In July, total consumer credit decreased at an annual rate of 1-3/4 percent. Revolving credit decreased at an annual rate of 6-1/4 percent, and nonrevolving credit increased at an annual rate of 1/2 percent.

Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods. Economic growth at a modest pace was the most common characterization of overall conditions, as provided by the five western Districts of St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The reports from Boston and Cleveland also pointed to positive developments or net improvements compared with the previous reporting period. However, the remaining Districts of New York, Philadelphia, Richmond, Atlanta, and Chicago all highlighted mixed conditions or deceleration in overall economic activity.

Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases, while activity in the travel and tourism sector picked up relative to seasonal norms. Activity was largely stable or up slightly for professional and other nonfinancial services. Reports on manufacturing activity pointed to further expansion, although the pace of growth eased according to several Districts. Agricultural producers and extractors of natural resources reported continued gains in demand and sales. Home sales slowed further following an initial drop after the expiration of the homebuyer tax credit at the end of June, prompting a slowdown in construction activity as well. Demand for commercial real estate remained quite weak but showed signs of stabilization in some areas. Reports from financial institutions pointed to generally stable or slightly lower loan demand and noted some modest improvements in credit quality.

Upward price pressures remained quite limited for most categories of final goods and services, despite higher prices for selected commodities such as grains and some industrial materials. Wage pressures also were limited, although a few Districts noted increased upward pressures in a narrow set of sectors experiencing a mismatch between job requirements and applicant skills.

There were 3.0 million job openings on the last business day of July 2010, the U.S. Bureau of Labor Statistics reported today. The job openings rate increased over the month to 2.3 percent. The hires rate (3.3 percent) and the separations rate (3.4 percent) were unchanged. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector by industry and geographic region.

The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index fell 0.4% in the week ended Saturday from the week before on a seasonally adjusted, comparable-store basis. The decrease--the fifth drop in the past six weeks--came as consumers shied away from stores during the warm summer weather and due to the threat of Hurricane Earl.

"Sales began the new fiscal month weak as the national weather remained unfavorable for fall merchandise demand," ICSC chief economist Michael Niemira said. On a year-on-year basis, the reading rose 1.8%

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 3, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.9 percent compared with the previous week.

The Refinance Index decreased 3.1 percent from the previous week. The seasonally adjusted Purchase Index increased 6.3 percent from one week earlier. The unadjusted Purchase Index increased 4.0 percent compared with the previous week and was 38.8 percent lower than the same week one year ago.

Purchase applications increased last week, reaching the highest level since the end of May. However, purchase activity remains well below levels seen prior to the expiration of the homebuyer tax credit, and is almost 40 percent below the level recorded one year ago. On the other hand, refinance volume dropped last week for the first time in six weeks, but the level of applications to refinance remains close to recent highs, as historically low mortgage rates continue to draw borrowers into the market.

The four week moving average for the seasonally adjusted Market Index is up 4.4 percent. The four week moving average is up 1.3 percent for the seasonally adjusted Purchase Index, while this average is up 5.0 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 81.9 percent of total applications from 82.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.1 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.50 percent from 4.43 percent, with points decreasing to 0.96 from 1.34 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.00 percent from 3.88 percent, with points decreasing to 0.87 from 1.45 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for one-year ARMs increased to 7.00 percent from 6.95 percent, with points decreasing to 0.21 from 0.23 (including the origination fee) for 80 percent LTV loans.

The Conference Board Employment Trends Index™ (ETI) decreased in August for the second time in the past four months. The index now stands at 96.7, down from July’s revised figure of 97.4. The index is up 9.4 percent from a year ago.

Employment growth has been slow lately, and the Employment Trends Index suggests that it may slow even further this fall. However, we still expect job growth rather than an outright decline in the next several months.

This month’s decline in the Employment Trends Index was driven by negative contributions from seven out of the eight components. The weakening indicators included Percentage of Respondents Who Say They Find “Jobs Hard to Get”, Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now, Part-Time Workers for Economic Reasons, Job Openings, Industrial Production and Real Manufacturing and Trade Sales. It is the first time since March 2009 that seven components contributed negatively to the overall index.

Economic activity in the non-manufacturing sector grew in August for the eighth consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The NMI (Non-Manufacturing Index) registered 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate. The Non-Manufacturing Business Activity Index decreased 3 percentage points to 54.4 percent, reflecting growth for the ninth consecutive month, but at a slower rate than in July. The New Orders Index decreased 4.3 percentage points to 52.4 percent, and the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July. According to the NMI, nine non-manufacturing industries reported growth in August. Respondents' comments continue to be mixed about business conditions and the state of the overall economy.

