June 2011 U.S. Economic Fundamentals

[Ally]

Debt limit battle risks crisis




WASHINGTON - U.S. Federal Reserve Chairman Ben Bernanke warned on Tuesday that a failure to lift the government`s US$14.3-trillion debt ceiling risks a potentially disastrous loss of confidence in America`s creditworthiness.







In comments that could give fresh impetus to talks on raising the legal limit on the nation`s debt, Mr. Bernanke said the United States could lose its prized AAA credit rating and the U.S. dollar`s special status as a reserve currency might be damaged if Congress fails to act soon.







"Even a short suspension of payments on principal or interest on the Treasury`s debt obligations could cause severe disruptions in financial markets and the payments system," he told a budget conference.





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[Ally]

Keep an eye on the loonie if you have any foreign holdings




For most people, the only time they notice what the loonie is doing is when they`re solidifying their travel plans.




However, all investors would do well to pay more attention to currency markets and currency issues, especially if there are any foreign holdings in your portfolio.




`Currency is a large asset class that most people don`t think about,` Alfred Lee, investment strategist with BMO Asset Management, said in an interview.







Foreign exchange markets are the most liquid in the world, with the most recent statistics from the Bank for International Settlements in April 2010 showing an average daily turnover of US$4trillion in more than 50 countries.





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[Ally]

U.S. housing crisis now worse than great depression


It's official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.





Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.





The news comes as the Federal Reserve considers whether the economy has regained enough strengthhttp://http://www.cnbc.com/id/43391458/ to stand on its own and as unemployment remains at a still-elevated 9.1 percent, throwing into question whether the recovery is real.





"The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression," Paul Dales, senior economist at Capital Economics in Toronto, wrote in research for clients.





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[Ally]

Might doesn't always make right, especially when comparing Canadian and U.S. real estate markets



When sizing up Canadian markets alongside their U.S. counterparts we often hear that what`s happening south of the border is sure to make its way north. Given that approach, there has been a lot of talk lately about the Canadian real estate market heading for an implosion.





Statistics Canada has reported a steady price climb with its new housing price index rising 1.9 per cent since last April. And Scotia Capital reported that Canadian real estate prices had increased five per cent in the first quarter of this year compared to the same period in 2010.





Taking what may look like healthy growth a step further, CIBC warned last month that 17 per cent of Canadian homes are overvalued. A five to 10 per cent price correction is likely to take place in the next two years, the report added. The report went on to say that homes in B.C. are overvalued by 20 per cent, 17 per cent in Alberta, 13 per cent in Manitoba, Saskatchewan and Quebec, 11 per cent in Ontario and 8.6 per cent in Atlantic Canada.





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[Ally]

Global growth hits soft patch, expect to rebound




Although the IMF kept its forecast for global growth broadly unchanged at 4.3 percent for this year, rising to 4.5 percent in 2012, the 187-member institution said the mild slowdown in the second quarter of 2011 `is not reassuring.`




While growth in most emerging and developing economies continues to be strong, slowdowns caused by the devastating earthquake and tsunami in Japan, weaker than expected activity in the United States, and shocks to oil supply weighed on the global expansion in the second quarter of the year, the IMF said in an update to its World Economic Outlook (WEO), released in SÃo Paulo, Brazil.




The IMF also released updates to the Global Financial Stability Report (GFSR), which assesses trends in capital markets and the global financial system, and the Fiscal Monitor, which tracks changes in public finance and debt.





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[Ally]

U.S. home sales hit 2011 low



Fewer people purchased previously occupied homes in May, lowering sales to their weakest point of the year.





Home sales sank 3.8 per cent last month to a seasonally adjusted annual rate of 4.81 million homes, the National Association of Realtors said Tuesday. Economists say that's far below the 6 million homes per year sold in healthy housing markets.





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[Ally]

U.S. jobless claims rise more than expected




WASHINGTON ` New U.S. claims for unemployment benefits rose more than expected last week, a government report showed on Thursday, suggesting little improvement in the labor market this month after employment stumbled in May.




Initial claims for state unemployment benefits climbed 9,000 to a seasonally adjusted 429,000, the Labor Department said. The prior week`s figure was revised up to 420,000. Economists polled by Reuters had forecast claims to edge up to 415,000 from a previously reported count of 414,000.




