Good Morning –
While the United States brought home the most gold, silver and bronze from the Olympics, the United Kingdom saw unemployment fall to 8 percent in the previous three month period, “possibly due to a spate of hiring associated with the Olympic Games.”
Also out this morning: mortgage application activity down 4.5 percent last week, according to the Mortgage Bankers Association.
On our radar: Consumer Price Index from the Labor Department at 8:30 AM; Federal Reserve report out at 9:15 AM on output at factories, mines and utilities. Preview in Bloomberg.
Doug’s Daily Economic Outlook
Since 2007, the basic pattern has remained the same: financial market turbulence undercutting main street business. With the debt debate in 2011, and the impending fiscal cliff the dynamic has shifted to government undercutting main street. Continual, and often well-intentioned, policy initiatives and sunsets are increasingly impeding the ability and willingness of households and businesses to undertake economic activity. No example better illustrates this than the housing market, where nearly 15 new mortgage-relief programs have been started — to little avail. It is time in housing, and economic policy as a whole, to set the policy framework and stick to it to improve the prospects for rapid growth.
What We’re Reading
Eurozone on brink of double-dip recession as growth falls 0.2% - GDP across the 17-nation bloc fell by 0.2% in the second quarter of this year and economists believe the downturn is continuing. Better-than-expected figures from Germany and France were offset by sharp contractions elsewhere, with the Spanish, Italian, Finnish, and Portuguese economies all shrinking. The wider European Union also suffered a 0.2% contraction. (Guardian)
‘Economic suicides’ shake Europe as financial crisis takes toll on mental health – So many people have been killing themselves and leaving behind notes citing financial hardship that European media outlets have a special name for them: “economic suicides.” Surveys are also showing increasing signs of mental stress: a jump in the use of antidepressants and illicit drugs, a rise in depression and anxiety among workers worried about salary cuts or being laid off, and an increase in the use of sick leave due to psychological problems. (WaPo)
Rising Retail Sales Ease Fears for Economy – Retail sales rose 0.8% in July from a month before, the Department of Commerce said Tuesday, ending a three-month streak of declines that included a 0.7% drop in June and a 0.1% drop in May. Consumer spending accounts for about three-quarters of demand in the U.S. economy, so a sustained upturn there, as well as a revival in confidence, are crucial to fueling growth. (WSJ)
Looming spending cuts hit more than defense – It’s not just the Pentagon and defense contractors that face a funding crisis from broad government spending cuts in January. Domestic programs are on the chopping block too, in ways that could affect average Americans more. (AP)
Insight: Fannie Mae, Freddie Mac clamping down on banks – Government-owned Fannie Mae and Freddie Mac are stepping up efforts to find bad home loans that they can force mortgage lenders to buy back from them, providing an increasingly bigger headache to banks. (Reuters)
Bonds, Stocks Fall on Fed Bets; Standard Chartered Climbs – Bonds fell, sending U.S. 10-year Treasury yields to an almost three-month high, while stocks declined on speculation America’s economy is growing enough for the Federal Reserve to put off more stimulus measures. Standard Chartered Plc climbed after setline a money laundering probe. (Bloomberg)
Report: Auto bailout cost up $3.4B – The auto industry bailout’s price tag has jumped a whopping $3.4 billion more than what the Treasury Department had previously estimated, according to a report. The department announced in a report sent to Congress on Friday that the $85 billion bailout is estimated to cost taxpayers $25.1 billion, Reuters reported Monday. (Politico)
Drought-Related Food Inflation Will Feel Bad but Not Disaster for Economy – Consumer inflation should show just a tiny pickup in July, event as the Midwest drought raises the prospect of food inflation in months to come. Economists expect to see an increase of 0.2 percent in the Consumer Price Index, for both headline and core, excluding food and energy. CPI is released Wednesday at 8:30 AM. (CNBC)
Also From the Forum
Understanding the Multifamily Mortgage Market – Single-family mortgages dominate discussions of the mortgage market and, especially, the housing government-sponsored enterprises (GSEs). But the GSEs have a significant history with the multifamily sector as well. (Paper here)
A Reminder on Tax Fairness – According to the data in the IRS’s report on “Individual Income Tax Returns 2010,” for the most part, the share and magnitude of taxes paid rises, indeed “progressively,” with income. (Blog here)
The Past and Future of Higher Education Finance – Despite billions of dollars spent over the last four years, the percentage of Americans with a postsecondary degree has barely ticked upward, only two tenths of a percentage point in 2010. (Study here)