Nonfarm payroll employment changed little (-54,000) in August, and the unem-
ployment rate was about unchanged at 9.6 percent, the U.S. Bureau of Labor
Statistics reported today. Government employment fell, as 114,000 temporary
workers hired for the decennial census completed their work. Private-sector
payroll employment continued to trend up modestly (+67,000).

The number of unemployed persons (14.9 million) and the unemployment rate
(9.6 percent) were little changed in August. From May through August, the
jobless rate remained in the range of 9.5 to 9.7 percent.

New orders for manufactured goods in June, down two consecutive months, decreased $5.1 billion or 1.2 percent to $406.4 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent May decrease. Excluding transportation, new orders decreased 1.1 percent.

Shipments, also down two consecutive months, decreased $3.5 billion or 0.8 percent to $411.2 billion. This followed a 1.8 percent May decrease.

Unfilled orders, down slightly following two consecutive monthly increases, decreased $0.3 billion to $802.8 billion. This followed a 0.3 percent May increase. The unfilled orders-to-shipments ratio was 5.60, down from 5.61 in May.

Inventories, down two consecutive months, decreased $0.5 billion or 0.1 percent to $520.0 billion. This followed a 0.4 percent May decrease. The inventories-to-shipments ratio was unchanged at 1.26.

For the week ending August 21, 2010, the DJ-BTMU U.S. Business Barometer was unchanged following an increase of +0.2 percent in the prior week. With only one week to go it appears that August lost ground compared to a strong jump in July. Much of the reversal of fortune can be attributed to the auto sector, however, where motor vehicle assemblies and auto jobs popped up in July when automakers skipped the typical period of factory shutdowns for model changeovers. This was reflected in various July economic indicators including higher industrial production, lower initial jobless claims, and higher employment. Unfortunately, as the barometer is showing, that strength was overstated by seasonal adjustment factors that were too kind and will give way to a reversal in the August data.

Following a sharp drop in the months immediately after expiration of the home buyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.

The PHSI in the Northeast rose 6.3 percent to 62.5 in July but is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 but remains 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, but are 15.6 percent lower than a year ago. In the West the index jumped 11.6 percent to 95.0 but is 17.6 percent below July 2009.

In the week ending Aug. 28, the advance figure for seasonally adjusted initial claims was 472,000, a decrease of 6,000 from the previous week's revised figure of 478,000. The 4-week moving average was 485,500, a decrease of 2,500 from the previous week's revised average of 488,000.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Aug. 21, unchanged from the prior week's unrevised rate of 3.5 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Aug. 21 was 4,456,000, a decrease of 23,000 from the preceding week's revised level of 4,479,000. The 4-week moving average was 4,485,250, a decrease of 28,500 from the preceding week's revised average of 4,513,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 4.994 million.

Nonfarm business sector labor productivity decreased at a 1.8 percent
annual rate during the second quarter of 2010, the U.S. Bureau of Labor
Statistics reported today as hours increased 3.5 percent and output
increased 1.6 percent. (All quarterly percent changes in this release are
seasonally adjusted annual rates.) The second-quarter gain in hours worked
was the largest since the first quarter of 2006. From the second quarter
of 2009 to the second quarter of 2010, productivity and output both grew
3.7 percent and hours were unchanged (tables A and 2). Nonfarm business
productivity increased at an average annual rate of 2.5 percent from 2000
through 2009.

Unit labor costs in nonfarm businesses rose 1.1 percent in the second
quarter of 2010, as the 1.8 percent decline in productivity was partially
offset by a 0.7 percent decline in hourly compensation. Unit labor costs
decreased 2.8 percent over the last four quarters, as output per hour
increased faster than hourly compensation.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2010 was estimated at a seasonally adjusted annual rate of $805.2 billion, 1.0 percent (±1.4%)* below the revised June estimate of $813.1 billion. The July figure is 10.7 percent (±1.8%) below the July 2009 estimate of $901.2 billion.

During the first 7 months of this year, construction spending amounted to $460.3 billion, 11.8 percent (±1.1%) below the $522.0 billion for the same period in 2009.

Economic activity in the manufacturing sector expanded in August for the 13th consecutive month, and the overall economy grew for the 16th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Manufacturing activity continued at a very positive rate in August as the PMI rose slightly when compared to July. In terms of month-over-month improvement, the Production and Employment Indexes experienced the greatest gains, while new orders continued to grow but at a slightly slower rate. August represents the 13th consecutive month of growth in U.S. manufacturing.