The claims report covers the survey period for the government`s closely watched data on nonfarm payrolls for June.




Claims increased 15,000 between the May and June survey periods, implying little or no gains in nonfarm payrolls this month after a modest 54,000 increase in May.





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[Ally]

U.S. consumer spending flat for first time in a year




WASHINGTON ` U.S. consumer spending was unchanged in May for the first time in almost a year as motor vehicle sales tumbled, according to a government report on Monday that also showed a build-up in underlying inflation pressures.




When adjusted for inflation, spending slipped 0.1% in May, the Commerce Department said, falling for a second straight month.




The flat reading in consumer spending came after 10 straight months of gains and suggested that consumer spending, which has been hampered by high gasoline prices, in the second quarter will be much slower than the 2.2% annual rate recorded in the first three months of the year.




Consumer spending, which accounts for 70% of U.S. economic activity, rose 0.3% in April and economists had expected a gain of 0.1% last month.





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[Ally]

The future of jobs and housing in the U.S.





It's starting to smell a lot like last year.




Then, the economy and stock market boomed for the first few months of the year only to peter out in summer. Same deal this year -- so far at least. The first few months brought the strongest job gains in years, a booming stock market, and hope that things were really turning the corner.




Now we're back to questions. Worries. Whispers. Jobs numbers are miserable. Gross domestic product is slowing. Stocks are down seven of the last eight weeks. Don't even ask about housing.




Time to worry? Who knows. But here's a bit of solace: Of the past 10 recessions, at least six have seen a major slowdown in the middle of what became an otherwise solid recovery. Nothing goes straight up. If the current slowdown is something more sinister than a normal quiver, it isn't -- and can't -- be known right now. Economies have too many moving parts to make accurate forecasts.





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[Ally]

Case-Shiller home price index dips slightly




NEW YORK ` U.S. single-family home prices dipped modestly in April, pointing to signs of stabilization in the battered housing market at the start of the spring buying season, a closely watched survey said Tuesday.




The S&P/Case-Shiller composite index of 20 metropolitan areas dipped 0.1% on a seasonally adjusted basis. A Reuters poll of economists had forecast a decline of 0.2%.




On a non-seasonally adjusted basis, however, the index rose 0.7%, its first advance in eight months, the report said.




`The seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season,` David Blitzer, chairman of the index committee at Standard & Poor`s, said in a statement.





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[Ally]

Home prices in 20 U.S. cities fall by most in 17 months, Case-Shiller says






Home prices decreased in the year ended April by the most in 17 months, showing the housing market remains an obstacle for the U.S. recovery.




The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from April 2010, the biggest drop since November 2009, the group said today in New York. From March to April, prices fell 0.1 percent on a seasonally adjusted basis, the smallest decline since July 2010.




A backlog of foreclosures and falling sales raise the risk that prices will decline further, discouraging builders from taking on new projects. The drop in property values and a jobless rate hovering around 9 percent are holding back consumer sentiment and spending, which accounts for 70 percent of the economy.





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[Ally]

U.S. consumer confidence slides in June




If you're a U.S. consumer, why would you be confident?




Following a string of bad economic news, consumer confidence fell to a seven-month low in June on

continuing worries about high unemployment and stagnating wages, according to a report released Tuesday by a private research group. The Conference Board's Consumer Confidence Index slipped to 58.5 in June. That's down from a revised 61.7 in May, which marked an almost six-point drop.





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[Ally]

The 19 cities where the housing crash keeps getting worse





Today's headline Case-Shiller number was yet another nightmare, showing another big year-over-year decline in the value of homes across the United States in April.






The data showed home prices have fallen 3.96% from last year, but fell a much smalled 0.09% month-over-month. Six cities hit brand new all time lows.




19 out of the 20 cities ranked by Case-Shiller continue to show year-over-year price declines. Only Washington D.C. is an exception.






Read the full article here.

 

[Ally]

The 20 cities that are having an awesome recovery





The cities performing well since the country's economy bottomed out all have one thing in common: They are doing more, with less.






While these cities were battered by increases in unemployment and declines in home prices during the recession, they have since bounced back to growth.




They're doing it with fewer people working, so efficiency has clearly been the driver of recovery in these spots.





Read the full article here.