sees as inflationary given the lack of excess economic resources. The Fed expects a sub-3% growth rate to continue in 2007 and 2008 as the lessening effect from the housing sector and the expected return of manufacturing demand is expected to provide a lift to growth over the second half of the year.
• Revised Q4 GDP was just 2.2%, final sales a strong 3.6%.
• Revisions leave 4 of the last 5 quarters below the 3% estimate for potential growth. Key for cooling inflation.
• Downward revisions widespread. Heaviest in inventories and business investment.
• Drag from inventories topped the -1.2% negative contribution from residential investment.
• Fed looks for sub-3% potential growth in 2007 and 2008.
• Lightening housing drag and expectation for a return of manufacturing demand drive stronger growth through 2007.
Oldcoin
Analyst
- Reaction score
- 12
Whew, well we made it through this morning’s economic releases without taking on much water. CPI Actual .4% expected .3% and Core CPI (excludes food and energy) Actual .2% expected .2% are fairly benign numbers. They don’t indicate that the Fed needs to increase rates at the FMOC meeting next weeks; conversely they don’t indicate a rate cut either.
The other releases were Industrial Production Actual 1% expected .3%, was a significant improvement over the prior period where we saw a decrease of -.3%. Here’s what briefing.com had to say about the report:
"Industrial production jumped 1.0% in February. This was well above expectations of a 0.3% increase. The larger gain was due primarily to a 6.7% surge in utility output. Cold temperatures were a major factor, as natural gas utilities output surged 11%. There was a good 0.4% increase in the key manufacturing component, however, even with the cold weather. This in itself is a good number. Manufacturing is up 2.8% over the past year, and total industrial production 3.4%."
http://tinyurl.com/3am7kq
So I think the 0.4% number is the key to the report and does not indicate a downturn in manufacturing.
Oldcoin
Analyst
- Reaction score
- 12
We’ll cut directly to the chase for next week and start with who’s talking. This will no doubt be the focus of the market. The FOMC will meet on March 20th and 21st. What to expect? Well not much. The year over year core rate has held at 2.7% as evidence by last weeks CPI numbers. The Feds mandate is 2% or lower so expectations of a cut are nil. I don’t believe that any discussions of cuts will occur, nor will they increase the rates. I think that we will get about the same as last meeting with them holding the line.
Monday could be impacted by what was said over the weekend. (And I increased my position on Friday. Dang!) Chinese Premier Wen Jiabao made statements about the Chinese economy that were not positive. They also raise rates to try and cool the economy to a sustainable level. When I looked at the Asian markets I’m not seeing a big impact…yet. We’ll see how the EU and U.S. handle this on Monday. Here are the links to that news.
http://edition.cnn.com/2007/BUSINESS/03/17/china.rates.reut/
http://www.fmprc.gov.cn/eng/zxxx/t304313.htm
Also on Thursday Randall Krozner and Donald Kohn both FOMC Voting members will be talking and on Friday Philly Fed Pres Charles Plosser and Timothy Gethner FOMC Voting member.
So, what else is happening this week? Monday will be quite with no significant releases. On Tuesday the 20th Housing Starts will be released. It should have no impact on the FOMC meeting. The report rates a B- for importance, but traders may key in on the results to determine the direction of the economy. In the forecast is a slight increase over February numbers. March 22nd has initial claims, and Friday existing home sales. It may be too early for any of the subprime lending fiasco to impact sales at this time, but it will be interesting to see how the numbers fall out.
http://biz.yahoo.com/c/ec/200712.html
http://www.nasdaq.com/asp/econodayframe.asp?page=http://www.nasdaq.com/econoday/index.html
Some widely held companies will report this week Oracle, Morgan Stanley, FedEx and Nike, (what happened to Tiger this weekend?).
http://www.briefing.com/Investor/Private/Calendars/EarningsCalendarWeek2.htm
The_Technician
Market Veteran
- Reaction score
- 15
Got a new one Oldcoin....rates are fixing to increase on the adjustable mortagages....they are expecting 1 million plus foreclosures afterwards.....could be a real deflationary input to the housing industry.....1 million more homes on the market and they will have to drop their price to sell them......
Oldcoin
Analyst
- Reaction score
- 12
Yes ARMs are going to cause some fallout in the housing market. We are seeing deflation, prices have dropped in my part of the world and houses are still sitting on the market for extended periods of time. Several scenarios for the economy could play out over the next six months. Personally, I hope we achieve a soft landing or at least a bumpy one. Some of the guys I read are very doom and gloom.
