by Calculated Risk on 7/17/2012 01:09:00 PM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment. ... The index for all items less food and energy rose 0.2 percent in June, the fourth consecutive such increase.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.1% (1.5% annualized rate) in June. The 16% trimmed-mean Consumer Price Index increased 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was virtually flat at 0.0% (0.5% annualized rate) in June. The CPI less food and energy increased 0.2% (2.5% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for June here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.2%, and core CPI rose 2.2%. Core PCE is for May and increased 1.8% year-over-year.

Most of these measures show inflation on a year-over-year basis are still above the Fed's 2% target, but it appears the inflation rate is slowing. On a monthly basis (annualized), most of these measure were below the Fed's target; median CPI was at 1.5%, trimmed-mean CPI was at 1.9%, and Core PCE for May was at 1.4% - although core CPI was at 2.5%.

by Calculated Risk on 7/17/2012 10:35:00 AM

Earlier ... The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased 6 points in July to 35. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Rises Six Points in July

Builder confidence in the market for newly built, single-family homes rose six points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, released today. This is the largest one-month gain recorded by the index in nearly a decade, and brings the HMI to its highest point since March of 2007.

"Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.
...
Every HMI component recorded gains in July. The components gauging current sales conditions and traffic of prospective buyers each rose six points, to 37 and 29, respectively, while the component gauging sales expectations for the next six months rose 11 points to 44.

Likewise, every region posted HMI gains in July. The Northeast registered an eight-point gain to 36, while the Midwest gained three points to 34, the South gained five points to 32 and the West gained 12 points to 44.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the July release for the HMI and the May data for starts (June housing starts will be released tomorrow). A reading of 35 was well above the consensus.

Housing Investment and Construction Graphs

by Calculated Risk on 7/17/2012 10:00:00 AM

Federal Reserve Chairman Ben Bernanke testimony "Semiannual Monetary Policy Report to the Congress" Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate:

Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

Here is the CNBC feed.

Here is the C-Span Link

by Calculated Risk on 7/17/2012 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.4 percent in June after having declined 0.2 percent in May. In the manufacturing sector, output advanced 0.7 percent in June and reversed a decrease of 0.7 percent in May. In the second quarter of 2012, manufacturing output rose at an annual rate of 1.4 percent, a marked deceleration from its strong gain of 9.8 percent in the first quarter. The largest contribution to the increase in the second quarter came from motor vehicles and parts, which climbed 18.2 percent; excluding motor vehicles and parts, manufacturing output edged up 0.1 percent. Outside of manufacturing, the output of mines advanced 0.7 percent in June, while the output of utilities decreased 1.9 percent. For the quarter, however, the output of mines fell at an annual rate of 1.2 percent, while the output of utilities rose 14.9 percent. At 97.4 percent of its 2007 average, total industrial production in June was 4.7 percent above its year-earlier level. Capacity utilization for total industry moved up 0.2 percentage point in June to 78.9 percent, a rate 1.4 percentage points below its long-run (1972--2011) average.

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 12.1 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.9% is still 1.4 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 80.6% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in June to 97.4. This is 16.7% above the recession low, but still 3.3% below the pre-recession peak.

The consensus is for Industrial Production to increase 0.3% in June, and for Capacity Utilization to increase to 79.2%. The increase IP was slightly above expectations, but Capacity Utilization was below expectations.

All current manufacturing graphs

by Calculated Risk on 7/17/2012 08:34:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.
...
The energy index fell 1.4 percent as the gasoline index declined for the third month in a row; other energy indexes were mixed. The food index rose 0.2 percent after being unchanged last month as the index for food at home turned up in June.

The index for all items less food and energy rose 0.2 percent in June, the fourth consecutive such increase.

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was at the consensus forecast of unchanged for CPI and a 0.2% increase in core CPI.

by Calculated Risk on 7/17/2012 06:00:00 AM

From Realtor.com: June 2012 Real Estate Data

The total US for-sale inventory of single family homes, condos, townhomes and co-ops (SFH/CTHCOPS) remained at historic lows with 1.88 million units for sale in June, down -19% compared to a year ago, and -39% below its peak of 3.10 million units in September, 2007 when Realtor.com began monitoring these markets.

