Thursday, September 3, 2009

Quick Notes for the Day - September 3

August ISM Services Up - The Institute for Supply Management reported Thursday that the service sectors contracted at a slower pace in August versus July. The ISM non-manufacturing index was a higher than expected 48.4% in August versus 46.4% in July. The business activity index rose to 51.3% in August versus 46.1% in July, and new orders also rose to 49.9% versus 48.1%. The employment index rose to 43.5% from 41.5%. Inflation pressures did increase though with the price index jumping to 63.1% versus 41.3% in July.

Natural Gas Inventories Rise, Price Falls - The EIA reported Thursday that natural gas inventories rose 65 billion cubic feet last week and prices fell 0.6% to around $2.70. At 3,323 billion cubic feet, stocks were 489 billion cubic feet higher than last year at this time and 501 billion cubic feet above the five-year average. *** Note - With this obviously abundant US natural resource, how has this not become part of the cleaner energy solution? It's abundant. It's cleaner. It's domestic.

Mortgage Rates Drop - Freddie Mac and both reported drops in the 30 year fixed mortgage rate over the past week. Freddie Mac reported that the 30-year fixed rate mortgage averaged 5.08% with an average 0.7 point versus last week at 5.14%. A year ago, the average was 6.35%. reported the average 30-year fixed mortgage rate declined to 5.41% versus 5.53% a week ago. The average 15-year fixed-rate mortgage also dropped to 4.74% from 4.83% last week. The average jumbo 30-year fixed rate also fell to 6.34%.

Initial Jobless Claims Drop - The Labor Department reported that initial jobless claims dropped 4,000 to a seasonally adjusted 570,000 last week. The four-week average of seasonally adjusted new claims rose 4,000 to 571,250. Meanwhile, the number of people collecting regular state benefits rose by 92,000 to a seasonally adjusted 6.23 million. The insured unemployment rate rose to 4.7% from 4.6%. The four-week average of continuing claims fell 27,250 to 6.22 million, the lowest since April. The number of people collecting benefits of any kind was 9.65 million, not seasonally adjusted.

'Recovery Arriving Quicker Than Expected' - OECD - The Organization for Economic Co-operation and Development released its estimates for the third quarter and adjusted its 2009 GDP forecast. In a statement, the OECD stated, "Recovery from the global recession is likely to arrive earlier than had been expected a few months ago but the pace of activity will remain weak well into next year." "Governments will need to continue to stimulate their economies as rising unemployment and weak housing markets continue to dampen private demand. The current exceptionally low interest rates should remain in force for the time being."

The OECD adjusted its economic growth forecast to show that growth across the G7 will fall by 3.7% in 2009 versus the previous forecast from June 2009 of a 4.1% drop. The latest GDP forecasts for this year provide slightly improved outlooks for Japan and the Euro area, an unchanged overall projection for the US but point to a gloomier situation in the UK.

ECB Adjusts Euro Zone GDP Estimates Upward for 2009, 2010 - Amid the recent economic data, the ECB has changed its predictions for the 16-nation euro zone for 2009 and 2010. In 2010, the ECB is now estimating growth with a midline estimate of 0.2% versus a previous estimate of -0.3%. In 2009, they are predicting a decline of 3.9% which is better than the previous estimate as well.

Since the ECB is always very, very mindful of inflation, they are predicting a 0.4% increase in inflation for 2009 and 1.2% increase in 2010. Based on these estimates of inflation and growth, the ECB's president, Jean-Claude Trichet, said rates are "appropriate" and said that while the period of contraction is over, economic uncertainty is still high.

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