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September 15, 2011

Fundamentals 9/15: Manufacturing Down, Jobless Claims & Inflation Up

September 15, 2011

Fundamentals 9/15: Manufacturing Down, Jobless Claims & Inflation Up

Initial Jobless Claims
-428,000 for the week ended September 10
-Up 11,000 from previous week’s revised 417,000 (was 414k)
-4-week moving average 419,500, up 4,000 from previous week
-Rising trend continues
Jobless Claims

Consumer Inflation, August
-CPI Month/Month +0.4%
-CPI Year/Year +3.8%
-CPI core (less food & energy) Month/Month +0.2%
-CPI core (less food & energy) – Year/Year change +2.0%
-Fed persists in using deflation fear as an excuse to boost money supply. There is no sign, even after a recession and perhaps in the early stages of another recession, of anything resembling deflation. QE2 caused commodity prices to increase and hurt the folks on the economic margins to whom increases in food and gasoline prices are significant. If one looks at the CPI data here, it is becoming obvious that the BEA is using bogus data to adjust GDP from nominal to real dollars.

Empire State Manufacturing Survey
-General Business Conditions Index -8.82
-Fourth straight negative reading. Negative means contraction.
-This is an index of manufacturing in the New York State.
-Inflation is an issue (on top of weak activity): future prices paid index climbed eleven points to 53.3, and the future prices received index rose eight points to 22.8.
Full September report
-Manufacturing in upper New York State has been killed by excessively high property taxes. Read this piece by my good friend and noted economist Steve Hanke of Johns Hopkins University.
NY Manufacturing

Philly Fed Manufacturing Survey
-Manufacturing index level at -17.5
-Measure of manufacturing in Philadelphia
-Negative (contraction) for three of last 4 months
-Inflation is an issue (on top of weak activity): “Increasing costs were somewhat more widespread this month compared to last month. Nearly 29 percent of firms reported paying higher prices for inputs this month. Only 6 percent reported lower prices. The prices paid diffusion index increased 10 points, its first one‐month increase in seven months.”
Full September report

Mortgage Defaults
Bloomberg reports mortgage defaults were up 33% in August.

Eurozone liquidity
A global effort to provide liquity to European banks is resulting in higher U.S. Treasury yields. It will take some time to see it this kills or merely delays our call for record low Treasury yields.

According to Bloomberg, the ECB said it coordinated with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year.