Private sector employment decreased by 10,000 from July to August on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month.

According to the ADP Report, employment in the service-providing sector rose by 30,000 in August, the seventh consecutive monthly gain. This increase was not enough to offset an employment decline in the goods-producing sector of 40,000. Construction employment dropped by 33,000 during August and manufacturing employment declined 6,000, the second consecutive monthly decline.

Today’s ADP National Employment Report shows that U.S. private sector employment remains essentially flat. Employers require economic certainty and a favorable environment in order to expand their businesses and create jobs. To achieve job growth, our nation’s policymakers should take stronger actions to incentivize businesses to innovate, invest and expand. The decline in private employment in August confirms a pause in the recovery already evident in other economic data. The deceleration in employment was evident in the major sectors and by size of business. This month’s decline in employment followed six monthly increases from February through July. Over those six months the average monthly gain in employment was 37,000 with no evidence of acceleration.

Unlike the estimate of total establishment employment to be released on Friday by the Bureau of Labor Statistics (BLS), today’s figure does not include the effects of federal hiring — and now firing — for the 2010 Census. Hiring for the census peaked in May. For this reason, Friday’s figure for the change in nonfarm total employment reported by the BLS might be weaker than today’s estimate for nonfarm private employment in the ADP National Employment Report.

Large businesses, defined as those with 500 or more workers, saw employment remain essentially flat while employment among medium-size businesses, defined as those with between 50 and 499 workers decreased by 5,000. Employment among small-size businesses, defined as those with fewer than 50 workers, decreased by 6,000.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2.3 percent compared with the previous week.

The Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier. The unadjusted Purchase Index decreased 0.4 percent compared with the previous week and was 37.0 percent lower than the same week one year ago.

Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates. The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market. The sharp decline in MBA's Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July. Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September.

The four week moving average for the seasonally adjusted Market Index is up 5.2 percent. The four week moving average is down 0.2 percent for the seasonally adjusted Purchase Index, while this average is up 6.3 percent for the Refinance Index.

The refinance share of mortgage activity increased to 82.9 percent of total applications from 82.4 percent the previous week and is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 5.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.43 percent from 4.55 percent, with points increasing to 1.34 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new low for this survey. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.88 percent from 3.91 percent, with points decreasing to 1.45 from 1.64 (including the origination fee) for 80 percent LTV loans. The contract rate is a new low for this survey. The effective rate also decreased from last week. The average contract interest rate for one-year ARMs increased to 6.95 percent from 6.84 percent, with points increasing to 0.23 from 0.22 (including the origination fee) for 80 percent LTV loans.

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER stumbled, marking an eleventh month of growth but indicating a decreasing breadth of expansion. Six of seven Business Activity indicators echoed the slowed expansion.

BUSINESS ACTIVITY:
EMPLOYMENT hiring continued, but at a slightly slower rate;
PRODUCTION fell to its lowest level since September 2009;
NEW ORDERS dropped.

BUYING POLICY:
Lead times for MRO SUPPLIES dropped nearly 50% from last month’s thirty-year high.

The Conference Board Consumer Confidence Index® which had declined in July, improved moderately in August. The Index now stands at 53.5 (1985=100), up from 51.0 in July. The Present Situation Index decreased to 24.9 from 26.4. The Expectations Index increased to 72.5 from 67.5 last month.

Consumer confidence posted a modest gain in August, the result of an improvement in consumers’ short-term outlook. Consumers’ assessment of current conditions, however, was less favorable as employment concerns continue to weigh heavily on consumers’ attitudes. Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future. All in all, consumers are about as confident today as they were a year ago (Aug. 2009, 54.5).

Consumers’ appraisal of current conditions continued to weaken in August. Those claiming business conditions are “good” decreased to 8.7 percent from 8.8 percent. However, those stating business conditions are “bad” declined to 41.9 percent from 43.3 percent. Consumers’ assessment of the labor market deteriorated further. Those saying jobs are “hard to get” increased to 45.7 percent from 45.1 percent, while those claiming jobs are “plentiful” declined to 3.8 percent from 4.4 percent.

Consumers’ expectations improved moderately in August, but overall, they remain pessimistic. Those anticipating an improvement in business conditions over the next six months increased to 17.0 percent from 15.8 percent, while those anticipating conditions will worsen declined to 13.4 percent from 15.3 percent.

Consumers were also slightly less pessimistic about future employment prospects. Those expecting more jobs in the months ahead increased to 14.6 percent from 14.2 percent, while those anticipating fewer jobs decreased to 19.4 percent from 20.9 percent. The proportion of consumers expecting an increase in their incomes held steady at 10.6 percent.