The median age of the inventory dropped to 84 days, which is down -9.67% on an annual basis.

With some notable exceptions, the majority of housing markets showed signs of continued improvement in June. On a year-over-year basis, the for-sale inventory declined in all but 2 (Shreveport, LA and Philadelphia, PA) of the 146 markets covered by Realtor.com, while list prices increased in 101 markets, held steady in 26 markets, and declined in just 19 markets. This pattern is in stark contrast to trends observed in June 2011, when median list prices were down -1% or more on an annual basis in 79 of the 146 markets covered by Realtor.com.

Realtor.com also reports that inventory was up 0.5% from the May level.

The NAR is scheduled to report June existing home sales and inventory this Thursday, July 19th.

by Calculated Risk on 7/16/2012 10:09:00 PM

This will be a busy day for economic data, but first from Tim Duy: A Slap in The Face

The retail sales number should be a slap in the face for any FOMC members sitting on the fence. ... Note ... that the 2010 slowdown in sales did not foreshadow a recession. But it did foreshadow the Jackson Hole speech and QE2. With that in mind, I would expect Federal Reserve Chairman Ben Bernanke to acknowledge the deceleration of activity when he marches up to Capitol Hill this week. And such acknowledgement would be a signal that more easing is on its way.

• At 8:30 AM ET, the Consumer Price Index for June will be released. The consensus is for headline CPI to be unchanged in June and for core CPI to increase 0.2%.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for June. The consensus is for Industrial Production to increase 0.3% in June, and for Capacity Utilization to increase to 79.2%.

• At 10:00 AM, the July NAHB homebuilder confidence survey will be released. The consensus is for a reading of 30, up slightly from 29 in June.


• Also at 10:00 AM, Fed Chairman Ben Bernanke will provide the Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs. Bernanke's comments will be analyzed closely for any comments about QE3, although he hasn't used this forum in the past to hint at further action.

For the July contest:

by Calculated Risk on 7/16/2012 07:34:00 PM

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for June. LA area ports handle about 40% of the nation's container port traffic.

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic is up about 0.4%, and outbound traffic is up about 0.5% compared to May.

In general, inbound and outbound traffic has been moving sideways recently.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

For the month of June, loaded outbound traffic was up 4.8% compared to June 2011, and loaded inbound traffic was up 6.3% compared to June 2011.

This suggests imports from Asia might be up in June, and exports to Asia up too.

All current trade graphs

by Calculated Risk on 7/16/2012 04:32:00 PM

From Alan Zibel at the WSJ: ‘Underwater’ Refis Grow; Critics Not Satisfied

The number of homeowners refinancing their mortgages under a revamped federal program grew in May, but critics are still pressing a federal regulator to do more.

For the first five months of 2012, more than 78,000 homeowners who owe more than 105% of their property’s value have refinanced using the government’s Home Affordable Refinance Program, or HARP. That was up from about 60,000 in all of 2011, the Federal Housing Finance Agency said in a report Monday.

This is a significant increase in refinance activity, but still somewhat below expectations. However the automated system wasn't released until the end of March - and there were some issues with that system - so maybe there more HARP refinances over the rest of 2012.

This table shows the number of HARP refinances by LTV through May of this year compared to all of 2011. Clearly there has been an increase in activity.

HARP Activity
	2012, Through May	All of 2011	Since Inception
Total HARP	297,103	400,024	1,318,954
LTV >80% -105%	218,830	340,033	1,150,065
LTV >105% -125%	67,155	59,991	157,771
LTV >125%	11,118	0	11,118

by Calculated Risk on 7/16/2012 01:35:00 PM

From Merrill Lynch:

Today’s weak retail sales report leaves Q2 GDP tracking a meager 1.1%. We expect the economy to remain weak through the rest of the year with growth of only 1.3% in Q3 and 1.0% in Q4. This translates to GDP growth of only 1.3% Q4/Q4, significantly below the Fed’s forecast of 1.9-2.4%.

