Posted by: cfigueira | September 2, 2010

Mortgage Industry News

Key Economic News:

Weekly claims, productivity revisions, retail chain store reports, pending home sales, factory orders, and the Fed’s weekly report on its own balance sheet, plus testimony from Chairman Bernanke and some other FOMC speakers….

8:30: Unemployment insurance claims…back in te old range? Last weektial claims returning to the upper end of the 425k-475k range in which thy had fluctuated during most of 2010 before some elevated readings in late July and early August. The median forecast shows little change in either initial claims or continuing claims (those receiving payments under regular programs). The overall number of claimants has risen sharply since the renewal of emergency benefits in late July.
For initial claims, median forecast (of 40): 475k, ranging from 460k to 485k; last 473k.
For continuing claims, median forecast (of 11): 4.45mm, ranging from 4.4mm to 4.5mm; last 4.456mm.

8:30: Productivity and costs for Q2 (revised)…a bigger setback. The downward revision to Q2 real GDP growth included a 1-point markdown in the growth rate of nonfarm output, this should show through to the productivity data. The impact on unit labor costs is slightly smaller, as the Q2 revisions also showed a slightly smaller increase in labor compensation. First-quarter data for unit labor costs are apt to be revised down.
For productivity, median forecast (of 56): -1.9%, ranging from -2.4% to -0.5%; last (Q2 prelim) -0.9%.
For unit labor costs, median forecast (of 54): +1.2%, ranging from +0.3% to +2.0%; last (Q2 prelim) +0.2%.

9:00: Boston Fed President Eric Rosengren and Cleveland Fed President Sandra Pianalto deliver opening remarks…at a summit looking at the effects of foreclosures and vacancies on neighborhoods. Both are voting members of the FOMC this year, though the specialized nature of this session makes it unlikely they will make market-moving comments.

10:00: Federal Reserve Chairman Ben Bernanke testifies…at a hearing of the Financial Crisis Inquiry Commission (FCIC), which is charged with examining the causes of the 2007-2008 financial meltdown.

10:00: Pending home sales index for July…further weakness? That’s the bias of forecasts for July. The index plunged nearly 30% in May, as activity to take advantage of the homebuyer tax credit was winding down, and it was off another 2.6% in June.
Median forecast (of 37): -1.0%, ranging from -5% to +4%; last -2.6%.

10:00: Factory orders for July…a small increase? As it usually the case, we expect this report to mimic – in subdued fashion – the patterns drop already reported for durable goods bookings. For July, this means roughly no change in overall orders (durable goods orders were up 0.3%) but a significant decline in those outside transportation (this component of durable goods orders fell 3.8%). Revisions to the durable goods data are always possible, and the inventory data bear some attention, as the durable goods component has risen significantly for six months running.
Median forecast (of 59): +0.2%, ranging from -1.2% to +2.5%; last -1.2%.

16:30: Federal Reserve balance sheet….We will highlight this report again as the reinvestment of principal repayments of MBS and agency debt begins to alter the asset composition. This actually started to show up in last week’s data. The overall size of the balance sheet should stay approximately the same, at $2.3trn.

Advice:

Claims somewhat better, on balance. Productivity weaker on revision
Initial and continuing claims both fall slightly, in line with expectations. Claims for extended benefits also come in lower. Q2 productivity lower on revision, as indicated by revisions to Q2 real GDP.

Key Numbers:
Initial claims -6k to 472k in week ended Aug 28 vs. median forecast 475k.
Continuing claims -23k to 4.456 million in week ended Aug 21 vs. median forecast 4.45 million.
Nonfarm productivity revised to -1.8% in Q2 vs. median forecast -1.9%.
Unit labor costs revised to +1.1% in Q2 vs. median forecast +1.2%.

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