Data through June 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels. In June, 17 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up; and the two composites and 15 MSAs showed year-over-year gains. Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 3.6% improvement in the second quarter of 2010 over the second quarter of 2009. In June, the 10-City and 20-City Composites recorded annual returns of +5.0% and +4.2%, respectively. These two indices are reported at a monthly frequency and, after 16 consecutive months of improvement in their annual rates of return, June’s figures were the first to moderate from their prior month’s pace, pointing to a possible deceleration in home price returns. The 10-City Composite posted a +5.0% annual growth rate in June, versus +5.4% in May, and the 20-City Composite was up 4.2%, versus its +4.6% May print.

The monthly Composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down. While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead. Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year. Further, California’s cities have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains. Among the other hard hit cities, the news is also a bit encouraging – Las Vegas, however, remains among the weaker cities.

Seventeen of the 20 MSAs and both Composites saw home prices increase in June over May – Las Vegas was down 0.6%, Phoenix and Seattle were both flat. Through the second quarter, 15 of the 20 MSAs and both Composites have positive annual growth rates, and no market is registering a doubledigit decline. The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak. The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.

As of the second quarter of 2010, average home prices across the United States are at similar levels to what they were in the autumn of 2003. The 2010 second quarter values improved by 4.4% over the first quarter, with a corresponding annual rate of return of +3.6%. Since its recent 2009 Q1 trough, home prices have grown nationally by +6.8%.

From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. Through June, they have recovered by +7.0% and +6.3%, respectively. The peak-to-date figures through June 2010 are -28.8% and -28.4%, respectively. Both the 10-City and 20-City Composites saw somewhat slower annual growth. The 10-City Composite was up 5.0% in June, versus +5.4% in May, and the 20-City Composite was up 4.2% in June, versus May’s +4.6%. Most cities also experienced smaller price gains; while June itself was positive, the annual growth rates decelerated in 14 of the MSAs.

Looking at the monthly statistics, both the 10-City and 20-City Composite were up 1.0% in June over May. Seventeen of the 20 metro areas showed an increase in June compared to May – Las Vegas was down 0.6%, Phoenix and Seattle were both flat. Sixteen MSAs were positive for all three months of the quarter. Minneapolis, San Diego, San Francisco and Washington have shown recovery from recent lows of +15.9%, +13.4%, +21.1% and +12.0%, respectively. San Diego, in particular, has stood out with 14 consecutive months of increasing home prices. Las Vegas continues to be weak, it was the only market that fell in two months of the second quarter. Home prices in that city are very close to their January 2000 levels.

New York City business activity cooled further in August, according to the survey taken by the Institute for Supply Management-New York (ISM-NY).

The Current Business Conditions index fell to a 12-month low of 55.6 in August from a revised 59.4 in July. This is slightly above the long-run average of about 55.

Future optimism moved into below-trend territory. The Six-Month Outlook index dropped to a 14-month low of 58.4 in August from a revised 69.6 in July. The long-run average is about 64. Purchasing and supply executives continued to scale back the volume of spending. The Quantity of Purchases index declined to a seven-month low of 54.3 in August from a revised 59.4 in July.

Job growth shifted into neutral. The Employment index hit a ten-month low of 50.0 in August from a revised 51.5 in July. Input prices reached a six-month low. The Prices Paid index fell to 43.2 in August from a revised 48.5 in July.

Two business impediments were notable. Skilled labor shortages were a positive sign as firms try to match the right talent with job openings. “Other” difficulties, however, were negative, combining various concerns.

The ICSC-Goldman Sachs (ICSC-GS) chain store sales index for the week ending August 28 rose by a moderate 0.1% on a week-over-week basis. The latest weeks increase broke an extended week-over-week drop that lasted four consecutive weeks. The fiscal month ended mixed, but slightly better than during the majority of the month. Over the last week, customer traffic weakened overall, but improved modestly for discounters. Nationwide, the seasonably warm weather continued to curb fall and back-to-school apparel merchandise demand. According to Weather Trends International (WTI) unseasonably hot weather lingered for its 14th consecutive week with temperatures trending both hotter than last year by 1.4F degrees and above its long-term average for the nation as a whole by 1.3F degrees.

WTI observed further that August is on track to be the hottest August in 15 years, but regionally California is shaping up to have its coldest August in over 20 years. That unevenness in the weather added to the unevenness of the sales during the month. Finally, on August 30, according to the U.S. Energy Information Administration, the average price of a gallon of regular-grade gasoline at the pump declined by about 2 cents (and cumulative about 10 cents per gallon over the last three weeks) to $2.682 — the lowest since late February — and was about 3% higher than the same week of the prior year.

