Global Business Confidence:
The global economy has meaningfully downshifted since peaking in the spring, according to the global business confidence survey. This is clearest in businesses' weaker responses to the question regarding the strength of present business conditions. Third quarter global growth looks set to fall well short of growth during the first half of the year. Expectations regarding the outlook into next year have also turned notably softer. Businesses are more nervous than they were a few months ago, but they are not signaling that the global economy is set to double dip. Responses regarding hiring and investment decisions are holding firm.

Treasury International Capital Flows:+$9.10 bil
Net long-term capital flows to the U.S. rose to $44.4 billion in June from $35.3 billion the prior month. Risk-averse private foreign investors and foreign official institutions increased their net purchases of U.S. Treasury bonds and notes, but they were less than enthusiastic about corporate bonds. Private foreign investors reduced their net holdings of U.S. corporate bonds by $13.4 billion in June, compared with a reduction of $8.5 billion in May. The recent tenor of capital movements reflects greater uncertainty that has crept into financial markets, as investors are unsure about the pace of recovery in the U.S. and in Europe.

The Conference Board Leading Indicators: +0.1%
The Conference Board's index of leading indicators rose 0.1% in July, recovering some of June's downwardly revised decline. Supporting the meager gain was the interest rate spread, supplier deliveries, and the average workweek. Key drags came from consumer expectations, building permits, and the real money supply. The small gain in the leading index is consistent with our expectation for a slow pace of recovery heading into 2011. The coincident index increased 0.2% from June's report and is likely being held back by census layoffs.

Risk of Recession: 29%
The recovery is vulnerable and the odds of a double dip are rising as signs of weakness are broadening and visible in housing, retail, manufacturing, and the labor market. For the second consecutive month, the probability that the U.S. will be in recession in six months increased, rising by 2 percentage points to 29% for July. The probability of recession has risen by 6 percentage points since May and is at its highest since February. Real GDP is expected to increase about 2% in the second half of this year, and the unemployment rate is expected to resume rising, finishing the year near 10%. If the economy underperforms, the Federal Reserve will need to provide additional monetary stimulus.

ABC News/Washington Post Consumer Comfort Index: +2
Consumer confidence increased in the latest week, extending its gains after retouching its 2010 low two weeks ago. According to the ABC News/Washington Post consumer confidence index, sentiment rose by 2 points to -45 for the week ended August 15. The improvement was broad-based among the components.

University of Michigan Consumer Sentiment Survey: +2
The University of Michigan consumer sentiment index inched up by almost 2 points in August, according to preliminary data, doing little to reverse July's plunge but at least not adding to it. The index came in at 69.6, compared with July's 67.8. Stock market gains likely supported the gain. Compared with July, the increase was nearly equally distributed across the current conditions and expectations components. Inflation expectations were little changed from July.

Business Employment Dynamics: +6.6 M new jobs
During the fourth quarter of 2009, the economy created 6.6 million new jobs, while losses moderated to 6.8 million, the lowest number since the early 1990s. Job creation improved compared with the first quarter of 2009 trough but remained very weak. The difference between gains and losses was the narrowest since early 2008, heralding the return to net job gains in 2010.

Bankruptcy Filings: +11.7%
Business bankruptcy filings fell in the second quarter for the fourth consecutive quarter. Personal filings rose, posting their largest increase in a year. Business filings were below their year-ago level for the first time in three and a half years, while year-over-year growth in personal filings continued to fall. Personal filings were 12% above last year, and only 5.6% above the average level of filings from 2001 through 2004, before reform legislation and in a far better credit environment. Business bankruptcies were down 10% from last year.

Business Inventories (MTIS): +0.3%
Total business inventories grew 0.3% in June, modestly above expectations for a smaller gain. Businesses continue to rebuild inventories, but at a slower pace than earlier in the year. Moreover, some of the recent increases in inventories can be attributed to the fact that sales are starting to slump once again. The inventory gain in the month was primarily driven by retailers, as manufacturer and wholesaler inventories were essentially flat.

Producer Price Index: 0.2%
Producer prices for finished goods rose 0.2% in July, in line with consensus. The month's gain reverses consecutive declines in the prior three months and resulted from higher prices for food and energy goods. Excluding food and energy, core prices for finished goods were up 0.3% in July. Falling core prices for intermediate and crude goods from their elevated levels earlier this year indicate weakening growth in the U.S. and globally. Yet pass-through from earlier stages to finished goods is constrained by high and rising unemployment, keeping inflation pressures tame.

