THE BASIS POINT

Initial Jobless down. GDP, Durable Goods, and Pending Home Sales Weak.

Jobs

Initial Jobless Claims (week ended 9/22/2012)

– Initial Claims 359,000.  Previous revised up to 385,000
– 4-week Moving Average 374,000.  Previous was 378,500.

This would be good news except for the following.

GDP (2ndQ2012)

 
– 2ndQ2012 GDP was revised downward from +1.7% to +1.3%. 

There are two distinct issues:  1) what is happening with the economy and 2) the inability to measure this very important statistic. One issue is that this data is always adjusted for inflation and the Commerce Department offers no explanation whatsoever for the number is chooses as the measure of inflation.  This is what gets nominal GDP to real (inflation adjusted) GDP.

With GDP growth this slow the bottom line can be affected as much by inventory growth or government spending as by final sales. In looking at the data one should concentrate on consumer spending. For this period, real personal consumption expenditures were +1.5% so, unlike some quarters, the data is not far from what the consumer is doing. Real exports increased 5.3 %. Real federal government consumption expenditures and gross investment decreased 0.2 %. The change in real private inventories subtracted 0.46% from the second-quarter change in real GDP.

What is paramount is that the debt the Federal Government is taking on is not sustainable unless we get consistent 4% GDP growth.

Durable Goods Orders (August 2012)

New Orders – Month/Month  -13.2%
Ex-transportation – Month/Month  -1.6%

The disparity is due to a large drop in non-defense aircraft.  This could be an early sign something akin to global recession.

Pending Home Sales

This index is produced by NAR.

Pending Home Sales Index –  99.2. Previous was 101.7. 
Pending Home Sales Index – Month/Month change -2.6%.

The housing recovery is tenuous.  It is still limited by high unemployment and tough mortgage qualifying standards.