April 2011 U.S. Economic Fundamentals

[Ally]

U.S. lacks 'credible' deficit plan: IMF






The United States lacks a credible plan to cut its deficit over the medium term, the International Monetary Fund`s chief economist Olivier Blanchard told French daily Le Monde in an interview published on Wednesday.




`There are reasons to be worried. The United States lacks a credible plan, for the medium term, to reduce its budget deficit,` Mr. Blanchard was quoted as saying, after rating agency Standard & Poor`s signalled on Monday that the United States` triple-A credit rating was under threat.





Read the full article here.

 

[Ally]

Investors drive up U.S. home sales





Investors drove up U.S. home sales last month, plunking down cash to grab cheap homes at risk of foreclosure. But purchases made by first-time home buyers, who are crucial to a housing recovery, fell.




Sales of previously occupied homes rose in March to a seasonally adjusted annual rate of 5.1 million, the National Association of Realtors said Wednesday. That's up 3.7 per cent from 4.92 million in February. The pace is far below the six million homes a year that economists say represents a healthy market.





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[Ally]

U.S. factory activity plunges





NEW YORK ` The pace of factory activity in the U.S. Mid-Atlantic region fell far more than expected in April, after expanding at its fastest pace in 27 years the month before, a survey showed Thursday.




The Philadelphia Federal Reserve Bank said its business activity index fell to 18.5 in April from 43.4 the month before.




Economists had expected a reading of 37.0, based on the results of a Reuters poll, which ranged from 28.0 to 45.0. Any reading above zero indicates expansion in the region`s manufacturing.





Read the full article here.

 

[Ally]

10 U.S. housing markets at a risk of major collapse





Even the baseline scenario in places like Las Vegas and Miami is grim, where Case Shiller projects a 21% decline in home prices from 2010 to 2012.





But in one scenario it could be worse.





6.7 million delinquent mortgages are waiting to flood the market around the country -- and with near-zero cure rates most of them will. Another 2 million homes in foreclosure are being held off the market by banks.





Read the full article here.

 

[Ally]

We just got the tenth sign that the U.S. economy is slowing down





We originally ran this post a couple of weeks ago showing 9 signs that the economy is slowing down...








Today we got the 10th sign: Initial jobless claims are starting to stagnate, jumping above 400K now two weeks in a row.



Read the full article here.

 

[Ally]

Yuan begins long mark towards global credibility




For a symbol of China`s economic might -- and its monetary policy challenges -- you need to look no further than the gleaming towers of Oriental Plaza.




A short walk from Beijing`s iconic Forbidden City and Tiananmen Square, this posh shopping mall and business complex is home to a five-star hotel, dozens of high-end shops, eight office towers housing foreign firms including Deloitte and a high profile graduate school of business -- in other words, some of the most modern aspects of the Chinese economy, and a source of national pride.





Read the full article here.

 

[Ally]

Delay in raising U.S. debt cap would cause broad damage: JP Morgan




A delay in raising the U.S. debt ceiling could cause widespread damage across markets and hurt economic growth if it led to a technical default, but this situation is `extremely unlikely,` according to JPMorgan.




The White House and congressional leaders must agree on a deal on raising the $14.3-trillion (U.S.) cap on borrowing in the next few weeks or the United States will be at risk of defaulting on its debt.





Read the full article here.

 

[Ally]

Just how much lower can the embattled U.S. dollar sink?




The U.S. currency (USD/EUR-I0.69-0.001-0.19%) continues slump, having trended lower all year. Here are six reasons cited by Ms. Sutton:

• 
  Markets are focusing again on the U.S. fiscal mess given the budget fight in the U.S. and the outlook downgrade by Standard & Poor's.
  
  
  Expectations that the Federal Reserve will keep interest rates at historic lows while many other central banks have either hiked or are poised to hike.
  

Read the full article here.

 

[Ally]

U.S. new home sales beat forecasts




WASHINGTON ` New U.S. single-family home sales increased more than expected in March and the supply of new houses on the market hit their lowest level since August 1967, but prices fell from a year ago.




The Commerce Department said on Monday sales rose 11.1% to a seasonally adjusted 300,000 unit annual rate, after an upwardly revised 270,000 unit pace in February. Economists polled by Reuters had forecast new home sales climbing to a 280,000-unit pace last month from a previously reported record low 250,000 unit rate.




Compared with March last year sales were down 21.9%. The market for new homes is being squeezed by competition from previously owned homes and a deluge of foreclosed properties, even though inventories of new houses are at a 43-1/2 year low.




A report last week showed there were 3.55 million previously owned homes on the market in March, well above the economy`s natural rate of between 2 million and 2.5 million.





Read the full article here.

 

[Ally]

Get ready to find out just how fragile the U.S. recovery is




NEW YORK ` Data on how the U.S. and British economies fared in the first three months of the year due this week will likely highlight the tenuous nature of the recovery from recession in developed countries.




A combination of rising gasoline prices and bad weather has prompted a number of big banks to cut their forecasts for U.S. economic growth in the first quarter.




The preliminary snapshot of U.S. GDP growth, which a Reuters survey puts at 2.0%, will be released on April 28.




In the UK, where weak consumer demand is expected to weigh on first-quarter output, the preliminary reading will be released on Wednesday.





Read the full article here.

