Friday, September 30, 2011

ABA Statement on Changing Landscape for Debit Cards

This afternoon Frank Keating, ABA President and CEO, commented on new recently announced bank fees.

“Recently a number of banks have announced new fees for bank services. Make no mistake about it – these fees are the direct result of government price fixing that has fundamentally altered the economics of offering a debit card. One prime culprit is the so-called “Durbin Amendment.””

Read full statement

Consumer Sentiment Rose in August

Consumer sentiment rose by 3.7 points in August to 59.4, according to the University of Michigan’s index. This is up from its August low of 55.7.

The improvement in the index was driven primarily by present conditions, which rose 6.2 points or 9%. Future expectations also showed a slight improvement, but by a more modest 1 point for a gain of 2%. This shows that although consumers view of the economy is better, they remain nervous about the future.

Although sentiment has improved from the August low, it remains very low. August’s level was lower than levels seen during the recession and was the fourth lowest historic reading. Economic drivers of confidence remain poor with high gasoline prices and a volatile stock market. Confidence is already extremely low and is not expected to fall much further, but it won’t improve until markets stabilize and unemployment shows signs of improvement.

Personal Income Fell 0.1% in August

Personal income fell 0.1% during August, the first decline since October 2009 according to a Bureau of Economic Analysis report released this morning. Wage income drove the decline posting a fall of 0.2%.
Dividend and rental income provided support for some, mostly upper income consumers; however, interest income growth remains weak. Also, growth in transfer payments has slowed dramatically.

Declining wages and personal income in August caused consumer spending to post a modest increase. Consumer spending rose 0.2% just enough to keep up with inflation. The savings rate fell for the second month to 4.5%, the lowest level since December 2009, as consumers reduce savings to avoid declines in their real spending.

Consumer prices rose 0.2% in August a smaller increase than seen in July (0.4%). Core inflation rose 0.1%, the slowest since March. Inflation remains low but is rising.

Read the release.

Thursday, September 29, 2011

Mortgage Delinquencies Rose During the Second Quarter

Performing mortgages dropped to 88.0% from 88.6% as measured by the OCC’s Mortgage Metrics Report released this morning. The report, which measures the performance a 32.7 million loan first-lien mortgages serviced by large national banks and federal savings associations, remains better than the 87.3% reading from this time last year.

The decline in portfolio quality was primarily a result of an increase in early stage delinquencies (30-to-59 days delinquent) which increased 0.4% from the previous quarter and now represent 3% of the portfolio. This increase is partially due to seasonal factors and partly due to a sluggish economy and a high rate of unemployment.

The percentage of mortgages that were seriously delinquent, 60 days or more past due and those held by bankrupt borrowers increased slightly to 4.9% of the portfolio from 4.8% the previous quarter. This represents the first increase in six quarters.

The full report can be found here.

Bankers Give Regulatory Feedback

ABA released a report on bank exam experiences gleaned from 700-plus surveys filed since June under the ABA and state bankers associations’ Regulatory Feedback Initiative.

The ABA executive officers also raised concerns about core deposits, the cliff effect of deposit insurance premiums for banks that grow to more than $10 billion in assets, and the need to better understand the standards the FDIC uses to refer discrimination cases to the Justice Department.

Gruenberg -- who also talked about community banking’s economic importance -- and the other senior agency officials said they wanted to continue discussions on each of those subjects.

Read the ABA report on banker exam experiences.

GDP Revised Upward to 1.33%

Second quarter GDP was revised upward to 1.3% from 1.0% (SAAR) according to a Bureau of Economic Analysis report released this morning. This exceeded consensus expectations of a revision to 1.2%. The upward revision was a result of an increase in consumer spending and exports combined with a downward revision to imports.

Despite this encouraging upward revision, growth remains stagnant, below the average 2.3% over the last six months and well below the 3.79% seen this time last year. This slow growth remains too weak to generate enough hiring for a self-sustaining expansion.

Read the report.

Wednesday, September 28, 2011

James Chessen Comments on Economy

ABA's Chief Economist James Chessen spoke yesterday at the American Bankers Insurance Association and gave an economic update, speaking on current banking and economic conditions, the unfolding crisis in Europe, and our domestic fiscal situation.

C-Span broadcast the talk and the video can be viewed here.