Via Ezra Klein:

Macro advisers: Q2 GDP tracking 1%

Nouriel Roubini:

US Q2 GDP growth looks like 1.2% at best ... Q3 growth could be well below 1% given June sales report and unintended inventory build up. US at stall speed

Goldman has lowered their forecast to 1.1% for Q2.

by Calculated Risk on 7/16/2012 11:27:00 AM

This was released earlier ... from the NY Fed: Empire State Manufacturing Survey

The general business conditions index rose five points to 7.4. New orders, however, declined, as that index slipped into negative territory for the first time since November 2011, falling five points to -2.7.
...
Employment levels climbed higher, with the employment index rising six points to 18.5, while the average workweek index fell three points to zero.
...
Indexes for the six-month outlook generally remained favorable, but held at levels below those seen earlier this year. The future general business conditions index fell three points to 20.2, with 37 percent of respondents expecting improved conditions in the months ahead and 17 percent anticipating a worsening.

This was the first regional manufacturing surveys released for July. The general business conditions index was slightly better than expected although new orders were down. The employment index was the highest since March.

The Philly Fed index was especially weak in June, and the July index will be released on Thursday.

by Calculated Risk on 7/16/2012 08:30:00 AM

On a monthly basis, retail sales were down 0.5% from May to June (seasonally adjusted), and sales were up 3.8% from June 2011. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $401.5 billion, a decrease of 0.5 percent (±0.5%) from the previous month, but 3.8 percent (±0.7%) above June 2011.

Ex-autos, retail sales declined 0.4% in June.

Click on graph for larger image.

Sales for May were unchanged at a 0.2% decrease.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 21.2% from the bottom, and now 6.0% above the pre-recession peak (not inflation adjusted)

The second graph shows the same data, but just since 2006 (to show the recent changes). Excluding gasoline, retail sales are up 18.1% from the bottom, and now 6.1% above the pre-recession peak (not inflation adjusted).

The third graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 4.2% on a YoY basis (3.8% for all retail sales). Retail sales ex-gasoline decreased 0.3% in June.

This was below the consensus forecast for retail sales of a 0.2% increase in June, and below the consensus for a 0.1% increase ex-auto.

Some of the decrease was related to the decline in gasoline prices, but this is another indicator of a weak June.
All current retail sales graphs

by Calculated Risk on 7/15/2012 10:12:00 PM

This will be a busy week for economic data.

• At 8:30 AM ET, Retail Sales for June will be released. The consensus is for retail sales to increase 0.2% in June, and for retail sales ex-autos to increase 0.l%.

• Also at 8:30 AM, the NY Fed Empire Manufacturing Survey for July will be released. The consensus is for a reading of 4.5, up from 2.3 in June (above zero is expansion). This is the first regional survey for July.

• At 10:00 AM, the Manufacturing and Trade: Inventories and Sales for May report will be released (Business inventories). The consensus is for 0.3% increase in inventories.

The Asian markets are mixed tonight, with little change.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down about 3, and the DOW futures down about 25.

Oil: WTI futures are down to $86.69 (this is down from $109.77 in February, but up last week) and Brent is at $102.35 per barrel.

Yesterday:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

Four more questions this week for the July contest:

by Calculated Risk on 7/15/2012 04:13:00 PM

From Reuters: Gasoline prices fall more, but slide may be over: survey

The Lundberg Survey said the national average price of self-serve, regular gas was $3.41 on July 13, down from $3.478 on June 22, and from $3.615 a year ago.
...
Gasoline prices have fallen 14 percent from a recent peak of $3.967 a gallon set on April 6.

Trilby Lundberg ...said prices may soon enter a period of "comparative stability,"...

Oil prices have rebounded some. Brent is back up to $102.62 per barrel (after falling to $89 per barrel on June 25th), and WTI is up to $87.10.

