US Economic News

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All central bankers must master the art of being non-committance... always making the whole world guessing what exactly are they up to...

US jobs market improving: Yellen
DOW JONES NEWSWIRES AUGUST 23, 2014 12:30AM

Federal Reserve Chairwoman Janet Yellen pointed to an improving US job market, but was non-committal about how this progress would affect monetary policy in a speech before global central bankers at an economic symposium here.

"The economy has made considerable progress in recovering from the largest and most sustained loss of employment in the United States since the Great Depression," she said remarks prepared for delivery Friday here. "These developments are encouraging, but it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover."

Ms Yellen stuck to an equivocal line she used in July in testimony to Congress. If the job market continues to improve more rapidly than expected or inflation rises quickly to the Fed's 2 per cent goal, the Fed could raise rates sooner than expected. But if progress stalls, low rates will persist.

She delivers her comments amid a deepening debate at the US central bank about when to start raising short-term interest rates from near zero, where they have been since December 2008. Many Fed officials don't expect to move rates until mid-2015, but a falling jobless rate and other indicators of improving job markets has led some officials to press for earlier moves.

Labor indicators "have improved more rapidly than the (Fed) had anticipated," Ms Yellen acknowledged. However her comments made clear that she isn't ready to move, in part because she is grappling for answers to questions about puzzling labor markets scrambled by the 2008 financial crisis.

"There is no simple recipe for appropriate policy in this context," Ms Yellen said. "Monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model, but instead reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy."

Judging the degree of slack in the economy is particularly hard right now, she argued, because of shifts in labor force participation, part-time employment, the demographics of the workforce, wage growth and broader measures of labor market dynamism. "A considerable body of research suggests that the behavior of these and other labor market variables has changed since the Great Recession," she said, complicating her decisions.

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http://www.businesstimes.com.sg/premium/...g-20140826

PUBLISHED AUGUST 26, 2014
US bond market does not see rates rising

Market's view is that growth is not strong enough to force Fed's hand

Window shopping: Average hourly earnings were unchanged last month, the third time in five months that they rose less than economists' estimates. - PHOTO: AFP
[NEW YORK] When it comes to predicting where US borrowing costs are headed, the bond market isn't taking Wall Street's advice seriously.
After giving up on calls last month that Treasury yields will rise this year, forecasters are sticking to estimates those on the 10-year note will climb next year and reach 3.6 per cent as the Federal Reserve increases interest rates. Yet based on the performance of long-term Treasuries, implied yields suggest investors don't foresee yields that high for a decade or more.
Getting it right has never been more important. With America's outstanding public debt at a record US$17.7 trillion, Fed chair Janet Yellen faces the task of lifting rates from close to zero without sparking a surge in funding costs.
While economists point to unrest in Ukraine and Gaza for why Treasuries remain in demand, the bond market's view that the US expansion isn't strong enough to force the Fed's hand suggests yields can stay low for years to come.

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PUBLISHED AUGUST 27, 2014
LATEST US DATA
Durable goods orders up 22.6% in July

Home prices rise at slower pace on falling affordability

Getting a boost: Last month's increase was the largest on record and far outpaced economists' forecasts for a 7.5 per cent advance. - PHOTO: BLOOMBERG
[WASHINGTON] Orders for long-lasting US manufactured goods posted their biggest gain on record last month on strong international demand for aircraft, but the underlying trend remained consistent with a steady pace of domestic economic growth.
The Commerce Department said on Tuesday durable goods orders, items ranging from toasters to aircraft that are meant to last three years or more, jumped 22.6 per cent last month after an upwardly revised 2.7 per cent increase in June.
Last month's increase was the largest on record and far outpaced economists' forecasts for a 7.5 per cent advance. Orders were previously reported to have gained 0.7 per cent in June.
Transportation orders rose 74.2 per cent, the biggest increase ever, boosted by a surge in bookings for civilian aircraft, which soared 318 per cent, the largest increase since January 2011.

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US trade gap narrows in July
AFP SEPTEMBER 05, 2014 1:00AM

The US trade deficit shrank for the third straight month in July helped by gains in exports especially from the automotive sector, Commerce Department data shows.

The monthly trade balance came in at a negative $US40.5 billion ($43.82bn), down from a $US40.8bn deficit in June.

