jonspring@BonnevilleResearch.com

Global Business Confidence +
A tentative global economic recovery has begun, according to the results of the global business confidence survey. Business expectations are strong that conditions will improve further later this year and early next. Sentiment is strongest in Asia and South America and among business service firms. European businesses and those that work in government are the least upbeat. Investment in equipment and software is notably strong, and while inventory investment and hiring are measurably weaker, they are also improving. Pricing power is consistent with very low rates of inflation.
 
Risk of Recession: 29%
The probability that the U.S. will be in recession in six months fell from 35% to 29% in August. The recent tone of the economic data has improved, and a recovery appears to have taken hold. The combination of a reduced pace of inventory liquidation, an increase in vehicle production, the fiscal stimulus, and the success of the cash for clunkers rebates will drive third quarter GDP positive for the first time since the second quarter of 2008. The resumption of growth doesn't mean policymakers can let down their guard, as the economy and financial markets remain fragile.
 
The Conference Board Leading Indicators:+ 0.6%
The leading index increased for a fifth consecutive month in August, rising 0.6%. The coincident index was unchanged in August after rising 0.1% in July. Together these indices signal that the recession has ended and that the economy is turning up.
 
Durable Goods (Advance): -2.4%
After posting its largest gain in two years in July, new orders for manufactured durable goods unexpectedly fell 2.4% in August. While disheartening, the decline only offsets some of the previous month's revised 4.8% gain (previously 4.9%). A 42% drop in nondefense aircraft, led the decline in new orders. Shipments fell 1.4% between July and August, following July's 2.3% gain. Orders of nondefense capital goods excluding aircraft, declined 0.4%, a modest improvement from July's -1.3% and a subtle hint that business equipment spending is recovering. The August durable goods report lends some downside risk to our forecast for a 1.1% annualized decline in equipment and software spending in the third quarter.

 

Jobless Claims:-21,000
Initial claims for unemployment benefits headed lower for the third consecutive week, declining by 21,000 to 530,000 for the week ending September 19. Continuing claims also declined, falling by 123,000 to 6.138 million for the week ending September 12. Labor market conditions are moving in the right direction, but there remains a long road toward labor market health.
 
New-Home Sales (C25): +0.7%
Sales of new homes advanced slightly in August, rising 0.7% above the July figure to an annualized 429,000 units. However, Census revised downward July sales. Sales remain below the year-ago pace. Months of supply slipped again to stand at 7.3. The median sales price is down by 11.6% y/y.

FHFA Purchase-Only House Price Index: +.3%
The FHFA purchase-only house price index increased by 0.3% from June to July but is still down by 4.2% from July 2008. The May to June increase was also revised downward from 0.5% to 0.1%. Purchase-only transaction prices are still down by 10.5% from their peak in April 2007. The June to July numbers indicate that for the conforming loan section of the housing market at least, things are not getting worse for the moment, but it is doubtful that house prices have really bottomed.

New Residential Construction (C20): 0.600 mil
Housing starts increased in August to 598,000 units, 1.5% above the revised July estimates. Multifamily construction is behind the gain. Single-family starts decreased by 3%. This softening follows several months of strengthening in the single-family market, however. Total permitting has increased as well, but completions are weakening.

 Existing-Home Sales: -2.7%
Against expectations, existing-home sales declined by 2.7% from July to August. Despite the decline, Augusts' 5.1 million annualized unit pace is easily the second strongest in nearly one year. Further, sales are up year over year by 3.4%. The inventory situation is improving as well, with months of inventory declining to 8.5, the lowest since April 2007. The 12.5% year-over-year drop in the median price remains deep but is stabilizing.
 
Chain Store Sales Snapshot: -2.0%
Chain store sales plunged 2% in the week ending September 19, according to the ICSC sales index. However, year-ago growth remained positive at 0.6%, as sales fell sharply in the comparable week last year as well. Consumer traffic reportedly slowed from the prior week, possibly hurt by warm weather. Spending remains weak, but easing comparisons are starting to boost performance significantly.

Weekly Natural Gas Storage Report:+ 67.00 bcf
Working gas in underground storage rose by 67 billion cubic feet during the week ending September 18, slightly below the consensus estimate of a 68 bcf increase in stocks.

Source: Economy.com