Professor Hamilton recently presented a calculator from Political Calculations that estimates the cost of gasoline based on Brent oil prices. Currently this suggests a price of around $3.40 per gallon - about the current price.

The following graph shows the decline in gasoline prices. Gasoline prices are down significantly from the peak in early April, but up a few cents over the last two weeks.

Note: If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

by Calculated Risk on 7/15/2012 10:28:00 AM

On Friday afternoon, one of the undecided FOMC members, Atlanta Fed President Dennis Lockhart appeared to move closer to voting for QE3 now. Back in June, Lockhart said he viewed the current "policy stance as appropriate". But, based on incoming data, his views are changing.

From Lockhart on Friday: The Debate Over Further Monetary Action. Excerpt:

The question that the members of the FOMC confront is whether there is more that can be done to address the related challenges of slower GDP growth and tepid job creation. So, to wind up, let me give you my take on the key questions underlying a decision to bring on more monetary stimulus.

I think the output gap—the amount of slack in the economy—is neither as sizeable as the high-end estimates, nor is it zero. ... I do not think a compelling case has yet been made that structural adjustment has played a dominant role in slowing growth and progress against unemployment.

On the risk associated with the balance sheet: in my judgment, some further use of the balance sheet to promote continued recovery and/or financial stability brings with it manageable risks. I think reversal of the cumulative balance sheet scale and maturity structure can be accomplished in an orderly manner. But the step of additional balance sheet expansion should be undertaken very judiciously. Such a step would take us further into uncharted territory.

On the likely effectiveness of further monetary stimulus—a policy that would necessarily be brought to bear at least in part through credit channels—I think we should have modest expectations about what further action can accomplish. I do not think this means monetary policy is impotent or has reached its limit. But I don't see more quantitative easing or similar policy action as a miracle cure, especially absent fixes in policy areas outside the central bank's purview.

So, as one policymaker, here's my situation: my support for the current stance of policy rests on a forecast that sees a step-up of output and employment growth by year-end and into 2013. If the economy continues on the track indicated by the most recent incoming data and information, that forecast will become untenable, as will the policy premises underlying it.

Although Lockhart weighed both sides of each issue in his speech, he concludes: 1) the risks of QE3 are "manageable", 2) QE3 will be modestly effective, and 3) his earlier forecast is becoming "untenable" and that means he will support more accommodation if the recent weak data continues.

Next up will be Fed Chairman Ben Bernanke's Semiannual Monetary Policy Report to the Congress on Tuesday and Wednesday. QE3 is coming. It is just a question of when.

by Calculated Risk on 7/14/2012 09:40:00 PM

From the NY Times DealBook: U.S. Is Building Criminal Cases in Rate-Fixing

The [Justice Department]’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays ... The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission.

The multiyear investigation has ensnared more than 10 big banks in the United States and abroad. With the prospects of criminal action, several firms, including at least two European institutions, are scrambling to arrange deals ...

According to people briefed on the matter, the Swiss bank UBS is among the next targets for regulatory action. ...

in April 2008, a senior enforcement official at the Commodity Futures Trading Commission, Vincent McGonagle, opened an investigation. ... At first the case stalled as the agency waited months to receive millions of pages of documents when Barclays pushed back ... By the fall of 2009, the trading commission received a trove of information, providing a broad view into the wrongdoing.

The questionable reliability of LIBOR was widely discussed in early 2008 - and iwe are finally seeing fines and possibly criminal charges.

Earlier:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

by Calculated Risk on 7/14/2012 05:05:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for July 13, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

We will have to wait until next week for the OCC to release its enforcement actions through mid-June 2012. As such, it was a quiet week for the Unofficial Problem Bank List with two removals and one addition. The changes leave the list with 912 institutions with assets of $352.9 billion. A year ago, the list held 995 institutions with assets of $416.2 billion.