Exports rose $US1.8bn to $US198bn, while imports gained $US1.6bn to $US238.6bn.

Cars and trucks, parts and engines were the primary force behind the export gains, up $US1.7bn in the month to $US15.3bn.

Also showing strength were exports of oil products, industrial machinery and telecommunications equipment, including mobile phones.

Meanwhile crude oil imports picked up, while consumer good imports fell.

For the year to July, the trade deficit at $US295.3bn was 4.6 per cent larger than a year ago, with exports for the seven month period up 3.1 per cent year on year and imports growing 3.4 per cent.

Analysts said the improvement in the deficit should give a boost to overall economic growth in the third quarter, if sustained.

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US private payrolls growth slows
DOW JONES NEWSWIRES SEPTEMBER 05, 2014 12:15AM
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US businesses slowed their pace of hiring in August, according to a closely-watched employment survey.

The survey, along with other job-related news, suggests a firming but not robust labour market.

Private payrolls in the US increased by 204,000 jobs last month, says the national employment report compiled by payroll processor Automatic Data Processing (ADP) and forecasting firm Moody's Analytics.

It is the weakest private sector hiring number since March.

Economists surveyed by The Wall Street Journal expected ADP to report that 215,000 new private sector jobs had been created in August. The July increase was revised down to 212,000 from 218,000.

The ADP estimate is issued ahead of the Bureau of Labor Statistics' employment situation report scheduled for Friday.

Economists think the BLS will report August non-farm payrolls, which include government positions, increased by 225,000 jobs, a bit more than the 209,000 added in July. If that is the case, and barring large downward revisions, August would mark the seventh-consecutive monthly gain of 200,000 jobs or more.

The unemployment rate is expected to fall to 6.1 per cent from 6.2 per cent in July.

Economists are unlikely to change their payrolls forecast after seeing the ADP number. The private sector report has a history of large misses when it comes to calling the BLS's number, although the margin has narrowed so far in 2014.

According to ADP, firms employing between 1-49 workers added 78,000 new workers last month. Medium-size businesses with payrolls of 50-499 workers increased payrolls by 75,000 employees. Large firms, businesses with 500 or more employees, hired 52,000 more workers.

Service sector payrolls increased by 164,000 workers in August. The factory sector added 23,000 positions, a large gain for that sector. Construction payrolls increased by 15,000 slots.

Other recent job news was more upbeat.

On Wednesday, TrimTabs Investment Research said the US economy created 231,000 jobs last month.

In addition, Challenger Gray & Christmas reported Thursday that companies announced 40,010 layoffs in August, down 15 per cent from July's figure and 21 per cent below the number of job cuts announced in August 2013.

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http://www.cnbc.com/id/101971619

Fed could toughen policy stance as ECB takes easy money baton
Patti Domm | @pattidomm
5 Hours Ago
CNBC.com

Janet Yellen speaks with Mario Draghi during the Jackson Hole economic symposium in August.
Bradly Boner | Bloomberg | Getty Images
Janet Yellen speaks with Mario Draghi during the Jackson Hole economic symposium in August.
The European Central Bank's full throttle easing program comes as the Fed backs away from its easy ways, and the distinction between the two could become even greater when the Fed meets later this month—meaning higher U.S. rates and a stronger dollar.

Some strategists expect the ECB's surprisingly robust easing program, and improvements in the U.S. economy to combine to give the Fed leverage to extend more hawkish talons at its September meeting. They say it could strike the language about keeping rates low for a "considerable period" from its statement, more clearly signaling its move to normalcy, expected next year.

U.S. Treasury yields were higher after the ECB Thursday cut three key interest rates, including its refinancing rate to 0.05 percent. It also drove its deposit rate deeper into negative territory, now charging 0.20 percent to banks that park money overnight.


Read MoreDraghi: ECB to buy asset-backed securities
ECB President Mario Draghi added to the one-two punch with a commitment for a sizeable bond buying program for asset backed securities and covered bonds that would start in October.

The news stung the euro, which fell below 1.30 for the first time since July 2013. Thursday's U.S. data was also dollar positive and weighed on Treasury prices, as stocks rallied. The ISM nonmanufacturing index rose to 59.6 in August from 58.7 in July, its best showing since 2005.

