FINC 664 ECONOMIC REPORT 9/5/11 9/9/11 9/7/11. MBA Mortgage Applications

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1 FINC 664 ECONOMIC REPORT 9/5/11 9/7/11 MBA Mortgage Applications MBA Mortgage Applications 2-Sep % -9.60% - - For the third consecutive week, mortgage applications in the U.S. fell. Fewer Americans chose to refinance, and purchases stayed flat, near their 14 year low. The overall percentage decrease was 4.9. Refinances were down 6.3%, while purchases were up 0.2%. The numbers seem to indicate that record low mortgage rates are doing little to jump start the weak housing market. Bloomberg 9/7/11 Fed s Beige Book

2 Reports indicated that, overall, growth continued at a modest pace. However, some districts noted mixed or weakening activity. Many districts noted that market volatility coupled with increased economic uncertainty led many contacts to downgrade or become more cautious about near term outlooks. Consumer spending increased in most districts, but non-auto retail sales were flat or down in most districts. Tourist activity remained solid in most districts. Residential real estate in most markets remained sluggish while manufacturing was mixed at a slow pace. Loan demand in most districts was mixed between stable and weakening. Employment markets remained relatively flat, with few areas reporting growth. The overall summary is consistent with what Fed chairman Ben Bernanke had noted in his speech last month, that growth is not occurring at a desirable pace and more action may need to be taken to jump start the economy. Bloomberg 9/7/11 9/8/11 Trade Balance Trade Balance JUL -$51.0B -$44.8B -$53.1B -$51.6B One bright spot in this turbulent week is that the trade deficit decreased greater than expected for July. The trade gap shrank by 13.1% at $44.8 billion. This is the lowest level since 2/09. Exports rose by 3.63% while imports fell by 0.2% over the same period. Bloomberg 9/8/11 Initial and Continuing Jobless Claims

3 Initial Jobless Claims 3-Sep 405K 414K 409K 412K Continuing Claims 27- Aug 3706K 3717K 3735K 3747K Initial Continuing Initial jobless claims rose unexpectedly rose by 2,000 to 414,000 after being projected to drop to 405,000. Continuing claims dropped by 30,000 to 3.72 million. The number of people receiving emergency and extended benefits decreased by 78,500 to 3.6 million. Bloomberg 9/8/11 Consumer Credit Consumer Credit JUL $6.000B $ $15.532B $11.349B B Consumer borrowing rose by the most in 3 years in July. The increase of $12 billion was much more than analysts had projected ($6 billion). The increase was fueled by an increase in non-revolving credit

4 (including student loans). Revolving credit showed its biggest decrease in 6 months. This suggests that consumers may be cutting back on non-essential items. Bloomberg 9/8/11 Obama's Speech President Obama gave a speech about his plan to spur job growth through the American Jobs Act. It includes a reduction of payroll tax, a $447 Billion package to spur job growth, $105 Billion in infrastructure spending, extended unemployment aid and tax reform. Without providing too much detail he also mentioned that the plan would help homeowners refinance their mortgages by working with Federal housing agencies. The joint committee on deficit reduction will have a November 23 rd deadline to approve the proposal once it is submitted. Congress will then have until December 23 rd to pass it. Wholesale Inventories Wholesale Inventories JUL 0.70% 0.80% 0.60% - - Wholesale inventories rose by 0.8% in July, ahead of analyst estimates of 0.7%. Sales remained low in July, providing less incentive for distributors to stockpile goods. Given the current sales pace, wholesalers had enough goods to last 1.17 months, the longest since 10/2010. Bloomberg

5 10 year treasury hit a record low (again) Ten year treasury yields hit a record low on Friday at 1.89% Debt to GDP 9/10/ /12/11 The Debt Ceiling We were scheduled to breach our new debt ceiling limit on Monday but a $500 Billion increase in the debt limit was approved last Thursday.