Tuesday, September 27, 2011

Existing Home Prices Rose 0.9% in July

Existing home prices rose by 0.9% in July according to both Case Shiller’s 10- and 20- city indices. This led to a slight improvement in year-over-year prices compared to last month. The 10-city index is down 3.7% from last year compared to the 3.9% reported last month. The 20-city index is down 4.1% from last year compared with the 4.6% drop reported last month.

Both the 10- and 20- city indices remain well below their mid-2006 peaks, sitting at 31.0% and 30.9% below their respective peaks.

Of the 20 metro areas surveyed only Las Vegas and Phoenix posted declines over the month, falling 0.2% and 0.1% respectively.

Only the Detroit and Washington metro areas are currently showing year-over-year growth, up 1.2% and 0.3% respectively. The declines over the year seen by the rest range from a 1.9% year-over-year decline in Boston to a 9.1% year-over-year decline in Minneapolis.

Read the report.

Monday, September 26, 2011

New Home Sales Lower in August

The Census Bureau reported that new home sales in August 2011 were at a seasonally adjusted annual rate of 295,000, 2.3% below the July revised rate of 302,000. August sales were 6.1% above the year-ago level of 278,000.

The median sales price of new houses sold in August 2011 was $209,100, dropping 8.7% from the previous month.

At the current pace of sales, there is a 6.6 month supply of new homes available for sale, which has remained near this level since April.

See the report.

Thursday, September 22, 2011

New York Federal Reserve Provides Guidance on Operation Twist

This morning the New York Federal Reserve gave some guidance as to how the Federal Reserve will enact “operation twist."

The New York Federal Reserve issued the following statement:

Purchases of Treasury securities associated with the $400 billion maturity extension program will be distributed across five sectors based on the approximate weights in the following table, although this distribution could be altered if market conditions warrant:

Read full report here.

Wednesday, September 21, 2011

Federal Reserve Initiates Operation Twist

In the FOMC statement released today, the Federal Reserve Board of Governors took yet another unconventional step to ease monetary policy by extending portfolio maturities, a process known as “operation twist.” the Federal Reserve will increase its share of longer-term Treasuries by $400 billion, selling off shorter-dated Treasuries of an equal value. This move will increase the average maturity in the Federal Reserve’s portfolio to just over eight years by the end of 2012 as opposed to just over six years now, while flattening the yield curve.

To keep mortgage rates low the Board of Governors will reinvest proceeds from maturing agency debt and mortgaged-backed securities into additional agency mortgage-backed securities.

Although the Federal Reserve acknowledged that the sale of short-term securities could put upward pressure on short-term rates, it expects the impact to be minimal because of the conditional pledge made in August to keep rates near zero until mid-2013.

As was the case at the last decision, the same three members of the 10 voting officials dissented, voicing concerns of inflation.

See the statement.

September 21st MeetingAugust 9th Meeting
Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected.  Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.  Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.  However, business investment in equipment and software continues to expand.  Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity.  Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions.  More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks.  Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.  Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further.  However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.  The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.  The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate. The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Existing Home Sales Improve Significantly in August

Existing home sales rose 7.7% in the month of August coming in at 5.03 million annualized units, an annualized gain of 18.6%. This pace of sales is the fastest since early spring, but is near the 18-month average.

The growth in sales was led by single-family homes, gaining 8.5% over the month. Condo sales also improved with a 1.8% gain. Compared to one year ago sales have risen by 18.6%, although this comparison benefits from the poor sales last August as a result of the end of the homebuyer tax credit.

Inventories continue to decline as a result of the rise in sales, with months supply dropping by a full month from 9.5 to 8.5. This was driven both by increasing sales and a decline in listings. The months supply is now at its lowest reading since March.

The median existing-house price fell by 5.1% over the year as well to $168,300.

Although we saw a strong gain in existing home sales in August, the rate just barely up to the low 18-month average. Weak consumer confidence and a persistently high unemployment rate are both constraining demand for those who plan to live in the homes. The majority of sales are to investors who comprised 22% of the August sales, up from 18% in August.

Read the report.

ABA Testifies on Raising Shareholder Registration Threshold

The American Bankers Association testified today before the House Subcommittee on Capital Markets and Government Sponsored Enterprises, expressing strong support for legislative solutions that would increase the shareholder threshold for Securities and Exchange Commission registration and allow the SEC to provide much-needed regulatory relief for community banks.

