Hover over this image for caption and link ↓↓↓

Rates are down this morning on continued fears of a double dip recession and the latest inflation report confirming tame prices. Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were 0.2% in June and 1.5% year-over-year through June. Excluding volatile oil and food costs from the readings, “Core” PCE price index was 0.1% for June and 1.4% YOY through June. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. At 1.4%, Core inflation is within their comfort zone, and PCE inflation has been stable for a year. Mortgage bonds are rallying once again to record levels, which pushes rates down to new record lows.

Personal income was up 0.2% in July, which is the same range of the last 6 months. Wages rose 0.3%, which is roughly the same monthly level for all of 2010. The household savings rate was 5.9%, which is down from the May 2009 all-time record of 6.9%. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.

Rates continue their run down this morning on doubts about the economy and the latest inflation report confirming tame prices. Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were 0.2% in May and 1.9% year-over-year through May. Excluding volatile oil and food costs from the readings, “Core” PCE price index was unchanged for May and 1.3% YOY through May. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. At 1.2%, Core inflation is within their comfort zone, and PCE inflation has been stable since summer 2009. Mortgage bonds are rallying once again to record levels, which pushes rates down to new record lows.

Personal income was up 0.4% in May, which is the same range of the last 4 months. Wages rose 0.5%, which is roughly the same monthly level for all of 2010. The household savings rate was 4%. This is up from 3.8% last month as consumers again get more cautious about the economy, but it’s still significantly down from the May 2009 all-time record of 6.9%. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.

The two top topics for debate following President Obama’s speech tonight on the BP oil spill are: (1) how to make BP accountable for their actions, and (2) how this spill influences U.S. energy policy. Comments on each below. Also worth noting a new statistic on BP leak rates. Last week, most estimates said 12-19k barrels per day were leaking. Tonight, Bloomberg’s Lizzie O’Leary said that estimate is now more like 60k barrels per day, which “is like an Exxon Valdez spill every 4-7 days.”

On BP accountability, there are a few speech excerpts below. The first is early in the speech and summarizes Obama’s you-break-it-you-buy-it plan for BP: they’ll pay for damage, and they’ll pay for the careers and businesses they’ve affected. The following excerpts explain each. Focusing on affected people and businesses makes practical and political sense. But the soon-to-be-raging debate between politicians and oil industry lawyers will be about how you make BP accountable without bankrupting them. And while this debate rages, those lawyers will be siphoning off available clean-up funds as fast as the clean-up rigs can siphon oil off the water. more…

Below is a letter President Obama sent out this weekend following his most recent visit to the Gulf to survey the effects of the BP oil spill. Requisite posturing aside, this is truly heartbreaking for those whose livelihoods will be destroyed by this spill.

Yesterday, I visited Caminada Bay in Grand Isle, Louisiana — one of the first places to feel the devastation wrought by the oil spill in the Gulf of Mexico. While I was here, at Camerdelle’s Live Bait shop, I met with a group of local residents and small business owners. more…

Rates are slightly better today following a key inflation report this morning. Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were unchanged in April and 2% year-over-year through April. Excluding volatile oil and food costs from the readings, “Core” PCE price index was 0.1% for April and 1.2% YOY through April. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. At 1.2%, Core inflation is within their comfort zone, and PCE inflation has been stable since summer 2009.

Personal income was up 0.4% in April after increasing the same in March, not changing in February, and increasing 0.3% percent in January. Wages rose 0.4%, which is roughly the same monthly level for all of 2010. The household savings rate was 3.6%, down from 4.8% in December and from the May 2009 all-time record of 6.9%. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were 0.1% in March and 2% year-over-year through March. Excluding volatile oil and food costs from the readings, “Core” PCE price index for March was 0.1% and 1.3% YOY through March. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. This 1.3% Core inflation (and the fact that PCE inflation has been stable since summer 2009) is within their comfort zone and reconfirms their statement last week that inflation is likely to be subdued for some time.

Personal income was 0.3% in March after 0% in January and 0.3% in February. Wages were 0.2% in March after being flat in March and increasing 0.4% in January. The household savings rate dropped from 4.8% in December and 3% in February to 2.7% in March. The 12 month average savings rate is 4% which is well below the May 2009 all-time record of 6.9%. Consumer spending was up 0.5%, the most in five months. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.