Texas factory activity was unchanged in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at zero, posting a third consecutive month of little to no growth.

Most other indexes for current activity remained negative in August. The new orders index stayed at –9, implying incoming orders continue to fall. The capacity utilization and shipments indexes pushed deeper into negative territory, suggesting further contraction of business.

The general business activity index was negative for the third month in a row, but advanced in August as the share of respondents reporting improved activity rose from 10 to 15 percent. The company outlook index climbed back into positive territory after being negative for two months, as 23 percent of manufacturers said their outlook improved in August, compared with 13 percent in July.

The employment index turned negative for the first time in six months, largely due to the share of firms reporting layoffs rising from 15 percent in July to 23 percent in August, and hours worked contracted again. Wage and benefits costs rose modestly.

The raw materials price index doubled from 12 in July to 24 in August, reflecting a surge in input costs. Twenty-eight percent of manufacturers reported an increase in raw materials prices, while only 4 percent noted a decrease. Finished goods prices fell again in August, although three-fourths of firms reported no change in selling prices. The future indexes for both raw materials prices and finished goods prices were positive and rose.

Most future indexes of manufacturing conditions fell in August, but remained in solid positive territory. The future company outlook index fell from 16 to 9, with 31 percent of respondents expecting an improved outlook six months from now. However, the future general business activity index, a broader measure of economic conditions, dipped into negative territory for the first time in more than a year.

Personal income increased $30.0 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.6 billion, or 0.2 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $44.1 billion, or 0.4 percent. In June, personal income decreased $2.7 billion, or less than 0.1 percent, DPI decreased $0.2 billion, or less than 0.1 percent, and PCE decreased $4.0 billion, or less than 0.1 percent, based on revised estimates.

Real disposable income decreased 0.1 percent in July, in contrast to an increase of 0.1 percent in June. Real PCE increased 0.2 percent, compared with an increase of 0.1 percent.

The overall level of confidence remained largely unchanged in August as consumers did not panic in the face of slowing economic growth and the media’s double-dip drumbeat. The bad news is that consumers expect lackluster income and job growth for an extended period of time. This “new normal” outlook has encouraged consumers to pare down their debts and increase their reserve funds. While the data indicate a slowdown in the pace of growth in consumption that will last into 2011, outright declines in consumer spending are very unlikely. Nonetheless, the finances of consumers remain quite weak, and any additional erosion could quickly reduce their spending even more.

Lackluster Income and Job Prospects
Just one-in-four households reported that their finances had recently improved in the August survey, and just one-in-four expected any improvement in their finances in the year ahead. While income gains were reported by one-fifth of all households in August, the highest proportion in two years, those gains were still less than half as common as ten years ago. Moreover, half of all households not only anticipate no increase in their income, but also expected their inflation-adjusted incomes to decline during the year ahead. Job prospects remained grim as well. Eight-in-ten consumers did not expect any decline in the unemployment rate in the year ahead. While unemployment expectations were twice as positive as two years ago, the entire gain was due to a shift from anticipating additional increases to the expectation that unemployment would remain unchanged at high levels. Consumers attributed the lack of employment gains to the ongoing slowdown in economic growth. While consumers did not expect renewed declines in the economy in the year ahead, just one-in-three anticipated that the economy would be characterized by uninterrupted growth over the next five years.

The Sentiment Index was 68.9 in the August 2010 survey, slightly above the 67.8 in July and last year’s 65.7. The Current Conditions Index improved by 17.6% from a year ago, due to more favorable personal finances situation as well as improvements in the economy. More importantly, a decline of 3.2% was recorded in the Expectations Index, a component of the Index of Leading Indicators.

Optimism has been the primary characteristic of American consumers during the past half century. To be sure, consumers repeatedly suspended that optimism around recessions, but the suspension was always considered temporary. Now economic uncertainty reigns. It is far too early to declare that consumer pessimism has become the new default outlook of consumers. Nonetheless, the economic uncertainty that now exists has caused consumers to reduce their spending and increase their precautionary saving. The lesson of the financial crisis for consumers was that their best defense against economic adversity was to reduce their own debt.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.6 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent

The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 2.2% in July, to a seasonally adjusted level of 81.4 (2007 = 100). Revised data show the index fell 0.2% in June to 79.6. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) increased 1.1% in July. Regional output in July rose 13.1% from a year earlier, and national output increased 8.1%.