With the exception of German bunds, yields in Europe moved lower as the 10-year Treasury yield rose to 2.45 percent, following the German bund but breaking a trend of moving lower with the rest of Europe's sovereigns.

Read MoreCleveland Fed chief: Forward guidance change needed

"Finally the data is overwhelming the force of global bond markets. Today the data is starting to win," said Jens Nordvig, global head of G-10 currency strategy at Nomura. "Certainly into this crucial FOMC meeting on the 17th, we'll be going more and more in that direction." Thursday's ECB announcement was followed by U.S. data that showed services sector activity at its best pace since 2005.

ADP private payroll data also showed an increase of 204,000 private sector jobs in August. While less than expected, ADP reaffirmed market expectations that Friday's government jobs report should show growth of more than 200,000 nonfarm payrolls for a seventh month. That jobs report is seen as a key element the Fed will consider when it meets starting Sept. 16.

"It really looks like U.S. data is finding a solid bottom, and the data is just literally on fire," Nordvig said. "You have so many indicators that are at 10-year highs. ISM is the latest one. It's a broad range of indicators that have totally broken out of the range of the last few years."

Nordvig said the data is convincing him the Fed will be forced to acknowledge the positives in the U.S. economy by dropping the crucial language promising to keep interest rates low for a considerable period. But that does not mean it would move anytime sooner to raise rates, but it is acknowledging improvement by leaving the door open, he said.

The Fed has emphasized that its policy path is data dependent so any setback could slow its march toward normalization—and rate hikes. "We're not going to to know until next year whether it's March or June or September," Nordvig said.

The Fed has been tapering back its "quantitative easing" bond buying program and is expected to end tapering in October. Many economists expect the Fed to make the first hike in short-term rates in the middle of next year.

David Ader, CRT Capital chief Treasury strategist, said the ECB's move makes it more likely the Fed will change the language in its statement in September. He had expected the change in October.

"Now that they've done this, the Fed can do what it's doing. It's no longer inhibited by concerns of Europe not doing what it's now doing," Ader said. He added that Japan also reaffirmed its bond buying program. "Now, you have those central banks with their foot on the gas pedal. The Fed could ease off a little."

Ward McCarthy, chief financial economist at Jefferies, however, said the Fed could be more leery of moving away from policy since the situation in Europe is forcing the ECB to carry out significant easing.

"Monetary policy is right now fixated on the labor market. Inflation is kind of an afterthought because it is still below target, and what that means is the Fed can continue to stimulate the economy to resuscitate the labor market at this point without worrying about inflation," he said.

Draghi, in comments after the ECB meeting, said inflation expectations are anchored but downside risks are increasing. The European economy has been growing sluggishly and some countries saw negative GDP last quarter.

Read MoreWhy analysts say September could be a big deal

"I think the Fed starts raising rates later rather than sooner, and they want to be convinced they've exercised the deflation demons before they do so," McCarthy said. "That means the Fed will probably be a little bit behind the curve."

Peter Boockvar, chief market analyst at Lindsey Group, said while the stock market was rallying Thursday, investors could start to respond negatively if rates start rising.

"Outside of this initial cheer, I don't see what the followup is on the upside," Boockvar said. "In the stock market, if you're a multinational corporation, you're dealing with a stronger dollar against the euro and a weaker U.S. economy. I don't know how this is good for corporate profits."

Boockvar said the market may take note of the move toward higher rates. "They all love this kind of fix. But outside of today, we have to see what kind of follow through there is because there are implications of a strong dollar and weakness around the world and a Fed that's reversing policy," he said. "We've been rallying for three weeks going into today."

—By CNBC's Patti Domm

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US industrial production falls in August
AFP SEPTEMBER 16, 2014 12:15AM

US industrial production unexpectedly fell in August after six months of gains, dragged down by a slump in automobile manufacturing, the Federal Reserve has reported.

Overall industrial production declined 0.1 per cent on the month, surprising analysts who on average had forecast a 0.3 per cent increase.

Compared with a year ago, industrial production was up 4.1 per cent in August.

Manufacturing output fell 0.4 per cent in August - the first time since January that total output and manufacturing output fell.

"The shortfall is somewhat misleading because it owes to a temporary reversal in motor vehicle and parts production where the trend is very strong, though the trend in manufacturing does appear a bit weaker outside of autos," said Aaron Smith of Moody's Analytics on Monday.

