For the first time in a year, monthly consumer spending dropped, the U.S. Bureau of Economic Analysis reports. Personal consumption expenditures (PCE) fell 0.2% in June as disposable personal income rose by a slight 0.1%. Joe Sixpack’s inclination to spend, it seems, is drying up. Indeed, PCE’s monthly pace has been descending non-stop since March and the latest number reflects outright decline. (Some news outlets are reporting that consumer spending, as per today’s revised numbers for PCE, fell in June for the first time in nearly two years. In fact, there was a slight 0.04% drop in June 2010, although rounding changes this to zero.)
Strategic Briefing | 8.2.2011 | The Debt Deal In Washington
Debt battle set to draw to close, for now
MSNBC | Aug 2
The United States was poised to step back from the brink of economic disaster Tuesday as a bitterly fought deal to cut the budget deficit was expected to clear the Senate and President Barack Obama’s desk.
Budget fight on health care cuts just beginning
AP | Aug 2
When it comes to Medicare and Medicaid, the debt deal raises more questions than it answers. The giant health care programs serving some 100 million elderly, low-income and disabled Americans were spared from the first round of cuts in the agreement between President Barack Obama and congressional leaders. But everything’s on the chopping block for a powerful new congressional committee that will be created under the deal to scour the budget for savings.
US Manufacturing Activity Slows Sharply In July
Today’s ISM Manufacturing report—the first economic data point for July—reflects a sharp slowdown. Although the ISM index is still above 50, indicating growth, it fell to its lowest level in two years.
Major Asset Classes | July 2011 Performance Update
July was kind to bonds, REITs and commodities, but it was a rough month for stocks, particularly in mature countries. That’s only fitting, considering that the mature markets have been suffering from a toxic blend of cyclical and self-inflicted troubles. The ongoing bailout challenges in Europe a la Greece, et al. roll on, although it’s apparently in remission for the moment. In the U.S., debate about debt ceilings and default roiled the equity market, although here too there seems to be some light at the end of the political tunnel if only temporarily, thanks to last night’s compromise.
Book Bits For Saturday: 7.30.2011
● Saving Capitalism From Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future
By Alfred Rappaport
Summary via publisher, McGraw-Hill
Business leaders today obsess over quarterly earnings and the current stock price—and for good reason. Corporate incentives typically focus on short-term profits rather than long-term value creation. Nothing is more harmful to businesses—and to the broader economy. Few business thinkers in recent decades have contributed more to this subject than Alfred Rappaport. As an author and educator, Rappaport is a pioneer in developing the principles of values-based management and is an acknowledged authority on how to make long-term shareholder value the essential driver of corporate strategy. His latest work, Saving Capitalism from Short-Termism, is a clarion call for conquering the addiction to short-term profit—and getting on the path to building long-term value.
Boehner vs. Moody’s?
The House finally passed budget legislation this evening that’s designed to keep the country from defaulting on its debt. But even if the bill survives the Senate and the President signs it into law (both rather doubtful at this point), there’s the question of whether it would save the country’s AAA credit rating? Not likely, according to Moody’s.
Q2 GDP Rises By A Weak 1.3%
Economic growth remained sluggish in the second quarter, the government reports. Real GDP rose at a 1.3% annualized pace during April through June, the slowest pace since the recession ended. That’s up from the anemic 0.4% rate in Q1, but no one will confuse the latest number as anything other than a weak performance. The best you can say is that the growth rate is once again moving in the right direction. The trick is whether it’ll continue moving higher.
A Closer Look At The Drop In Jobless Claims
Yesterday’s news that new jobless claims dropped sharply—to under 400,000 for the first time in three months—raises the question of whether the good news will continue? “That’s partly up to Congress,” opines Mark Thoma, professor of economics at the University of Oregon. “If they keep bickering until the time to raise the ceiling passes, or if the deal they agree to imposes substantial cuts to spending too soon, that could put an end to any good news on the recovery for awhile.”
Kauffman Foundation: Bloggers Are Gloomy On The Economic Outlook
The Kauffman Foundation’s latest quarterly survey of “leading economics bloggers,” which generously includes yours truly, reports that “optimism is out; pessimism is in,” according to the press release. Tim Kane, the survey’s director and a scholar at the foundation, says: “This quarter’s survey provides an unprecedented level of pessimism about the state of the U.S. economy among top bloggers.”
Is The Rough Patch Over? Lower Jobless Claims Inspire Fresh Hope
Ah, a breath of fresh statistical air. Just when you thought the economic gods had cast us into cyclical hell, today’s update on initial jobless claims delivers a counterpunch. Last week’s tally of new filings for jobless benefits dropped by a hefty 24,000 to a seasonally adjusted 398,000—the first dip below the 400,000 mark since early April. It may or may not last, but let’s bask in the glow, if only for a moment.