Three of the four regional industry sectors increased in July:
• Regional auto sector production rose 7.2%;
• Regional steel sector output grew 2.2%;
• Regional machinery sector production went up 0.9%; and
• Regional resource sector output edged down 0.1%.

Tenth District manufacturing activity slowed in August, and producers were somewhat less optimistic than in previous months. Price indexes in the survey were mostly unchanged.

The net percentage of firms reporting month-over-month increases in production in August was 0, down from 14 in July and 3 in June. The slowdown in production occurred among both durable and nondurable goods producing plants, with the exception of aircraft and electronic equipment producers, who reported some improvements. Other month-over-month indicators also fell. The shipments, new orders, and employment indexes dropped into negative territory, and the order backlog index slipped from -2 to -16. The new orders for exports index was essentially flat, while supplier delivery times increased modestly. The raw materials inventory index rose from -1 to 6, and the finished goods inventory index also inched higher.

For the week ending August 14, 2010, the DJ-BTMU U.S. Business Barometer turned around by increasing +0.2 percent following a few weeks of decline. The barometer’s increase in the latest week is not convincing, however, as much of the strength came from indicators of production that were simply reversing the prior week’s decline, while important indicators of consumer demand suffered. Mortgage applications dropped as did inflation-adjusted chain store sales, but were masked by a surge in demand for utilities on unseasonably hot weather. Judging from the barometer’s performance quarter-to-date the third quarter is shaping up to be even slower than the second, where we are expecting a hefty downward revision to the area of +1.1 percent (compared to the advanced report of +2.4%). The BEA will release its second estimate of GDP on Friday, August 27th.

In the week ending Aug. 21, the advance figure for seasonally adjusted initial claims was 473,000, a decrease of 31,000 from the previous week's revised figure of 504,000. The 4-week moving average was 486,750, an increase of 3,250 from the previous week's revised average of 483,500.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Aug. 14, a decrease of 0.1 percentage point from the prior week's revised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Aug. 14 was 4,456,000, a decrease of 62,000 from the preceding week's revised level of 4,518,000. The 4-week moving average was 4,508,750, a decrease of 28,000 from the preceding week's revised average of 4,536,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.001 million.

Sales of new single-family houses in July 2010 were at a seasonally adjusted annual rate of 276,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent (±10.8%) below the revised June rate of 315,000 and is 32.4 percent (±8.7%) below the July 2009 estimate of 408,000. ,

The median sales price of new houses sold in July 2010 was $204,000; the average sales price was $235,300. The seasonally adjusted estimate of new houses for sale at the end of July was 210,000. This represents a supply of 9.1 months at the current sales rate.

New orders for manufactured durable goods in July increased $0.6 billion or 0.3 percent to $193.0 billion, the U.S. Census Bureau announced today. This increase followed two consecutive monthly decreases including a 0.1 percent June decrease. Excluding transportation, new orders decreased 3.8 percent. Excluding defense, new orders increased 0.3 percent. Transportation equipment, also up following two consecutive monthly decreases, had the largest increase, $6.1 billion or 13.1 percent to $52.6 billion. This was due to nondefense aircraft and parts, which increased $4.0 billion.

Shipments of manufactured durable goods in July, up four of the last five months, increased $4.4 billion or 2.2 percent to $200.6 billion. This followed a 0.2 percent June increase. Transportation equipment, also up four of the last five months, had the largest increase, $3.4 billion or 6.9 percent to $52.7 billion.

Unfilled orders for manufactured durable goods in July, down following three consecutive monthly increases, decreased $1.1 billion or 0.1 percent to $802.8 billion. This followed a 0.1 percent June increase. Computers and electronic products, down following four consecutive monthly increases, had the largest decrease, $0.5 billion or 0.4 percent to $121.1 billion.

Inventories of manufactured durable goods in July, up seven consecutive months, increased $1.8 billion or 0.6 percent to $311.2 billion. This followed a 1.3 percent June increase. Machinery, up five consecutive months, had the largest increase, $0.9 billion or 1.9 percent to $51.4 billion.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 20, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 4.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4.5 percent compared with the previous week.

The Refinance Index increased 5.7 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6 percent from one week earlier. The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 38.8 percent lower than the same week one year ago.

The volume of refi applications last week was up 26% over their level four weeks ago. Mortgage rates dropped to their lowest level in the survey, going back to 1990, as incoming data continue to indicate that economic growth has slowed We are at a new 15 month high for the Refinance index. With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.

The four week moving average for the seasonally adjusted Market Index is up 5.0 percent. The four week moving average is down 0.3 percent for the seasonally adjusted Purchase Index, while this average is up 6.2 percent for the Refinance Index.

