Disposable personal income (DPI) and personal consumption expenditures (PCE) increased in December, the Bureau of Economic Analysis reports. The update marks the sixth straight monthly rise in PCE and the third consecutive gain for DPI. In other words, if you’re looking for a reason to doubt the revival in consumer spending of late, you won’t find it here.
STRATEGIC BRIEFING | 1.31.2011 | OIL & EGYPTIAN CRISIS
Oil price nears $100 on Egypt crisis
AFP/Jan 31
World oil prices rose to within a whisker of $100 a barrel Monday on fears that violent unrest in Egypt could disrupt the flow of oil through the Suez Canal on its way to the West, analysts said. Brent North Sea crude for delivery in March struck $99.97 a barrel in Asian deals. Crude last hit $100 dollars in October, 2008. In later London trade, it pulled back to stand at $99.20, down 22 cents compared with the close on Friday.
Oil Prices Rise as Egypt Unrest Gooses Market
CNBC/Jan 30
There is no immediate threat to oil supplies at this time. The Suez Canal and Sumed Pipeline — which combined carry over 2 million barrels of oil a day — are operating normally right now. Egyptian oil output currently stands at under 700,000 barrels a day. Even combined with production in other areas where there have been protests — Tunisia, Yemen, and Jordan — their total output is about one-tenth that of Saudi Arabia, the region’s top oil producer. OPEC has plenty of spare capacity (about 5.8 million barrels a day) — and the International Energy Agency could even consider releasing strategic reserves if needed — to meet a supply disruption. But a disruption in supply may not be the major catalyst for a big move in the price of oil. The main risk is not actual disruption of oil flows from Egypt, says Lawrence Eagles, head of commodity research at J.P Morgan. “It’s the potential for these events to act as a catalyst to unrest in countries that are otherwise seen as stable,” Eagles says. Uncertainty about the spread of the unrest could send oil prices significantly higher early this week.
STRATEGIC BRIEFING | 1.30.2011 | TURMOIL IN EGYPT & GLOBAL ECONOMY
U.S. Stock Futures Decline on Concern Egypt May Slow Recovery
Bloomberg/Jan 30
U.S. stock-index futures fell, indicating the Standard & Poor’s 500 Index may extend the biggest decline since August, as investors speculated Egypt’s crisis will slow the global recovery… “The situation in Egypt is the catalyst for a downturn,” said James Paulsen, chief investment strategist at Minneapolis- based Wells Capital Management, which oversees about $340 billion. “We have a market that is vulnerable to a technical correction. There’s an investor mindset that’s been expecting that to happen for a while now, given where the market is and how fast it’s come up.”
BOOK BITS FOR SATURDAY: 1.29.2011
● Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy
By Daniel Altman
Review via The Economist
Mr Altman writes with some verve, yet he makes only a partially convincing case in support of his predictions. He is best on purely economic ones. Thus he is surely right to argue that China’s seemingly inexorable growth will slow, though it is less clear that China may, like Japan before it, then slip back. He is also persuasive in maintaining that the rich world’s policies on immigration (taking in the brightest and best) and the environment (transferring polluting industries abroad) will damage the poorest countries.
RISING OIL PRICES: FUNDAMENTALS & GEOPOLITICAL RISK
Oil prices are climbing again. Since bottoming in late-2008, amid the depths of the financial crisis, crude has nearly doubled. Yet oil is still far below the record higher of $145/barrel reached in July 2008.
US ECONOMY GROWS 3.2% IN Q4:2010
U.S. economic growth picked up speed in last year’s fourth quarter, the Bureau of Economic Analysis reports. But the 3.2% pace of annualized real growth was below economists’ 3.6% consensus forecast. Still, a 3.2% gain for GDP represents a substantial acceleration from the third quarter’s 2.6% rise.
STRATEGIC BRIEFING | 1.28.2011 | DEFICITS & ECONOMIC GROWTH
Fiscal Monitor Update: Strengthening Fiscal Credibility
IMF/Jan 27
The pace of fiscal consolidation in 2011 is now projected to be slower on average, and more varied across countries. The overall pace of deficit reduction in advanced economies in 2011 will be below earlier estimates. On average, fiscal consolidation among the advanced G20, measured in cyclically adjusted terms, is now projected to equal less than ¼ percent of GDP compared to the 1 percent of GDP projected in November. Their debt ratio is anticipated to rise by almost 5 percentage points, to exceed 107 percent of GDP.
DURABLE GOODS ORDERS RETREAT IN DECEMBER
New orders for durable goods dropped by 2.5% last month, the third monthly decline in a row. Excluding the volatile transportation sector, however, new orders rose slightly in December.
JOBLESS CLAIMS SURGE… DUE TO SNOW?
New jobless claims rose sharply last week, surging 51,000 to 454,000 on a seasonally adjusted basis, the Labor Department reports. New filings for unemployment benefits are now at the highest since last October. Is it time to rethink the economic revival that appeared to be chugging along anew in recent months?
INFLATION: CAN IT HAPPEN HERE?
The Fed announced that it would continue purchasing Treasuries for its second round of quantitative easing (QE2). The news wasn’t a surprise, but yesterday’s FOMC statement triggered fresh talk about inflation. But if there’s a higher risk, it’s not showing up in the implied forecast via the yield spread on nominal less inflation-indexed 10-year Treasuries.