The addition is The Bank of Southern Connecticut, New Haven, CT ($134 million Ticker: SSE). The removals include an action termination against Tower Bank & Trust Company, Fort Wayne, IN ($651 million Ticker: TOFC) and the failed Glasgow Savings Bank, Glasgow, MO ($25 million).

The FDIC estimated the failure cost of Glasgow Savings Bank at $100 thousand or 0.4 percent of its assets. That is the lowest cost failure in this crisis without the winning bidder paying a deposit premium or receiving a loss share agreement. With such a small cost, it is surprising the bank could not recapitalize itself or shrink to increase its capital ratios.

Authorities are still searching for Aubrey Lee Price, the director that embezzled at least $17 million from Montgomery Bank & Trust, which failed last week. The FBI has placed Price on the Most Wanted List and offered a $20 thousand reward for information that leads to his arrest. Stories are starting to surface about the investors he bilked including this woman that lost her life savings. This should serve as a lesson to never place all of your savings with one institution or financial advisor.

Missing banker accused of fraud in Sarasota

Investor: Missing bank director Aubrey Lee Price stole my life savings

Earlier:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

by Calculated Risk on 7/14/2012 12:45:00 PM

Earlier:
• Summary for Week Ending July 13th

This will be a very busy week for economic data. Key reports include retail sales, housing starts, and existing home sales for June.

For manufacturing, the Fed will release the June Industrial Production and Capacity Utilization, and two regional surveys will be released for July (the first look at manufacturing in July).

On prices, CPI will be released on Tuesday.

Investors will focus on Fed Chairman Ben Bernanke's testimony on Tuesday and Wednesday for hints about QE3.

----- Monday, July 16th -----
8:30 AM ET: Retail Sales for June.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 22.1% from the bottom, and now 6.8% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to increase 0.2% in June, and for retail sales ex-autos to increase 0.l%.

8:30 AM ET: NY Fed Empire Manufacturing Survey for July. The consensus is for a reading of 4.5, up from 2.3 in June (above zero is expansion).

10:00 AM: Manufacturing and Trade: Inventories and Sales for May (Business inventories). The consensus is for 0.3% increase in inventories.

----- Tuesday, July 17th -----
8:30 AM: Consumer Price Index for June. The consensus is for headline CPI to be unchanged in June. The consensus is for core CPI to increase 0.2%.

9:15 AM ET: The Fed will release Industrial Production and Capacity Utilization for June.

This shows industrial production since 1967.

The consensus is for Industrial Production to increase 0.3% in June, and for Capacity Utilization to increase to 79.2%.

10:00 AM: The July NAHB homebuilder survey. The consensus is for a reading of 30, up slightly from 29 in June. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

10:00 AM: Testimony, Fed Chairman Ben Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

----- Wednesday, July 18th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

8:30 AM: Housing Starts for June.

Total housing starts were at 708 thousand (SAAR) in May, down 4.8% from the revised April rate of 744 thousand (SAAR). Note that April was revised up from 717 thousand. March was revised up too.

The consensus is for total housing starts to increase to 745,000 (SAAR) in June from 708,000 in May.

10:00 AM: Testimony, Fed Chairman Ben Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts. This will receive extra attention this month as investors look for signs of a slowdown.

During the day: The AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).

----- Thursday, July 19th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand.

10:00 AM: Existing Home Sales for June from the National Association of Realtors (NAR).

The consensus is for sales of 4.65 million on seasonally adjusted annual rate (SAAR) basis, up from 4.55 million in May.

A key will be inventory and months-of-supply.

10:00 AM: Philly Fed Survey for July. The consensus is for a reading of -8.0, up from -16.6 last month (above zero indicates expansion).

10:00 AM: Conference Board Leading Indicators for June. The consensus is for a 0.1% decrease in this index.

----- Friday, July 20th -----
10:00 AM: Regional and State Employment and Unemployment (Monthly) for June 2012

by Calculated Risk on 7/14/2012 08:01:00 AM

This was a very light week for economic news. The only significant report was the trade deficit for May, and that was at expectations. Import oil prices will fall further in June, so the downtrend in the deficit will probably continue for another month. Interestingly, exports to the euro area were actually up year-over-year for May, but that will probably be short lived.

