ECONOMIC AND FINANCIAL HIGHLIGHTS

Size: px

Start display at page:

Download "ECONOMIC AND FINANCIAL HIGHLIGHTS"

Roy Ellis
6 years ago
Views:

1 ECONOMIC AND FINANCIAL HIGHLIGHTS LABOR MARKET Contributions to Change in Nonfarm Payrolls 2 Unemployment and Labor Force Participation Rate 3 MANUFACTURING ISM Manufacturing Index 4 CONSUMERS Light Vehicle Sales 5 Consumer Confidence and Expectations 6-7 Consumer Credit 8 Consumer Asset-Backed Securities Issuance 9 HOUSING U.S. Private Construction Spending 1 INTEREST RATES Treasury Yields 11 EUROPE European Bond Spreads 12 INFLATION Inflation Expectations 13 FEDERAL RESERVE BALANCE SHEET Assets 14 Liabilities 15 NOVEMBER 7, 212

2 LABOR MARKET The BLS Employment Situation Report for October revealed that 171, net new payrolls were created over the month. Significant upward revisions of 34, payrolls and 5, payrolls were added to figures for September and August, respectively. This increase brings the total number of payrolls added in September and August to 148, and 192,, respectively Contributions to Change in Nonfarm Payroll Employment thousands, SA Other Services & Gov Leisure & Hosp Professional & Business Retail Trade Goods Producing Total nonfarm Source: U.S. Bureau of Labor Statistics through October 212 The largest sector increases in October were in professional and business services, which added 51, payrolls, and retail trade, where there were 36, new payrolls over the month. The leisure and hospitality sector added 28, payrolls, while education and health services employment grew by 25, payrolls. The October report also had a strong showing for the construction sector, where it is estimated 17, new payrolls were created over the month, after adding 2, in September. The manufacturing sector also added 13, payrolls after giving up 14, in September. The government sector was one of only two sectors to shed payrolls in October, losing 13, payrolls. The natural resources and mining sector was the only other sector with negative net payroll growth, giving up 9, payrolls. 2

3 LABOR MARKET The unemployment rate ticked up.1 percentage point in October to reach 7.9 percent, after having dipped.3 percentage point in September. The labor force participation rate ticked up.2 percentage point to reach 63.8 percent in October. This increase followed an rise of.1 percentage point in the labor force participation rate in September Unemployment and Labor Force Participation Rates percent, SA 68 Unemployment Rate (left axis) October 212 = 7.9% Participation Rate (right axis) October 212 = 63.8% Source: U.S. Bureau of Labor Statistics through October 212 Following September s particularly strong addition of 873, employed persons into the labor force, 41, were added in October. Following a large reduction in the number of unemployed persons in September (a reduction of 456,), the number of unemployed that returned to the labor force increased by 17,. 3

4 MANUFACTURING The Institute for Supply Management s Purchasing Managers Index (PMI) tacked on.2 index points from September to October, indicating a slightly faster pace of expansion for the manufacturing sector ISM Manufacturing Purchasing Managers Index (PMI) Index: 5+ = expansion; SA The report s most encouraging component was its indicator measuring new orders for manufacturers, which added 1.9 index points to reach The component measuring production also expanded to 52.4 in October, from 49.5 in September. The employment indicator, however, slipped 2.6 index points but still indicated growth with a reading of Purchasing Managers Index New Orders 3 Production Employment Source: Institute for Supply Management through October 212 4

5 CONSUMERS Light vehicles sales edged down in October, decreasing 4.4 percent over the month to a seasonally adjusted annual rate of 14.2 million units Light Vehicle Sales millions of units, SAAR 15 Total 1 Domestic 5 Imported through October 212 Source: Bureau of Economic Analysis 5

6 CONSUMERS Final measures of overall Consumer Sentiment, as measured by Reuters/University of Michigan and the Conference Board, indicated an improvement in consumers perceptions of the current state of the economy in October. The weekly Bloomberg Consumer Comfort Index has improved in recent weeks as well Consumer Confidence Indices Measuring Current Situation relative to level in June 27 University Of Michigan - Current Economic Conditions (NSA) Conference Board Consumer Confidence - Present Situation (SA) Bloomberg Consumer Comfort Index (NSA) Sources: The Conference Board, Reuters/University of Michigan, Bloomberg through October 212 While the future components of both the Conference Board and Reuters/University of Michigan survey have fairly similar underlying questions, the present components are notably different. The Conference Board s Present Situation Index is based on consumer s perception of local business conditions and local availability of jobs. The Reuters/University of Michigan Current conditions asks about attitude towards big-ticket purchases and if personal finances have improved over the past year. The Bloomberg Consumer Comfort survey is somewhat of a hybrid, probing consumers about their perception of the current state of the national economy, their personal finances, and the buying climate. 6

7 CONSUMERS In the October reading of the Conference board s Consumer Confidence survey, six-month-ahead consumer expectations for business conditions and higher income improved. The outlook for jobs was essentially unchanged. While consumers were more likely to say they anticipate fewer jobs and not more jobs, that sentiment was typical before the recession as well month ahead Consumer Expectations net percent of participants expecting, SA Expecting better business conditions Expecting more jobs Expecting higher income Sources: The Conference Board, author s calculations through October 212 The net percent anticipating better business conditions six months from now rose from a net 3.4 percent to 6.3 percent. The net percent anticipating more jobs six months from now declined from a net -.6 percent to -1.1 percent. The net percent expecting higher income six months from now improved from a net.1 percent to 1.4 percent. 7

CONSUMERS Consumer credit outstanding increased $11.

9 billion while nonrevolving increased $14.3 billion.

