Economic Headlines;US jobless claims US Durable Goods 06.24.10

 

Economic Headlines
· US jobless claims - Following the jump in claims last week, initial jobless claims for the week ending June 19 decreased to 457,000 from the prior week’s revised value of 476,000, returning close to the June 5 level. This is a slight improvement over the values we have seen over the past month with the four-week moving average decreasing 1,500 to 462,750. Continuing claims dropped off for the week ending June 12, decreasing by 45,000 to 4,548,000.   
· US Durable Goods - The details of the May durable goods report were quite solid and signal that business capital spending is still on a firming trajectory. Although headline durable orders fell 1.1%, this decline was entirely due to a fall-off in the volatile aircraft category, which had surged forward in April. The more important core capital goods category (which excludes aircraft and defense capital equipment) saw orders rise 2.1% and shipments increase 1.6%. 

April 6, 2010 Morgan Stanley Strategy Forum $SPY $USO

The labor market is showing signs of gradual healing. Friday's report showed payrolls rising 162,000 in March, with net upward revisions of 62,000 to Jan/Feb. Census related hiring totaled a less-than-anticipated 48,000, sothe ex-census increase in jobs totaled 176,000, versus our forecast of +150,000.The report also provided more support for the notion that the unemployment rate has peaked for this cycle. In fact, the household survey showed another month of very strong employment growth (+264,000).From a broader perspective, a pickup in employment growth is inevitable given that the economy's output has started to expand. History tells us that a rapid rise in productivity is fairly typical during the early stages of economic recovery, but this surge in productivity cannot be sustained indefinitely. Additional labor will be needed to sustain the rise in output.

Updates on Greece $EWG $TLT

Market Movers ahead

1. In Europe focus will continue to be on Greece. The scheduled data releases for next week suggest a relatively quiet week coming up.
   
2. In the US the agenda next week is heavy. Amongst a wide range of economic data the most important will be retail sales and CPI for March. Retail sales appear to have been very strong in March.
   
3. There is increasing speculation that China will move on the exchange rate before the Chinese president's arrival in Washington this week to participate in the Nuclear Security summit.

February 18, 2010 Investment Perspectives — Global

Limited spillover to the US. The European sovereign debt crisis may net to slower European growth from an already- tepid starting point. Although the European Council of gov-
ernment leaders has pledged “to take determined and coordi- nated action, if needed, to safeguard financial stability in the euro area as a whole,” that backstop is unlikely to immunize the eurozone economies completely. The crisis likely will tighten financial conditions and promote fiscal austerity, consisting of increased taxes and lower public-sector demand.

And the crisis hits a still-tender euro area economy, which we have expected to advance just 1.2% in 2010. Incoming data showing that growth rose just 0.1% in Q4 09 and a poor start
to Q1 10 underscore the downside risks.

The impact of even dramatically slower growth in Europe would only trim US growth fractionally; Asia is far more important for the US outlook. However, the European sovereign crisis does create a tail risk for US growth and markets: If the crisis spills over into broader risk aversion and a drying up of liquidity — the functional equivalent of the US subprime crisis — the consequences could be more dire. At the least, these unknown risks make us more cautious about risky ass

Full report here

US Budget Deficits: Slightly Larger, Still Unsustainable [Goldman Sachs Research]

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We now expect the US budget deficit to rise to $1.64 trillion (11.2% of GDP) in fiscal year (FY) 2010 and to total $10.8 trillion (trn) over the next ten years. This profile is modestly above our early October forecast and well above the administration’s figures.

Even so, near-term risks lie to the side of a bigger deficit. Tax receipts have started the year in a deep hole and could continue to fall short. And if the economy struggles as the current dose of fiscal stimulus wears off, as we expect, then policymakers are apt to adopt more stimulus than we have assumed.

While such a response would be quite sensible at this point in the cycle, restraint must be the order of the day as soon as the private sector is strong enough to drive growth on its own, as the long-term federal fiscal trend is unsustainable. By FY 2020, we expect the debt/GDP ratio to approach 90%, from 53% last September.

The magnitude of this imbalance is indicated by our profile for the primary budget deficit, which excludes net interest and never falls below 2% of GDP. Achieving a primary balance, which in most circumstances would lead to stability in the debt-to-GDP ratio, would require budget cuts of nearly $300bn per year in current dollars. Fortunately, the Treasury’s current program of debt issuance is more than sufficient to finance the deficits we envision over the next five years.

In a week of mostly stronger-than-expected data, the standout was the 0.3-point drop in the unemployment rate in January, to 9.7%. Although this came in the face of yet another drop in nonfarm payrolls and still-sticky jobless claims, we have adjusted our path for the unemployment down and now see a peak of 10½% in early 2011, against 10¾% previously. However, we continue to expect no interest-rate hikes from the Fed in 2010 and, more likely than not, in 2011 as well.

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