Weekly initial unemployment claims were down sharply last week, but that was due to onetime factors. Consumer sentiment was down – and so was small business confidence – but those are fairly minor reports.

Enjoy the weekend and rest up - next week will be very busy with several key reports and testimony from Fed Chairman Ben Bernanke. Luckily there are a few housing reports next week, so all the data will not be grim (still seems weird to be writing about the housing recovery after all those years of being a housing Grizzly bear!).

Here is a summary of last week in graphs:

• Trade Deficit declines in May to $48.7 Billion

Click on graph for larger image.

The trade deficit was at the consensus forecast of $48.7 billion.

Oil averaged $107.91 per barrel in May, down from $109.94 per barrel in April. This will decline further in June. The trade deficit with China increased to $26 billion in May, up from $24.9 billion in May 2011. Once again most of the trade deficit is due to oil and China.

Exports to the euro area were $17 billion in May, up from $16.4 billion in May 2011; so the euro area recession didn't lead to less US exports to the euro area in May.

• BLS: Job Openings increased in May

Job openings increased in May to 3.642 million, up from 3.447 million in April. The number of job openings (yellow) has generally been trending up, and openings are up about 18% year-over-year compared to May 2011.

Quits increased slightly in May, and quits are now up about 6% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs
• NFIB: Small Business Optimism Index declines in June

This graph shows the small business optimism index since 1986. The index decreased to 91.4 in June from 94.4 in May.

This index remains low, and once again, lack of demand is the biggest problem for small businesses. (In the survey, the "single most important problem" was "poor sales".

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy and that has contributed to this index remaining low.

• Weekly Initial Unemployment Claims decline to 350,000 due to onetime factors

From MarketWatch: "onetime factors such as fewer auto-sector layoffs than normal likely caused the sharp decline, the Labor Department said Thursday".

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 376,500.

The sharp decline was probably due to onetime factors, plus this included the holiday week.

This was well below the consensus forecast of 375,000. With the holiday week and onetime factors, it is difficult to tell if there is any improvement - but this is the lowest level for the four week average since May.

All current Employment Graphs
• Consumer Sentiment declines in July to 72.0

The preliminary Reuters / University of Michigan consumer sentiment index for July declined to 72.0, down from the June reading of 73.2.

This was below the consensus forecast of 73.5 and the lowest level this year. Overall sentiment is still weak - probably due to a combination of the high unemployment rate and the sluggish economy.

• Other Economic Stories ...
• CoreLogic: Negative Equity Decreases in Q1 2012
• WSJ: The U.S. Housing Bust Is Over
• Q1 2012: Mortgage Equity Withdrawal strongly negative
• LPS: Mortgages in Foreclosure still near record high, Much higher in Judicial States

by Calculated Risk on 7/13/2012 11:13:00 PM

First, from the NY Times today: New York Fed Was Aware of False Reporting on Rates

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that “we know that we’re not posting um, an honest” rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to “fit in with the rest of the crowd.”

Oh my. Really? In April 2008? We were discussing this in 2007! Here are a few of the articles I linked to years ago ...

From the Financial Times in September 2007:

“The Libor rates are a bit of a fiction. The number on the screen doesn’t always match what we see now,” complains the treasurer of one of the largest City banks.
...
The screen will say one thing but people are actually quoting a different level, if they are quoting at all,” says one senior banker.

From the WSJ in April 2008: Bankers Cast Doubt On Key Rate Amid Crisis

The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.

From Bloomberg in May 2008: Libor Set for Overhaul as Credibility Is Doubted

"The Libor numbers that banks reported to the BBA were a lie," said Tim Bond, head of global asset allocation at Barclays Capital in London. "They had been all the way along. The BBA has been trying to investigate them and that's why banks have started to report the right numbers."

The only new news is that the banks are finally paying fines ...