During a hearing titled, “Legislative Proposals to Facilitate Small Business Capital Formation and Job Creation,” ABA Vice Chairman Matthew H. Williams testified on the significant costs and reporting requirements many banks face due to the outdated 500-shareholder threshold, a rule that has not been adjusted for more than 40 years. Williams is also chairman and president of Gothenburg State Bank in Gothenburg, Neb.

“We are grateful to Vice Chairman Schweikert and to Representatives Himes and Womack for introducing legislative solutions that would update the shareholder threshold for registration – up to as many as 2,000 shareholders, a level that ABA strongly supports,” Williams said. “Raising the 500 shareholder cap would eliminate costly reporting requirements that are unnecessary for small banks that are already highly regulated and have significant reporting requirements. It would increase access to capital and free up resources that could be better used making loans in the community.”

When the economy is weak, new sources of capital are scarce, a challenge exacerbated by bank regulators’ new requests for even greater levels of capital.
“Banks that are nearing the 500 shareholder threshold cannot access new capital from additional investors without registering as a public company and incurring significant compliance costs,” Williams said. “These regulatory requirements and costs eat into capital and limit banks’ ability to make loans in their communities.”
ABA has long advocated that the shareholder threshold be increased, a needed change that has taken on new urgency in today’s regulatory climate.

“Over the last several years, banks have faced increased regulatory costs and expect hundreds of new regulations from the Dodd-Frank Act,” Williams said. “These pressures are slowly but surely strangling traditional community banks, handicapping their ability to meet the credit needs of their communities. Increasing the shareholder limit would open up an avenue to bring capital into small community banks.”

For a copy of Williams’ full testimony, please click here.

GOP Urges Federal Reserve to Avoid Stimulus

Top Republican lawmakers sent a letter to Federal Reserve Chairman Ben Bernanke, urging him to “resist further extraordinary intervention in the U.S. economy.”

The letter questioned the efficacy of recent Fed measures noting, “[i]t is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate.”

Leaders of the GOP have “serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy.” Specifically, “the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.”

Below is the text of the letter:

Tuesday, September 20, 2011

Housing Starts Fell in August

Housing remains weak, as new residential construction fell again in August to an annualized rate of 571,000 new units. This is a 5% drop from July’s 601,000 new units (downwardly revised) and a loss of 5.8% from a year ago.

This represents the second month of losses after a gain in June. Starts are 62% below the 50-year average of 1.5 million units.

Declines in multi-family were larger in August and single-family starts declined by 1.4% from the previous month. Completions also fell by 2.7% from the previous month. The one bright spot were permits, which gained 3.2% over the month.

Read the release

Monday, September 19, 2011

President Obama Presents Deficit Reduction Plan

Today, President Obama announced the White House’s plan to reduce the federal deficit by $3 trillion. The plan will be sent to the joint House-Senate committee tasked with cutting at least $1.2 trillion from the current deficit.

The President’s plan will reduce the federal deficit by about $3.6 trillion according to White House estimates. The plan includes $1.5 trillion revenues from tax increases that are centered on wealthy individuals and corporations. This would be achieved by a combination of allowing the Bush-era tax cuts expire, closing loopholes and limiting the amount that high earners can deduct. Additionally, the President proposed an increase in taxes on millionaires that has been termed the “Buffet plan.”

The plan also includes $580 billion in adjustments to health and entitlement programs, including a $248 billion cut to Medicare and $72 billion cut to Medicaid. The administration has said that the Medicare cuts will not come from raising the eligibility age.

An additional $1.1 trillion in savings is designated to come from the ending of the American combat mission in Iraq and the withdrawal of American troops from Afghanistan.

Should the bipartisan supercommittee fail to come up with at least $1.2 trillion in cuts by December 23rd, broad automatic cuts will come into effect.

Friday, September 16, 2011

Household Net Worth Fell Slightly in Second Quarter

Household net worth decreased in the second quarter, according to the Federal Reserve’s Flow of Funds report. Net worth now stands at $58.4 trillion, down slightly from 58.6 trillion in the first quarter. This fall is the first following four straight quarters of growth and leaves us well short of the 2Q 2007 high of 65.6 trillion.

As was expected, the recent poor performance in the stock market following the downgrade in U.S. debt compounded by the ongoing sovereign debt crisis have had a negative impact on household net worth. This follows a period in the first quarter where the stock market was recovering and contributing to net worth growth.

This report is very little changed from the last report and is in line with a number of other indicators that show our economy failing to grow, but also not yet contracting.

See the release.