 

[Ally]

The next financial crisis could be right around the corner




When a financial bubble bursts, there`s a run on scapegoats. With hundreds of billions of dollars in wealth wiped away in short order, it`s natural to look for someone to blame. So, after each economy-shaking crash, the U.S. Congress goes after the evildoers with determination and vigor. In 1929, it targeted the brokers who fueled a speculative bubble with easy loans and abundant hype. In 2000, the villains were unscrupulous dot-com CEOs, peddlers of counterfeit value that never existed. And in 2008, it was executives at big investment banks, who created inscrutable derivatives from worthless mortgages.





In each case, Congress called the culprits to account at a series of acrimonious hearings, the purpose of which was to sniff out the reasons for the crash and to prevent a recurrence. Each time, once-cocky executives, now suitably humbled, faced the censure of Congress inside committee rooms and crushes of angry reporters outside them. In the aftermath, Congress worked to change regulations to ensure that future players could not engage in the kind of dangerously risky behavior that had led to each crash.





Read the full article here.

 

[Ally]

U.S. housing gets a small lift





New U.S. single-family home sales increased more than expected in March and the supply of new houses on the market hit their lowest level since August, 1967, but prices fell from a year ago.




The Commerce Department said on Monday sales rose 11.1 per cent to a seasonally adjusted 300,000 unit annual rate, after an upwardly revised 270,000 unit pace in February.





Read the full article here.

 

[Ally]

Spreading inflation speeds up the debt repayment clock




It came as a stark reminder that U.S. profligacy can`t continue forever.




The admonishment by credit-rating agency Standard & Poor`s that it might cut Uncle Sam`s cherished triple-A rating rocked Washington this week, as markets absorbed the staggering debt numbers afresh: The United States owes its creditors $14-trillion and change, a figure that is approaching 70 per cent of gross domestic product. And while there are duelling, widely divergent proposals for dealing with the costly tab, the world`s biggest economy still has no official plan for digging itself out of the red.





Read the full article here.

 

[Ally]

The latest look at the distressing gap that's still haunting the housing market





From Calculated Risk, The latest look at the gap between new and existing home sales. The key thing is that since the housing crisis began, existing home sales have rapidly outpaced sales of new home sales, thanks to the flood of distressed sales.




As long as this gap is so huge, it's obvious that the market is, to some extent, broken.




Read the full article here.

 

[Ally]

U.S. home prices continue to fall in major cities




WASHINGTON`Home prices are falling in most major U.S. cities, and at least 10 major markets are at their lowest point since the housing bubble burst.




The Standard & Poor`s/Case-Shiller 20-city index shows price declines in 19 cities from January to February. The index fell for the seventh straight month. Prices fell at a faster rate in 11 markets in February compared with the previous month.




High unemployment, stricter lending rules and fears that prices will fall further are among the reasons why few people are buying and selling homes. A record number of foreclosures are forcing down home prices in most metro areas, and prices are expected to keep falling through this year.




`There is evidence that potential sellers are holding their properties off the market, waiting for housing prices to stop falling,` said Bricklin Dwyer, an analyst at BNP Paribas.




Detroit was the only market to show a monthly gain, although the Motor City is one of five cities where home prices are now below their January 2000 levels.





Read the full article here.

 

[Ally]

U.S. home prices decline




What more can be said about U.S. housing prices other than ugh? The S&P Case Shiller home price index for February fell 0.2 per cent in February from the previous month. On a year-over-year basis, prices sank 3.3 per cent. As Toronto-Dominion Bank points out, that`s the biggest decline since November 2009. And as The Big Picture notes, a double dip is almost upon us, raising questions about the economic recovery and the Federal Reserve`s likely response.





Yet, stocks were higher in mid-morning trading on Tuesday, suggesting that investors are willing to blow this one off. The gains could be because the Conference Board`s consumer confidence index rose to 65.4 in April, which was a little better than expectations. It suggests that recent job gains are overshadowing rising energy prices.





But as The Economist`s Free Exchange points out, the report on U.S. home prices wasn`t quite as bad as the headlines might suggest. As they remind us, the Case Shiller index is actually a three-month rolling average, which means that the latest reading might not be taking into account some recent improvements.





Read the full article here.

 

[Ally]

Ben Bernanke warns U.S. of risks from weak house prices and ailing banks






Ben Bernanke, the head of the Federal Reserve, is expected to emphasise the risks faced by the US economy from persistently weak house prices and an ailing banking sector when he gives his first press conference on Wednesday.




In contrast to resurgent corporate profits and the booming stock market, which on Tuesday saw the Standard & Poor's 500 hit a three-year high, he will downplay the strength of the economy.




He is also expected to defy critics of his low interest rate policy, who have called for rate rises and an end to quantitative easing, which they blame for the collapse of the dollar and rising inflation. The twice yearly press conferences are a nod to the Bank of England and European Central Bank, which regularly address journalists on monetary policy trends. Bernanke is not expected to adopt the same football analogies beloved of Bank of England governor Mervyn King, but he is known to want to explain his policies to a wider audience.







Read the full article here.

 

[Ally]

Bad housing news still isn't that bad




The latest Case-Shiller home price data, for the month of February, are now out, and headlines are sure to be gloomy. Year-on-year, the 20-city index dropped 3.3% in February, down slightly more than in the previous month. Most of the markets tracked by the index fell for the month. Eight of the tracked markets hit new post-boom lows.




Still, it would be a mistake to be too pessimistic. First, one must remember the peculiarities of the Case-Shiller data. The reported indexes are a three-month moving average, so the latest figures include data that became available in December, January, and February. The contracts for those sales may have closed a month or two before, so the figures capture a snapshot of the housing market that includes last fall. Conditions have likely improved since then.





Read the full article here.