The real tragedy is the folks loosing their homes. I know there are some States that are trying help people out and some legal action against lenders, but these systems could be overwhelmed by shear numbers. Part of the true economic price.
I agree that its a tragedy. Theres no part of loosing a house that is "good". But you have to remind yourself that the lender only made the offer for the loan, the people who signed those agreements are the ones who committed themselves to the agreement. While I empathize with what they are going through, sometimes hard lessons are the best teachers.
Oldcoin
Analyst
- Reaction score
- 12
Sometimes I thinks this guy reads our MB, naw
But a interesting view of ARMs and the potential impact on banking. He has a good timeline also.
http://www.stocktiming.com/Monday-DailyMarketUpdate.htm
Sub-Prime loans are a problem, who is looking at the ARMs problem?
When Greenspan was playing up the wonderfulness of Adjustable Rate Mortgages, many homeowners jumped on the band wagon and took out 3 and 5 year ARMs.
Next month, 3 year ARM holders will understand why that was a bad decision.
There are 2 waves of ARM mortgage rate increases coming.
The first wave will occur in April on 3 year ARMs. This is hard to believe, but if interest rates remain the same in the next few weeks, then these ARM mortgage holders will see a 100% increase in their interest rate. If they were to refinance today, they would see a 60% increase in their rate.
The second wave of increases will begin this Summer on the 5 year ARMs, and will continue to run for the next few years unless homeowners refinance. The best hope these people have now, is for us to have a large enough slowdown in the economy that would cause Bernanke to lower interest rates.
While some market analyst were only worrying about defaults coming from sub-prime loans, they forgot to look at the mortgage defaults that will occur because of the 3 and 5 year ARMs.
What this means is that we are likely to see these problems filter down to the banking industry, and that would put pressure on the market. Analyst are telling us that these problems are not affecting the banks. The reality is that these problems take time to filter down to banking financials. Over the next few months, you will hear how banks will have to increase their default reserves, and how it will begin to affect their profits.
Oldcoin
Analyst
- Reaction score
- 12
U.S. Homebuilder Confidence Index Falls to 36 in March From 39
By Courtney Schlisserman
March 19 (Bloomberg) -- U.S. homebuilders lost confidence this month amid concern that tighter credit standards would discourage would-be buyers.
The National Association of Home Builders/Wells Fargo index of sentiment fell to 36 this month from February's revised 39, a seven-month high, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.
Homebuilders, struggling to recover after more than a year of slumping sales, now face the possibility that a surge in defaults on subprime mortgages will make other types of home loans harder to get. That may provide a greater drag on construction as builders hold off starting work on more houses until completed ones are sold.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aD2aFaxi.5Yg&refer=home
Oldcoin
Analyst
- Reaction score
- 12
We could be the ones who will pay for these lending practices;
Senate Weighs Aid to 2.2 Million Subprime Borrowers (Update4)
By James Tyson
March 13 (Bloomberg) -- U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ai0NF1.Z3P9M
Oldcoin
Analyst
- Reaction score
- 12
ECONOMIC REPORT
Housing starts bounce back in February
Building permits for single-family homes drop to 9-year low
http://tinyurl.com/2xo45y
A mixed message?
Oldcoin
Analyst
- Reaction score
- 12
Global
Unstable, Unbalanced, Uncoordinated, and Unsustainable
March 19, 2007
By Stephen Roach | New York
Those were not my words – at least not when I heard them firsthand in Beijing, last Friday, 15 March. In uncharacteristically blunt language, China’s Premier, Wen Jiabao, used the occasion of his annual press conference following the conclusion of the National People’s Congress to send a very clear message about the state of the Chinese economy. He explicitly characterized macro conditions as “unstable, unbalanced, uncoordinated, and unsustainable.” I have never known a senior policy maker or political leader anywhere to leave it like that without rising to meet his own self-imposed challenge. Premier Wen has put his reputation firmly on the line. China, in my view, now has no choice but to continue tightening as it attempts to bring its rapidly growing and unbalanced economy under control.
http://www.morganstanley.com/views/gef/index.html#anchor4530
I was surprised when the global markets blew off the action in China over the weekend. I guess everyone is focused on the FOMC meetings.Similar threads