Production of cars and trucks and parts dropped 7.6 per cent after surging more than nine per cent in July.

Stripping out automobile production, manufacturing rose 0.1 per cent in both July and August.

Mining production rebounded, increasing 0.5 per cent from a 0.3 per cent drop.

Utilities output rose for the first time in three months, by 1.0 per cent.

Capacity use dipped to 78.8 per cent from 79.1 per cent in July.

The Fed downwardly revised July's output growth by half, to 0.2 per cent.

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US consumer prices fall in August
DOW JONES NEWSWIRES SEPTEMBER 17, 2014 11:00PM

Consumer prices fell in August, a reading that could support Federal Reserve policymakers seeking to move slowly in raising ultra-low interest rates.

The consumer-price index, which measures how much Americans pay for everything from rent to refrigerators, fell a seasonally adjusted 0.2 per cent in August from a month earlier, the Labor Department said Wednesday. It was the first monthly decline for the inflation measure since April 2013.

The index was unchanged after excluding volatile food and energy categories, the first time that measure didn't record an increase since October 2010.

Economists surveyed by The Wall Street Journal had forecast overall prices would be unchanged but costs excluding food and energy would rise 0.2 per cent.

Inflation had picked up somewhat during the spring, but the latest data shows that pressure easing. From a year earlier, the index was up 1.7 per cent in August, a slowdown from the 2.0 per cent annual rise recorded in July.

Fed officials are closely monitoring inflation measures as they discuss next steps for monetary policy during a two-day meeting set to conclude later Wednesday. With the Fed on track to end its bond-buying program next month, investors are now closely monitoring when the central bank might move to raise benchmark interest rates from near zero, where they've stood since 2008.

Tame inflation suggests the Fed has flexibility to keep rates low without risk of the economy overheating. The Fed has a 2 per cent annual inflation target but prefers to use a different reading, the Commerce Department's price index for personal consumption. In July, that index was up 1.6 per cent from a year earlier.

The Fed's preferred gauge of inflation has undershot the central bank's target for more than two years.

Weak inflation is a symptom of a sluggish five-year recovery that has produced little upward pressure on wages. Small income gains and still historically high unemployment have also limited consumer demand. Job creation has accelerated this year, but wage gains remain largely in check.

Wednesday's report showed energy prices fell 2.6 per cent in August. The fall was led by a 4.1 per cent drop in gasoline prices. Food prices rose 0.2 per cent during the month. Meat prices, led by beef, contributed to the gain last month. But prices for fruits and vegetables fell.

Shelter costs, which advanced 0.2 per cent for the month, are up 2.9 per cent over the past year. Housing costs account for almost a third of consumer expenditures.

Medical care prices were unchanged in August, the first time this year that measure didn't increase. And airfares fell sharply for the second straight month, falling in 4.7 per cent in August after a nearly 6 per cent drop the prior month.

Separately, the Labor Department reported that Americans' inflation-adjusted weekly earnings rose 0.4 per cent in August. The gain reflects both falling prices--which improves purchasing power--and a small increase in pay. But from a year earlier, real weekly earnings are also up only 0.4 per cent, reflecting lackluster wage growth.

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What a convincing term -considerable TIME

http://www.cnbc.com/id/102009066

Fed will end QE next month, 'considerable time' remains
Jeff Cox | @JeffCoxCNBCcom
4 Hours Ago
CNBC.com


The Federal Reserve remained on its easy-money course Wednesday, allaying market fears that it might start raising interest rates sooner than expected. Chair Janet Yellen reiterated that any move in rates will be "data-dependent" on not based on a calendar projection.
In a statement released following its two-day meeting, the U.S. central bank left largely intact key provisions, despite expectations in some quarters that it would indicate a tightening bias. It also cut its bond-buying program down to $15 billion a month and indicated quantitative easing will end in October.

The Fed's Open Market Committee did not remove language that said interest rates would rise "a considerable time" after the monthly bond-buying program ended. Market fears centered over whether excising the language could have sent a signal that a rate hike would come as soon as six months later.

The full sentence reads, as in the past: "The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."

Responding to a question at a news conference following the statement release, Yellen said, "The committee decided that based on its assessment of economic conditions, that characterization remains appropriate and it was comfortable with it."