The refinance share of mortgage activity increased to 82.4 percent of total applications from 81.4 percent the previous week, which is the highest share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.8 percent from 5.7 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.55 percent from 4.60 percent, with points decreasing to 0.89 from .92 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This was the lowest 30-year contract rate ever recorded in the survey. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.91 percent from 3.99 percent, with points increasing to 1.64 from 1.05 (including the origination fee) for 80 percent LTV loans. This was the lowest 15-year contract rate ever recorded in the survey. However due to the increase in points, the effective rate increased from last week. The average contract interest rate for one-year ARMs decreased to 6.84 percent from 6.90 percent, with points increasing to 0.22 from 0.21 (including the origination fee) for 80 percent LTV loans.

Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.

Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.

Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.

The national median existing-home price for all housing types was $182,600 in July, up 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009.

In August, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — declined five points to 11 from July's reading of 16. Among the index's components, shipments declined 11 points to 11, new orders slipped three points to finish at 10, and the jobs index eased three points to 12.

Other indicators varied. The backlogs of orders measure flattened, and the index for capacity utilization was virtually unchanged at 14. The delivery times index picked up four points to end at 8. Our gauges for inventories were mixed in August. The finished goods inventory index edged up three points to 11, and the raw materials inventory index trimmed two points to finish at 9.

For the fourth consecutive week retailers saw their weekly sales decline as a confluence of factors seem to be softening consumers’ willingness to spend. As a result, for the weekly ending August 21, weekly sales slipped by 0.4 percent — the longest stretch since September 2008, according to the ICSC and Goldman Sachs Weekly Chain Store Sales Index. On a year-over-year basis, the sales index slowed to 2.3 percent, however, continued to remain positive.

“Sales growth receded again as lingering hot weather curbed the demand for fall and back-to-school clothing, weak pricing power restrained the nominal reported spending pace and a general economic malaise slowed the consumers’ desire to spend,” said Michael Niemira, ICSC director of research and chief economist. “Overall demand is modest and ICSC Research continues to expect monthly comparable or same-store sales for August — which largely will be reported on September 2 — to rise about 3.0 percent, which is consistent with recent monthly trends,” Niemira added.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index returned to its historical average of zero in July, up from –0.70 in June. Three of the four broad categories of indicators that make up the index improved from June, but only the production and income category made a positive contribution to the index in July.

The index’s three-month moving average, CFNAI-MA3, edged lower to –0.17 in July from –0.12 in June. July’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

Production-related indicators made a contribution of +0.43 to the index in July, up from –0.16 in June. Total industrial production increased 1.0 percent in July after edging lower 0.1 percent in June. In addition, manufacturing production rose 1.1 percent in July after decreasing 0.4 percent in the previous month, and manufacturing capacity utilization increased to 72.2 percent in July from 71.4 percent in June.

Employers took 1,609 mass layoff actions in July that resulted in the separation of 143,703 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer. The number of mass layoff events in July decreased by 38 from the prior month, and the number of associated initial claims decreased by 1,835. In July, 307 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 33,381 initial claims.

During the 32 months from December 2007 through July 2010, the total number of mass layoff events (seasonally adjusted) was 63,461, and the associated number of initial claims was 6,357,583. (December 2007 was the start of a recession as designated by the National Bureau of Economic Research.)

The national unemployment rate was 9.5 percent in July 2010, seasonally adjusted, unchanged from the prior month and essentially unchanged from 9.4 percent a year earlier. In July, total nonfarm payroll employment decreased by 131,000 over the month and by 52,000 from a year earlier.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in July to 109.8, following a 0.3 percent decline in June, and a 0.5 percent increase in May.

The indicators point to a slow expansion through the end of the year. With inventory rebuilding moderating, the industrial core of the economy has moved to a slower pace. There appears to be no change in the pace of the service sector. Combined, the result is a weak economy with little forward momentum. However, the good news is that the data do not point to a recession.

The economy should continue expanding, albeit slowly. The LEI is growing at its slowest pace since mid-2009 and it has been essentially flat since March. However, the index is still well above pre-recession levels and the CEI remains on a rising trend that began in late 2009. All four coincident indicators have risen over the last six months, with July’s gain in industrial production offsetting the recent weakness in employment.

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in July to 101.4, following a 0.1 percent decline in June, and a 0.4 percent increase in May. The Conference Board Lagging Economic Index® (LAG) increased 0.4 percent in July to 107.9, following a 0.1 percent increase in June, and a 0.1 percent decline in May.