SA $5 -$5 -$15 -$25 6 7 8 9 1 11 12 Source: Federal Reserve Board

8 CONSUMERS Consumer credit outstanding increased $11.4 billion in September. Revolving decreased $2.9 billion while nonrevolving increased $14.3 billion. $25 $15 Monthly Changes Nonrevolving Revolving Consumer Credit billions, SA $5 -$5 -$15 -$ Source: Federal Reserve Board through September 212 Consumer credit outstanding is currently $154 billion past its prerecession peak. The recovery has come mostly from nonrevolving credit, which is now 21 percent greater than its precession peak. Revolving credit, meanwhile, is 17 percent below the level in mid

9 CONSUMERS Issuance of securities backed by consumer-related assets was slightly lower in the third quarter of 212 compared with the second quarter of 212. $ Billions Consumer ABS Issuance Auto Credit Cards Student Loans Avg Avg Avg Avg Avg Avg Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Source: SIFMA Issuance of securities backed by autos remained on par with second-quarter levels, again surpassing average prerecession levels. Issuance of securities backed by credit card debt increased from $12.1 billion in the second quarter to $13.4 billion in the third quarter. Issuance of securities backed by student loans fell from $8.7 billion in the second quarter to $4 billion in the third quarter. 9

10 HOUSING The U.S. Census Bureau reported that total construction spending improved somewhat from August to September, up.6 percent and remained ahead of the year-earlier level, up 7.8 percent. Private construction spending improved as well, boosted by gains in the residential sector. $7 $65 $6 $55 $5 $45 $4 U.S. Private Construction Spending billions, SAAR Residential $35 Nonresidential $3 $25 $ Source: U.S. Census Bureau through September 212 Total Total Private Total Public September 212 Construction Spending Put in Place Total Nonresidential Private Nonresidential Public Nonresidential Total Residential Private Residential Billions, SAAR M/M.6% 1.3% -.8% -.4% -.1% -.8% 2.7% 2.8% Y/Y 7.8% 14.4% -4.2% 2.6% 8.8% -3.6% 19.2% 2.9% 1

11 INTEREST RATES Longer-term U.S. Treasury yields have moved lower since the October FOMC meeting 3.5 U.S. Treasury Yields daily, percent October FOMC The 1-year note and the 3- year bond have dropped by 13 basis points (bps) and 16 bps, respectively, and they now yield about 1.63 percent and 2.82 percent Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 1-mo 3-mo 2-yr Source: Bloomberg 5-yr 1-yr 3-yr through November 7,

12 EUROPE The bonds spreads (relative to German bonds) for some of the euro zone countries remain elevated, though slightly improved, over the past month. 7 6 Italy Spain European Bond Spreads basis points, 1-year bond spread to German bonds October FOMC Since the October FOMC meeting, Spanish and Italian 1-year bond spreads are each up about 2 bps, to 4.4 percent and 3.4 percent, respectively. 5 4 France UK Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Source: Bloomberg through November 6,

13 INFLATION The Barclays 5-year/5-year forward breakeven inflation rate is currently at 2.83 percent, within the range seen since January 211, though on the higher end Barclays 5-year/5-year forward breakeven inflation rate percent October FOMC 2.83 Note: The breakeven inflation rate is a measure of expected inflation derived from nominal Treasury securities and their real counterparts inflationprotected Treasury securities, or TIPS Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Source: Barclays Capital through November 7,

14 FEDERAL RESERVE BALANCE SHEET Between October 24 and October 31, the Federal Reserve s balance sheet decreased by $18.1 billion, leaving the overall size of the balance sheet essentially unchanged at $2.9 trillion. 3, 2,7 2,4 2,1 1,8 1,5 1, Currency Swaps Agency Debt & MBS Lending to Nonbank Credit Markets Short-Term lending to Financials Other Treasuries Federal Reserve Assets (Uses of Funds) $ billions Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Source: Federal Reserve Board through October 31, 212 Since mid-february, decreased use of swap lines by foreign central banks has caused the balance sheet to contract by $96 billion. Treasuries decreased by $1.2 billion while agency debt and MBS decreased by $16.9 billion. The pace of the increase in Agency MBS holdings will fluctuate somewhat due to differences between trade and settlement dates and due to the timing of principal payment dates. According to the New York Fed s tentative outright Treasury operation schedule, the desk plans to purchase approximately $47 billion in Treasury securities with remaining maturities of from six to 3 years and sell approximately $37 billion with remaining maturities of three years or less over the month of November. The purchase amount of $47 billion includes approximately $2 billion from the purchase operation rescheduled from October 3. The desk will redeem approximately $.1 billion in Treasury securities. 14

15 FEDERAL RESERVE BALANCE SHEET Between October 24 and October 31, bank reserve balances with the Federal Reserve increased by $1.2 billion while Treasury deposits with the Federal Reserve increased by $47.1 billion. As of October 31, 212, bank reserves held at the Federal Reserve were $1.43 trillion. 3, 2,7 2,4 2,1 1,8 1,5 1, Federal Reserve Liabilities (Sources of Funds) $ billions Treasury SFP Other Banks Reserve Balances Currency in Circulation Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Source: Federal Reserve Board SFP=Supplemental Financing Program through October 31, 212 Reverse repurchase agreements with foreign officials and international accounts increased by $8 billion. Nonreserve deposits with the Federal Reserve decreased by $82.1 billion. 15

ECONOMIC AND FINANCIAL HIGHLIGHTS

ECONOMIC AND FINANCIAL HIGHLIGHTS FEDERAL RESERVE BALANCE SHEET Assets and Liabilities 2-3 REAL ESTATE Construction Spending 4 CoreLogic Home Price Index 5 Mortgage Rates and Applications 6-7 CONSUMER