Yellen also reiterated that any future decisions about rate changes would be "data dependent" and not necessarily based on a specific calendar target. That is significant because Yellen rattled the market in March when she said that a "considerable time" could mean a rate increase six months after the end of QE—putting a hike in March.

"I know 'considerable time' sounds like it's a calendar assessment, but it is highly conditional and linked to the committee's assessment of the economy," she said.

Read MoreWhy these words matter most
The Fed, however, changed the parameters for how it will make future rate calls and it moved its expectations for interest rates higher than market expectations.

Ultimately, the statement showed that the fuss over whether the Fed would change a few words was a lot of ado without too much to show for it.

"It's kind of a shame that there's this obsession over what is minutiae further down the road," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "The Fed is moving toward normalization. It will finish tapering next month and at the middle point of next year it will begin raising rates."

Economic estimates from Fed officials changed little, though the so-called dot plot showed a growing gap between rate expectations from Fed officials and those priced in at the market level through fed fund futures.

A trader works on the floor of the NYSE as Fed Chair Janet Yellen speaks on television during a June news conference.
Jin Lee | Bloomberg | Getty Images
A trader works on the floor of the NYSE as Fed Chair Janet Yellen speaks on television during a June news conference.
"There is too big a gap now between what the market expects for the funds rate and the path the Fed expects for the funds rate," Sonders said. "I would watch market expectations. Therein lies a potential trigger for the market that is more extreme than what we've seen."

Stocks turned positive after digesting the Fed news. The U.S. dollar index gained while bond yields were little changed.

"They are trying for a soft landing here," said David Kelly, chief global strategist for JP Morgan Funds. "The problem is they are a mile from the runway and they're at 30,000 feet and they've got to get monetary policy normalized more quickly and you can see this in how they are actually adjusting up their expectations for short-term interest rates and that should have an effect on market perception of where long-term rates are going to be."

There was one additional dissenter for the September statement. Philadelphia Fed President Charles Plosser voted against the position in July, and he was joined this month by Dallas Fed President Richard Fisher.

"President Fisher believed that the continued strengthening of the real economy, improved outlook for labor utilization and for general price stability, and continued signs of financial market excess, will likely warrant an earlier reduction in monetary accommodation than is suggested by the Committee's stated forward guidance," the statement said.
The Fed's new policy guidance regime provided a more nebulous backdrop for how the central bank's leaders will proceed.

"When economic conditions and the economic outlook warrant a less accommodative monetary policy, the Committee will raise its target range for the federal funds rate," the statement said.
In reducing accommodation, the Fed will adjust the rate it pays on excess reserve balances, and will use overnight reverse repurchases on its $4.5 trillion portfolio. It also said it would reduce its balance sheet "in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal and securities" it holds.

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US families must boost savings: Yellen
AAP SEPTEMBER 19, 2014 12:00AM

The global financial crisis showed that a large number of American families are "extraordinarily vulnerable" to financial setbacks because they have few assets to fall back on, Federal Reserve Chair Janet Yellen says.

In a speech in Washington on Thursday, Yellen said a Fed survey found that an unexpected expense of just $US400 ($A430) would force the majority of American families to borrow money, sell something or simply not pay.

"The financial crisis and the Great Recession demonstrated, in a dramatic and unmistakable manner, how extraordinarily vulnerable are the large share of American families with few assets to fall back on," Yellen said.

She said the bottom fifth of households by income - about 25 million households - had median net worth in 2013 of just $US6,400, and many of these families had nothing saved or negative net worth, meaning their debts were greater than their assets.

Yellen said the Fed's 2013 Survey of Consumer Finances, an in-depth analysis of family wealth, found that the next one-fifth of households had a net worth of only $US27,900 and that both of the bottom two-fifths of households had seen declines in net worth since the Fed's last survey in 2010.

She said one reason for this decline was that incomes for these families had continued to decline.

"For many lower-income families without assets, the definition of a financial crisis is a month or two without a pay cheque, or the advent of a sudden illness or some other unexpected expense," Yellen said.

Yellen said nothing in her brief remarks about the Fed's interest rate policies.

The Fed on Wednesday concluded a two-day meeting in which it kept interest rates at a record low and retained language in its statement that rates should remain low for a "considerable time" after its bond purchasing program comes to an end in November.