Thursday, September 15, 2011

Industrial Production Rose 0.2% in August

Industrial production increased gradually in August, following a 0.9% rise in July according to a Federal Reserve report released this morning. This growth is below the six-month average of 0.3% and is consistent with a slowing pace of growth.

The manufacturing output posted a gain of 0.5%, driven largely by a 1.7% gain in motor vehicle production and decent gains in the other sectors.

The mining sector posted another month of positive growth, up 1.2%. The largest headwind to factory production was a 3.0% drop in utilities. August also saw the capacity utilization rate continue its recent trend, rising to 77.4% from 77.3%.

Read the report

Consumer Prices Increase 0.4% in August

In August consumer prices continued their recent trend, increasing by a substantial 0.4% according to a Bureau of Labor Statistics report released this morning. Aside from a decline driven by falling energy prices in June, this represents continuous growth since June of 2010. The broad CPI index is now up 3.8% versus one year ago, with core CPI up by 2.0% over the same period.

The pricing strength was broad based with gasoline, food, shelter and apparel indices all contributing to the growth. Energy contributed heavily, up 1.2%. Core CPI rose by a slightly more modest 0.2%, generally in line with recent growth.

This report shows that inflation is more persistent than many have predicted, potentially limiting the Federal Reserve’s propensity to adopt further stimulus.

Read the report.

Wednesday, September 14, 2011

Retail Sales Unchanged in August

Retail sales were unchanged (0%) in August as consumers in the U.S. reacted to a weak job market and volatile financial markets. This report follows 0.3% growth in July.

Non-auto sales posted a small 0.1% gain, down from July’s 0.2% increase. Sales excluding autos, building materials and gasoline were also unchanged. The weakness was broad based as most retail segments saw little sales growth between July and August.

The miscellaneous and clothing retailers saw the biggest drop, falling 2.2% and 0.7% respectively.

ABA's Chief Economist James Chessen commented, “August proved to be a difficult month for both consumers and the economy. With unemployment above 9%, volatile financial markets, and weak income growth, optimism is in short supply and buying decisions are put on hold.”

Read the report.

PPI Flat in August

Prices for finished goods remained unchanged (0%) in August, following a 0.2% rise in July according to the Bureau of Labor Statistics’ Producer Price Index. Expectations were for a decline, like the one seen in June, that would have been only the second negative reading in 14 months. Currently prices are up 6.5% from this time last year.

The finished foods index jumped again, more than making up for a plunge in energy prices. Inflation in core goods prices slowed substantially and inflation at earlier stages of production continues to moderate.

Read the report.

Tuesday, September 13, 2011

Sales Remain Biggest Problem Facing Small Business

Once again, the National Federation of Independent Business (NFIB) found that in August weak sales, not the availability of credit, is the biggest problem facing small business owners.

Four percent reported financing as their #1 business problem, compared to 25 percent which said sales growth was the biggest obstacle.

Thirty-two percent of all owners reported borrowing on a regular basis, up 2 points from July, but only 4 points above the record low.

As “weak sales [remained] top business problem… new investments in new equipment or new workers are not likely to “pay off” by generating enough additional earnings to repay the loan required to finance the investment.”

Only 5% of small business owners said that this is a good time to expand their facilities.

Given these conditions, small business optimism fell for the sixth month in a row in August, declining 1.8 points to 88.1.

See the full NFIB report.

Friday, September 9, 2011

Online Banking Popular Among All Age Groups

A new survey by the American Bankers Association shows that for the first time the majority, 57%, of bank customers over the age of 55 say they prefer online banking to any other method, compared to the 20% in 2010.

The research indicates 62% of all bank customers prefer online banking, more than all other methods combined, compared to 36% last year.

"These survey results hammer home the point that retail banking has changed for good," said Nessa Feddis, ABA senior counsel and retail banking expert. "They tell us for the first time that customers of all age groups prefer the speed and convenience of conducting their banking transactions on the Internet to visiting their local branch or ATM. They also tell us that customers trust the accuracy and security of online banking," she added.

See the full report

Details of President Obama’s Job Act

President Obama last night unveiled the American Jobs Act, a four part proposal aiming to stimulate hiring. It included numerous tax cuts and additional stimulus spending to be paid for through recent budget agreements and through asking Congress to come up with an additional $1.5 trillion in savings by year-end. Obama urged immediate passage of the plan.