Jobless Claims: +12,000
The labor market is weakening, which is making it more difficult to be sanguine about the job market and the recovery's staying power. Initial claims for unemployment insurance increased by 12,000 to 500,000 for the week ending August 14. Initial claims have risen for three consecutive weeks by a cumulative 40,000. The increase in new filings bucks expectations for a modest decline and puts initial claims at their highest since November. Continuing claims decreased by 13,000 to 4.478 million for the week ending August 7. Overall, this week's data on initial claims are troubling, and they may pressure the Federal Reserve to put its contingency plan into motion.

Industrial Production: +1.0%
Industrial production rose a better than expected 1% in July, led by auto output, mining and utilities, although even nonauto manufacturing output edged up 0.6% after exaggerated weakness in June. While manufacturing is losing momentum as the impetus from the inventory cycle wanes, the results confirm our view that the pace of output growth will remain solid in the coming months.

Senior Loan Officer Opinion Survey: -8.8%
The Federal Reserve's senior loan officer opinion survey, which covered most of the second quarter, showed that domestic banks have begun to slowly loosen lending standards on loans to both large and small businesses, residential mortgages to prime borrowers, and all types of consumer credit. Demand is still weak and falling across most loan categories, and most banks are still tightening lending standards on commercial real estate loans.

Consumer Price Index: +0.3%
As forecast, the consumer price index rose 0.3% in July, climbing strongly after three straight deflationary monthly readings. The rise was mostly due to a jump in the energy index, which broke the long negative streak it was in since January. The core CPI rose a more modest 0.1%, only half the pace of the previous month. Both headline and core CPI are still stuck near a historically low 1% year-ago rate of change, indicating well-contained inflationary pressures in the economy.

Creditforecast.com Household Credit Report: -4.0%
Consumer credit conditions remain weak, and July results confirm that the pace of improvement is slowing. Balances are declining faster than early in the year, and more mortgage defaults drove up the aggregate dollar default rate. Nonetheless, conditions are in place for slower deleveraging and reduced defaults.

MBA Mortgage Applications Survey:+ 13%
In the week ending August 13, the MBA market index posted a large gain of 13%, ending at 829.7. Performance was split between the refinance and purchase indices. The refinance index jumped 17.1% to 4,676.7. Meanwhile, the purchase index dropped to 169.4, a decline of 3.4%.

NAHB Housing Market Index: -7.1%
The NAHB housing market index fell to 13 this August, down by 7.1% from the revised July level of 14. Two of the three subindices fell while the other stayed level. Similarly, three of the four regional indices fell in August while the fourth stayed level. The housing market index also came in on the downside of expectations, which was for a slight recovery. The overall index is still at a very low level, reflecting the weak current state of housing demand, although the rate of decrease has started to slow.

New Residential Construction (C20): +1.7%
Conditions improved a little in the new-home market, with residential construction increasing slightly in July from June. Housing starts rose 1.7%, to an annualized 546,000 units. Single-family starts, however, declined 4.2% month over month. Total starts remain down 7% from one year ago. Census revised downward last month's reading as well. Permits declined in July, while completions plummeted.

Retail Sales :+ 0.4%
Retail sales rose 0.4% in July in total and 0.2% excluding autos as consumers spend conservatively. Sales were down 0.1% excluding both gas and autos. Sales rose strongly at auto dealers and gas stations, while declines were more widespread, but generally modest outside of department stores. May and June sales were revised higher, now showing declines of 1% and 0.3%, respectively. Sales were 5.5% above their year-ago level.

Chain Store Sales Snapshot: -1.3%
Chain store sales dropped sharply in the week ending August 14, according to the ICSC. The index was down by 1.3%. Year-over-year growth slipped only modestly, however, to 3.4%, as sales fell almost as steeply in the comparable week last year. The ICSC attributed the decline to weak pricing and continued seasonably hot weather, but indicated store traffic held up.

Internet Sales (E-Commerce Sales): +2.6%
Retail e-commerce sales picked up their pace in the second quarter of 2010, advancing 2.6% q/q, compared with a (revised) 1.5% in the first quarter. E-commerce sales rose by 14% from a year ago.