Home Prices – July 2009


Home prices nationwide continue to bounce back and have now risen for the 3rd month straight.

Top 3 monthly increases:

1. Minneapolis, MN: 4.58%
2. San Francisco, CA: 3.34%
3. Chicago, IL: 2.66%

Noteworthy: The only city there prices continue to decline is Las Vegas where home prices have dropped by 1.15% from last month.

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Producer Prices July 2009 – All Time Record Declines Across the Board

The BLS Reports Producer Price Data for July 2009:

The Producer Price Index for Finished Goods declined 0.9 percent in July, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed advances of 1.8 percent in June and 0.2 percent in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 0.2 percent in July after rising 1.9 percent in the prior month, and the crude goods index fell 4.5 percent following a 4.6-percent increase in June. (See table A.)

The downturn in finished goods prices was broad based. The index for energy goods fell 2.4 percent in July after climbing 6.6 percent a month earlier, prices for consumer foods decreased 1.5 percent following a 1.1-percent advance in the previous month, and the index for goods other than foods and energy edged down 0.1 percent compared with a 0.5-percent rise in June.

Before seasonal adjustment, the Producer Price Index for Finished Goods decreased 0.9 percent in July to 172.6 (1982 = 100). From July 2008 to July 2009, prices for finished goods fell 6.8 percent, the index for intermediate goods decreased 15.1 percent, and crude goods prices dropped 44.8 percent, all of which are record 12-month declines. Over the same period within finished goods, the index for energy goods fell 29.7 percent, prices for consumer foods moved down 4.2 percent, and the index for goods other than foods and energy rose 2.6 percent.

Seasonally adjusted, producer prices fell by 11.7 percent from 1 year ago, also an all time record:


… as we can see, deflation not only continues to run its course, but its impacts are showing at an accelerated pace and increasing magnitude.

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Money Supply Growth – July 2009


The true money supply has dropped to $2.157 trillion in July 2009 from $2.172 in June 2009. It is still up 14% from 1 year ago, but annual growth has slowed down from 15.3% in June.

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Jobless Claims, Foreclosures & Retail Sales – A Triple Whammy

As per latest AP reports, Jobless claims up, retail sales dip unexpectedly:

There were 617,000 new jobless claims in late June, before the figures were distorted last month by a shift in the timing of temporary auto plant shutdowns. That shift caused claims to drop sharply and then jump up last month.

Claims fell steeply last week, however, when the data were no longer affected by the distortions.

Still, initial claims remain far above the roughly 325,000 that economists say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007.

Including federal emergency benefit programs, 9.25 million people received unemployment compensation in the week ending July 25, the latest data available. That’s down from a record of 9.35 million the previous week. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.

According to Realtytrac.com, new records are being set in foreclosure activity:

[smartads]The foreclosure plague continued to devastate last month.

There were more than 360,000 properties with foreclosure filings — including default notices, scheduled auctions and bank repossessions — an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.

“July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. “Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

The jump occurred as several foreclosure moratoriums phased out. They were initiated by many states to give the administration’s foreclosure-prevention efforts time to work. But for many help did not come: The modification and refinancing programs have met with less success than hoped.

… and last but not least, retail sales fell unexpectedly:

Sales at U.S. retailers unexpectedly fell in July from June, a government report showed on Thursday, casting a shadow over an anticipated rebound in consumer spending in the third quarter.

The Commerce Department said total retail sales edged down 0.1 percent from increasing a revised 0.8 percent in June. Sales in June were initially reported to have risen 0.6 percent.

Analysts polled by Reuters had forecast retail sales rising 0.7 percent in July, expecting a boost from the government’s “cash for clunkers” program, which gives consumers cash to swap aging gas-guzzlers for new, more fuel efficient models.

Excluding motor vehicles and parts, sales fell 0.6 percent in July after rising 0.5 percent the prior month. Analysts had expected a 0.1 percent gain in sales excluding autos.

Gasoline station sales fell 2.1 percent in July, reflecting a retreat in gasoline prices during the month, after surging 6.3 percent in June. Excluding gasoline, retail sales nudged up 0.1 percent. Sales of building materials were down 2.1 percent in July after falling 0.6 percent in June.

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US Consumer Mood Down in July Survey

Reuters writes U.S. consumers’ mood wanes in late July:

U.S. consumer confidence waned in late July to its lowest ebb since April on growing pessimism about the long-term economic outlook, especially about income and jobs, a survey showed on Friday, even as some economists reckon the longest recession in decades may be easing.

The Reuters/University of Michigan Surveys of Consumers said its final July consumer sentiment reading fell to 66.0 from June’s 70.8, though it was slightly higher than economists’ median expectation for a reading of 65.0, according to a Reuters poll.

The index of consumer expectations fell to 63.2 in July’s final reading, from 69.2 in June.

Consumers believe that the economic free-fall is now over, but consumers see little reason to believe the stimulus policies will improve their financial condition anytime soon,” the Reuters/University of Michigan Surveys of Consumers said in a statement.

On the long-term outlook, 58 percent of respondents said they anticipated bad times, up from 49 percent in May.

Lower income and less favorable job prospects in the next year are key factors making consumers anxious about their financial position, the statement said.

“People are a little more worried about the economy, especially over the labor market and what’s happening in Washington. It’s still consistent with the picture that the economy is bottoming out, but you are not going to get a big bounce in consumer spending,” said David Wyss, chief economist with Standard & Poor’s Ratings Services in New York.

The current conditions index slipped to 70.5 in the final July reading, from 73.2 in June.

U.S. stocks extended losses after the report’s release, but the dollar and safe-haven Treasury bonds traded fairly steady.

“We are going to see the stock market improve, but it has gotten ahead of itself given my expectations of a soft economic recovery. We are going to need a mid-rally correction. This (recent rebound) is the biggest rally we’ve had since the 1930s, and it makes me nervous,” Wyss said.

“Recent income gains were reported by the fewest consumers in the more than 60-year history of the survey in each of the past three months. Reported declines in income, from lost jobs, shorter work hours, cuts in pay or bonuses were also at record levels,” the survey statement said.

We may be seeing a temporary bottoming out, but are still in for a long period of ongoing job losses and little consumer spending. The recent rally has indeed been a phenomenal one, all the more a reason to be concerned about expensive stocks. To get an idea of how low consumer spending may go, please see True Consumption as Percentage of GDP:


The likely bottom for a serious recovery would here be somewhere between 86% and 90%.

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