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SMF Blogs > Economic Analysis > August 2008
ECONX July Personal Income Falls 0.7%
July personal income fell 0.7%. The decline was due largely to the lower amount of fiscal stimulus checks as compared to June and May. Excluding the impact from the fiscal stimulus, real disposable personal income was up 0.5% in July, compared to 0.3% in June and 0.4% in May.

Wage growth actually accelerated in July to a 0.3% gain compared to 0.2% June. The weak income number should not be seen as a sign of underlying weakness... Personal consumption expenditures (PCE) were up 0.2% for July.

That was as expected. It was weak relative the 0.6% increase in June and 0.8% in May, but was expected given the soft July retail sales number. Our expectation is for a solid increase in August spending... The PCE deflator at 0.6% reflects higher gas prices in July compared to June and won't cause great concern as gas prices will move lower for August and probably September (the current average price is below the August average).

The core PCE was up 0.3% for the second month in a row. This was in-line with expectations, and consistent with the core July CPI gain. The market does not typically react sharply to these data. That should be the case again today as the numbers are broadly in-line with expectations, reflecting already recognized July data on retail sales and inflation.

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Posted: 8/29/2008 9:04:00 AM by Global Administrator | with 0 comments


Tight credit puts squeeze on big three auto dealers
WSJ reports the credit crunch squeezing Detroit's Big Three auto makers is now spreading to some of their dealers, adding financial pressure to a group already strained by this year's big drop in auto sales.

The latest and most prominent example is Bill Heard Enterprises, one of the largest Chevrolet dealers in the country, with 2007 sales of $2.1 billion. Earlier this month GMAC stopped doing business with Bill Heard over concerns about financial losses related to the privately owned chain of 14 stores, Bill Heard confirmed through a spokesman.

The weakening credit profiles of GM, Ford Motor and Chrysler and their finance arms are adding a new challenge for dealers. In the past, GMAC, Chrysler Financial and Ford Motor Credit were key elements in how Detroit pumped up vehicle sales. They typically offered dealers easy credit to help them sell as many cars and trucks as possible, even if they gave away some of their margin to do so.

But now that the car makers and their once-lucrative financing units are racking up losses and struggling to raise funds themselves, they are getting tougher on dealers with weak finances. And since GMAC and Chrysler Financial are both controlled by private-equity group Cerberus Capital Management, each is now being run to maximize profits, not auto sales. (GM, F)

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Posted: 8/28/2008 4:17:14 PM by Global Administrator | with 0 comments


SMF Traders Report ECONX Q2 GDP Revision Defies Recession Talk
Second quarter real GDP growth was revised up to 3.3% from a previously reported 1.9%.  As expected, net exports played a key part in the upward revision, but an inventory adjustment also helped, too, as the change in inventories was narrowed to -$49.4 billion from -$62.2 billion. 

Personal consumption was also revised up to 1.7% from 1.5%  Real final sales, which exclude inventories and are a better indicator of underlying demand, were revised up to 4.8% from 3.9%.  The deflator was revised up to 1.2% (from 1.1%) while core PCE remained unchanged at 2.1%.  

The revised GDP number shows the economy was a long way from recession in the second quarter.  Heck, the 3.3% rate of growth is even above the long-term trend.  Clearly, the fiscal stimulus package has helped in this period while the weaker dollar has been a clear boon for exports. 

This report should be taken as nothing but encouraging news in the face of many gloomy -- and incorrect -- headlines discussing the state of the U.S. economy.  What's more is that the trends in the data suggest a similar-sized increase for Q3.   

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Posted: 8/28/2008 11:09:31 AM by Global Administrator | with 0 comments


SMF Traders ECONX Initial Claims Stabilize
Weekly initial claims for the week ended August 23 fell 10K to 425K.  The 4-week moving average, meanwhile, dipped to 440,250 from 446,250. 

This is relatively good news given the negative surprises seen of late, however the numbers reman consistent with a soft labor market and won't alter expectations that we'll see another modest decline in nonfarm payrolls for August. 

Continuing claims rose to 3.423 million from 3.359 million.

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Posted: 8/28/2008 10:25:40 AM by Global Administrator | with 0 comments


The FDIC insurance fund ratio fell to 1.01% as of June 30, which is below what’s required by law
  The Board of the FDIC wil have to come up with a plan to get it back up to required levels of 1.15%.

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14:45
 
FDIC says reserves for loan losses quadrupled to $50.2 bln
 
 
 
14:45
 
FDIC says bank earnings fell to $4.96 bln in Q2; Bair says 'another rough quarter' for bank earnings
Posted: 8/27/2008 11:21:17 AM by Global Administrator | with 0 comments


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