The plan includes:

Tax cuts to help America’s small businesses hire and grow:
  • extending the payroll tax cut, which cuts firms’ payroll taxes in half for the first $5 million and decreases next year’s taxes to 3.1%,
  • offering a complete refund of payroll taxes paid by the added expense of additional employees or increased wages to current employees, capped at $50 million in new wages,
  • allowing firms to deduct the full value of new investments from their tax obligations through 2012.
Veteran hiring incentives and infrastructure reinvestments:
  • Wounded Warriors Tax Credit: offering firms up to $9,600 for hiring veterans with service-connected disabilities who have been unemployed six months or longer,
  • Returning Heroes Tax Credit: offering $5,600 for veterans who remain unemployed six months or longer,
  • investing $35 billion to prevent teacher, police, first responders and firefighter layoffs and $30 billion for modernizing public schools,
  • investing $50 billion into infrastructure and $10 billion into the National Infrastructure Bank.
Long-term unemployment relief:
  • extending unemployment insurance for an additional year, costing $49 billion,
  • offering a $4,000 tax credit to firms for each new hire who had been unemployed for more than six months and,
  • investing $5 billion in low-income youth and adult programs.
Extending the payroll tax cut, which reduces employees’ payroll taxes in half for the next year, costing $179 billion.

The plan would reduce the deficit by making additional spending cuts, by making modest adjustments to health care programs like Medicare and Medicaid, and by reforming our tax code in a way that asks the wealthiest Americans and biggest corporations to pay a higher tax rate.

See the full plan

Thursday, September 8, 2011

Consumer Credit Increased In July

Consumer credit increased in July by $12.0 billion, the largest rise since the recession, according to a Federal Reserve report released this afternoon. June’s growth in consumer credit was revised down to $11.3 billion from $15.5 billion. Total consumer credit has now increased for 10 consecutive months.

The growth in consumer credit was led by a $15.4 (11.8%) increase in non-revolving credit. The increase in non-revolving credit was caused primarily by high July auto loans and student loans. Revolving credit shrunk by $3.4 billion (5.1%), not nearly enough to offset the growth in non-revolving credit.

Read the report.

Bernanke Reiterated Lower Inflation Expectations

Inflation Expectations to Ease
Inflation rose significantly over the first half of this year due to transitory factors, such as supply distributions from disasters in Japan and oil price increases.

However, at a speech in Minneapolis, Bernanke stated “inflation is expected to moderate in the coming quarters as these transitory influences wane” and noted that “longer-term inflation expectations have remained stable.”

Given weaker inflation expectations, the FMOC will continue to consider more monetary stimulus in their September meeting.

U.S. to Remain Competitive in the Future
Bernanke reiterated the strength of the U.S., focusing on the economy’s “traditional advantages of a strong market orientation, a robust entrepreneurial culture, and flexible capital and labor markets.”

“The U.S. economy remains the largest in the world, with a highly diverse mix of industries and a degree of international competitiveness that, if anything, has improved in recent years.”

Short-Term Government Tightening Could Harm Recovery
While noting the U.S.’s strong long-term growth expectation, Bernanke highlighted numerous short-term hurdles, particularly creating a coherent plan to address our long-term fiscal condition while, balancing the impact such decisions can have on the fragile state of our current recovery.

“There is ample room for debate about the appropriate size and role for the government in the longer term, but--in the absence of adequate demand from the private sector--a substantial fiscal consolidation in the shorter term could add to the headwinds facing economic growth and hiring.”

See Bernanke's full speech.

Trade Deficit Narrows

The U.S. trade deficit narrowed by $6.8 billion in July to $44.8 billion according to a Census Bureau report released this morning. The decline was driven by both a 3.6% rise in exports and a 0.2% fall in imports.

The real goods deficit also narrowed significantly, falling $5 billion from $50.3 billion to $45.3 billion. Additionally the volume of exports rose by 4.9% accompanied by a 0.2% fall in the volume of imports.

The improvement in the real deficit suggests that net exports could add two thirds of a percentage point to GDP growth, rather than the one third that is currently built into the forecast.

Read the report.

Wednesday, September 7, 2011

Beige Book Points to Modest Growth

The Federal Reserve’s Beige Book, released today, pointed to modest growth in most Federal Reserve Districts, although some reported mixed or weakening activity.

Five of the 12 districts - St. Louis, Minneapolis, Kansas City, Dallas and San Francisco - reported “a modest or slight” expansion. The other seven districts reported either sluggish growth, a mixed picture or slower overall activity.

