Mixed Economic News ...

Mixed economic news came out this morning as June personal income, May Case/Shiller home price index, July Chicago PMI, and consumer confidence index beat estimates while personal spending was disappointing.  In addition, personal savings went up 4.4% in June from May's 4.0%, which although the market may not like, we think is good news.

Personal Income & Spending (June)

A few things stood out regarding personal income.  One, the social security government social benefit increased by $7.8bil and represented nearly 13% of the total personal income monthly change.  This percentage figure is the highest since nearly 19% in Jan. '12.  Two, total pure wage & salary disbursement was down.  In fact, this was down even more for private industries; only partially offset by a nice increase in government wage & salary disbursements.  And three, downward revisions of prior years also positively impacted the personal income change print.  In fact, personal income was revised down for all three years from 2009 to 2011.  These downward revisions not only impact Y/Y changes but also m/m.  Regarding personal spending, it was revised down by $20.2bil and $29.8bil for 2009 and 2010, respectively; and revised up only slightly, a mere $3.0bil, for 2011.

Case/Shiller Home Price Index (May)

The Case/Shiller home price index for May came in much better than expected.  The 20-city index declined 0.7% Y/Y compared with the 1.8% consensus.  We are not seeing growth in wages, which is one of the main reasons we are not yet as bullish on the housing market as some of the professionals.

Chicago PMI (July)

July Chicago PMI index of 53.7 beat the 52.5 consensus, and was higher than June's 52.9.  The positive things about this report included a slight uptick in new orders and a huge increase in the order backlog index, from below 50 to 52.8.  However, the employment and capital equipment indexes both declined significantly.  Employment index reached its lowest level YTD and capital equipment came in at the lowest since April.

Consumer Confidence (July)

Conference Board's consumer confidence came in at 65.9, nicely topping the mere 61.0 expectation, and up from June's upwardly revised 62.7.  While many continue to be disappointed with the present situation (as shown by slight decline in the 'Present Situation' sub-index), most continue to have faith in seeing improvements in the future as the 'Expectations' index increased nicely in July.