Thursday, August 30, 2012

Initial Jobless Claims & July Personal Spending Disappoint

Last week's initial jobless claims and personal spending in July were both disappointing.  However, the data, we believe, was not bad enough to nudge the Fed to launch another QE.  The market also indicates this at least in early trading as the S&P 500 is down approx. 7 points.
Initial Jobless Claims
It appears that for once we were too optimistic.  Even with a higher seasonal factor applied to last week's non-adjusted initial jobless claims (as compared with prior years), the print exceeded expectations; 374K versus 370K consensus.  The upward revision of prior week's data continued with another 2K increase to 374K.  The 4-week moving average, which unfortunately has been 'trending up', came in above 370K. 
Personal Spending & Income
July personal spending inched up 0.4% over the prior month.  However, this was below the Street's 0.5% expectation.  In addition, spending growth in June was revised down 20bps to 0.3%.  Personal income and PCE price index were in-line; 0.3% and 0.0%, respectively.  Savings as a percentage of disposable income was down 10bps to 4.2%, which may be good news for spending in Aug.  We expect to see a sizable increase in the PCE price index for August given the recent spike in oil futures, and gasoline and food prices. 

Although the market is down currently, there are indications that it continues to yearn for more help from the Fed as gold remains in positive territory and VIX is up only around 2% after the bad economic news.   

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