The report also noted that “Several districts also indicated that recent stock market volatility and increased economic uncertainty had led many contacts to downgrade or become more cautious about their near-term outlooks."

See the full Beige Book report.

Tuesday, September 6, 2011

ISM Nonmanufacturing Improves to 53.3

The ISM nonmanufacturing index improved in August, rising from 52.7 to 53.3. This report breaks two straight months of decline and completely offsets the decline seen in July. The index remains above its neutral point of 50, signifying industry expansion. New orders and supplier deliveries led the gain offsetting declines in business activity and employment.

There were some encouraging points to this report, specifically the new orders index, a forward looking indicator rose from 51.7 to 52.8. Also, export orders rose 7.5 points to 56.5 with imports increasing from 47.5 to 53.5. The employment index edged lower and backlogged orders remains below the neutral level of 50 for the third consecutive month.

Overall this report is positive. The numbers are consistent with sluggish GDP growth, but not an economic contraction.

Read the report.

Friday, September 2, 2011

Employment Unchanged in August

Nonfarm payroll employment was unchanged (0) in August, with the unemployment rate holding at 9.1% as the recovery in the labor market ground to a halt. July growth was revised down as well, from 117,000 to 85,000.


The private sector grew by 17,000 in August, down from 156,000 in July. Government cuts offset this growth perfectly, cutting 17,000 jobs. Adding to jobs were primarily the healthcare and mining sectors, with the information industry losing the most. A strike at Verizon meant 45,000 less jobs, but if those were added in the growth would remain extremely weak.

The unemployment rate held at 9.1% even with a slight growth in the labor force participation rate. The labor force participation rate rose from 63.9% to 64.0%. The number of long-term unemployed (searching for a job for 6+ months) remained steady at six million, while the number of discouraged workers fell by 133,000 from a year earlier.

Read the report.

Thursday, September 1, 2011

Most Bank Customers Pay Nothing For Bank Services

Even in the face of rising bank fees resulting from massive new regulatory pressure on banks, most bank customers – 71 percent – are finding ways to avoid paying any fees, a recent survey by the American Bankers Association shows. And, 82 percent of consumers spend $3 or less in monthly bank fees for services such as checking account maintenance and ATM access.

“It’s impressive that so many customers avoid paying any bank fees,” said Nessa Feddis, ABA vice president, senior federal counsel and retail banking expert. “It shows that consumers are savvy and able to navigate the new banking landscape with skill. Often, avoiding bank fees can be as simple as maintaining a minimum balance or accepting a paycheck by direct deposit,” Feddis added.

When asked how much they estimate they spend on fees for banking services each month such as checking account maintenance and ATM access, consumers provided the following responses:

  • 71 percent said they pay nothing;

  • 11 percent said $3 or less;

  • 6 percent said $4 to $6;

  • 4 percent said $7 to $9; and

  • 7 percent said they pay $10 or more.

ABA has conducted the survey annually since 1998.

Construction Spending Fell 1.3% in July

Construction Spending in July fell 1.3% below the June level according to a Census Bureau report released this morning. This follows three months of spending growth and indicates that the housing recovery has nearly ground to a halt.

Construction spending sits only 0.1% higher than it was in July 2010. The decline last month was led by a fall in public construction spending, though there were declines for both private residential and non-residential as well.

Read the report.

ISM Manufacturing Declines Slightly

The ISM manufacturing index moved slightly lower in August, falling from 50.9 to 50.6. Many expected the index to fall below the neutral level of 50 for the first time since mid-2009.

Despite being above 50, this report remains weak. Inventories, which tend to be volatile, buoyed the index as many leading indicators fell. New orders remained below 50 for the second consecutive month. Both employment and production index fell.

Although 50 is the breakeven point, a reading above 42.5 generally indicates an expansion of the overall economy. As such, this month’s reading represents 25 consecutive months above 42.5

Read the report.

Productivity Fell 0.7% in 2Q 2011

Nonfarm business productivity fell 0.7% in the second quarter on a seasonally adjusted annualized basis, according to the Bureau of Labor Statistics report released this morning. This represents a trend of two consecutive quarters of declining productivity, following 8 quarters of productivity growth.

The unit labor costs increased in the second quarter by 3.3%.

Productivity growth has slowed notably from its rapid pace earlier in the recovery, and unit labor costs remain well below their peak in late 2008.

Read the release.