The US Producer Price Index, which measures inflation at the business and manufacturing levels of the economy, was 0.7% in March and 6% year-over-year through March. Excluding volatile oil and food costs from the readings, “Core” PPI for March was 0.1% and 0.9% YOY through March. The “Core” numbers were very close to last month and considered tame, but the YOY March number of 6% is cause for concern. Rates initially ticked up on the news this morning, but have since evened out on stock weakness caused by: higher than expected jobless claims (456k actual vs. 450k expected) and a worse than previously reported number on Greece’s budget deficit. Looking forward today, Treasury will announce the amount of securities to be auctioned off next week: 2-yr, 5-yr, 7-yr, and 5-yr TIPS. And also President Obama will be speaking shortly on regulatory reform.

See the BLS charts for producer prices below; you can see how volatile this monthly inflation report is, and this is why markets shift so much each month as it’s released. Also you can automatically create charts and download historical PPI data by scrolling to our data section on the right side of the site, or visiting our Data page. And you can see all stats on our Economic Calendar page, and click each release title for the definition of what each stat means.

The US Consumer Price Index, which measures inflation at the consumer level of the economy, was nearly flat at 0.1% in March and 2.3% year-over-year through March. Excluding volatile oil and food costs from the readings, “Core” CPI for March was unchanged and increased 1.1% YOY through March. Consumer inflation for the month is within the Fed’s comfort zone of 1-2%. Also released today was March Retail Sales showing a 1.6% gain. One month doesn’t make a trend but compared to February’s 0.5% number, it shows that consumers (who typically account for two-thirds of GDP) might be ramping up spending. This tame inflation data along with a more aggressive Retail Sales number have offset each other today in the bond market and rates are even as a result—low inflation typically causes bonds to rally and rates to drop, and an improving economic stat like today’s retail sales has the opposite market effect.

See Commerce Department’s retail sales charts below. Also you can automatically create charts and download historical CPI data by scrolling to our data section on the right side of the site, or visiting our Data page. And you can see all stats on our Economic Calendar page, and click each release title for the definition of what each stat means.

Banks Filling Fed MBS Buying Void
So now we are done with the Fed’s program. It purchased $6 billion net in agency MBS over the past week, bringing its total net purchase to $1.250 trillion. On the first day post-Fed, current coupon mortgage securities only widened 3 basis points (invisible to any originator) to Treasury securities, although they widened 8 basis points over the last two days. Traders estimate that origination yesterday was about $2.5 billion, and believe that banks, flush with cash, appear to be in the best position to fill in the Fed’s void but are dealing with “quarter-end issues”. But rates in general have become somewhat more volatile.

New Treasury Auctions Next Week
Today is not a Federal Holiday, the stock markets are closed, and the bond market has a short day. If you don’t think that the economy is doing better, look at the price of oil. Oil hit a 2010 high yesterday, and is up over $4 per barrel just this week. Next week we have a new round of 3, 10, and 30-yr Treasury auctions to compete with institutions buying mortgage-backed securities. This morning Non-farm payrolls showed a gain of 162,000 jobs, the unemployment rates came in at 9.7%, but average hourly earnings declined .1%. January & February had revisions of +40k jobs. After the news the 10-yr is up to 3.92%, as you would expect with an expanding economy, the dollar is rallying, and mortgage prices are following Treasuries lower with prices worse by .250-.50 depending on coupon. more…

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were unchanged in February and 1.8% year-over-year through February. Excluding volatile oil and food costs from the readings, “Core” PCE price index for February was unchanged and 1.3% YOY through February. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. At 1.3%, Core inflation is within their comfort zone, as confirmed by Ben Bernanke’s remarks last week that inflation is likely to be subdued for some time, and the fact that PCE inflation has been stable since summer 2009.

Personal income was unchanged in February after increasing 0.3% percent in January, and wages were also flat after increasing 0.4% in January. The household savings rate dropped from 4.8% in December to 3.1% for February. The 12 month average savings rate is 4.1% which is well below the May 2009 all-time record of 6.9%. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.