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Monday February 2, 2009 - 16:25:17 GMT
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No Fundamental Change


By the time this downturn is over that number may be the most famous economic indicator of the past generation.  But as diligently as it has been sought it has not yet arrived. In the United States there are no signs that the recession has even reached a bottom, let alone evinced signs of recovery.

The United States housing market, sub-prime, prime, foreclosed and abandoned, continues to fall. New home sales in December at 331,000 were 63% below the level of Jan 2007 and 44% below January 2008.  The backlog of unsold homes at current selling rates rose to 12.9 months. Sales of existing homes gained 6.5% to 4.74 million but much of that rise was due to foreclosed properties. December’s existing sales were 26% lower than January 2007 and 3% lower than January of this year.  Prices on homes that are selling were 15.3% lower in December than a year earlier; in November the year-over-year fall was 13.6%. The December drop is the largest yearly fall in this series which originated in 1968. The Case-Shiller study of 20 metropolitan area home prices reported an 18.2% drop in prices year to year in November; in October the decline had been 18.0%, in September 17.4% in January 11%.  The slump in prices is still accelerating. Housing starts and building permits were both precipitously lower in December and half what they were at the beginning of the year.

Housing is important for two reasons; first, it is the original component of the asset backed debacle.  Most of those questionable assets remain on bank books.  As long as housing prices continue to decline so will the mark to market value of those housing assets.  Until those securities are removed or their values regain better levels bank lending will remain constrained by the potential for further portfolio losses against which they will have to set aside additional capital.  Second and more telling for the future recovery, consumers are on strike.  If the value of their major asset is still falling there is little likelihood that they will return to the stores and dealerships to buy plasma screens and cars. Even if job concerns were not a present and growing danger, adding an additional burden, consumers would be reluctant to spend without at least a bottom in the housing market.

American GDP in the fourth quarter contracted 3.8% annually but that number conceals GDP produced by a buildup in inventories.  Manufacturers may have not reacted quickly enough to the recession and cut sufficient production to keep pace with collapsing purchases.  This overhang of inventory will depress GDP in the first quarter unless there is a pickup in consumption. Without that inventory GDP would have contracted about 5.1%.   Personal Consumption Expenditures (PCE) were down 3.5% in the fourth quarter, even though retail gasoline and heating oil prices were much lower. The drop in gasoline prices effectively gave consumers a boost in income but spending did not rise in response, it sank. PCE also fell 3.8% in the third quarter. US industrial production has also fallen in six of the last nine months to December.

Payrolls shed an average of 510,000 jobs per month in the last quarter. The unemployment rate is 7.2% and will likely rise to 7.5% on Friday; a year ago it was 5.0%. A 50% increase in twelve months will discourage even the hardiest mall shoppers. Consumer Confidence, the Chicago Purchaser’s Index and the ISM surveys are all at or near all time lows. 

When improvements in statistics do occur the results are still negative. Either the numbers are not quite as bad as expected like fourth quarter GDP or they are small upticks from levels that are overwhelmingly recessionary. Existing home sales registered a 6.5% increase in December but they are still almost a third below their peak.  Even the more than 50% drop in pump prices, about the only positive in the economic picture has not translated into consumer spending. A fall in oil or gas cannot offset fear of or an actual lost job. The shock of $147 oil and $4 at the pump will not wear off easily.  Consumers sensibly assume oil could return to those levels.

The purpose of this recitation is not to depress readers but to remind that even with markets eager to speculate on recovery they will not do so without evidence. As Alfred P. Doolittle’s Eliza’s father might have said ‘We are willing to recover, we are wanting to recover, we are waiting recover’, but even Mr. Doolittle, sunny optimist that he was, would not do so without a sign.  And that sign has not been forthcoming.

 

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Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

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Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



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Amazing Trader EVENT RISK Calendar:

Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays

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  • POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.


  • POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
  • POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity

  • POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
  • POTENTIAL PRICE RISK: Medium- Wed --15:30-- US- EIA Crude

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EXCLUSIVE: Global-View Free Forex Database updated




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