Results from the Business Outlook Survey suggest that regional manufacturing activity weakened in August, after two months of slowing activity. Indexes for general activity, new orders, and shipments all registered negative readings this month. Firms also reported declines in employment and work hours. The survey's broad indicators of future activity continue to suggest that the region's manufacturing executives expect growth in business over the next six months, but optimism has waned notably in recent months.

Indicators Suggest Weakness
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a reading of 5.1 in July to -7.7 in August. The index turned negative, marking a period of declining monthly activity for the first time since July 2009 (see Chart). Indexes for new orders and shipments also suggest a slowing this month; the new orders index fell slightly, to -7.1, while the shipments index turned negative, declining to -4.5. Indicating weakness, indexes for both delivery times and unfilled orders remained negative this month.

The percentage of firms reporting a decline in employment (23 percent) was higher than the percentage (20 percent) reporting an increase. More concerning was the significant drop in the average employee workweek index from 1.7 in July to -17.1 in August.

For the week ending August 7, 2010, the DJ-BTMU U.S. Business Barometer declined by -0.2 percent on top of -0.1 percent in the prior week. While the consumption side of the barometer held up with a gain in inflation-adjusted chain store sales, mortgage applications and demand for utilities, the production indicators continued to slide. Lumber, truck, and auto production lost ground in the latest week, as did overall business activity as measured by the number of railcar loadings. The slowdown of late in the production side of the barometer is mirroring what we’ve seen in recent manufacturing surveys that show the sector is expanding, but at a slower rate.

In the week ending Aug. 14, the advance figure for seasonally adjusted initial claims was 500,000, an increase of 12,000 from the previous week's revised figure of 488,000. The 4-week moving average was 482,500, an increase of 8,000 from the previous week's revised average of 474,500.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Aug. 7, unchanged from the prior week's unrevised rate of 3.5 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Aug. 7 was 4,478,000, a decrease of 13,000 from the preceding week's revised level of 4,491,000. The 4-week moving average was 4,526,750, a decrease of 1,500 from the preceding week's revised average of 4,528,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.010 million.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 13, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 13.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12.4 percent compared with the previous week.

The Refinance Index increased 17.1 percent from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009. The seasonally adjusted Purchase Index decreased 3.4 percent from one week earlier. The unadjusted Purchase Index decreased 4.6 percent compared with the previous week and was 38.6 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 2.6 percent. The four week moving average is up 0.1 percent for the seasonally adjusted Purchase Index, while this average is up 3.2 percent for the Refinance Index.

The refinance share of mortgage activity increased to 81.4 percent of total applications from 78.1 percent the previous week, which is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity decreased to 5.7 percent from 5.9 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.60 percent from 4.57 percent, with points increasing to 0.92 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.99 percent from 3.95 percent, with points decreasing to 1.05 from 1.08 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week. The average contract interest rate for one-year ARMs decreased to 6.90 percent from 7.00 percent, with points decreasing to 0.21 from 0.22 (including the origination fee) for 80 percent LTV loans.

Industrial production rose 1.0 percent in July after having edged down 0.1 percent in June, and manufacturing output moved up 1.1 percent in July after having fallen 0.5 percent in June. A large contributor to the jump in manufacturing output in July was an increase of nearly 10 percent in the production of motor vehicles and parts; even so, manufacturing production excluding motor vehicles and parts advanced 0.6 percent. The output of mines rose 0.9 percent, and the output of utilities increased 0.1 percent. At 93.4 percent of its 2007 average, total industrial production in July was 7.7 percent above its year-earlier level. The capacity utilization rate for total industry moved up to 74.8 percent, a rate 5.7 percentage points above the rate from a year earlier but 5.8 percentage points below its average from 1972 to 2009.

BUILDING PERMITS
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 565,000. This is 3.1 percent (±2.0%) below the revised June rate of 583,000 and is 3.7 percent (±2.2%) below the July 2009 estimate of 587,000. Single-family authorizations in July were at a rate of 416,000; this is 1.2 percent (±1.2%) below the revised June figure of 421,000. Authorizations of units in buildings with five units or more were at a rate of 129,000 in July.

HOUSING STARTS
Privately-owned housing starts in July were at a seasonally adjusted annual rate of 546,000. This is 1.7 percent (±9.7%) above the revised June estimate of 537,000, but is 7.0 percent (±7.5%) below the July 2009 rate of 587,000. Single-family housing starts in July were at a rate of 432,000; this is 4.2 percent (±8.7%)* below the revised June figure of 451,000. The July rate for units in buildings with five units or more was 95,000.

HOUSING COMPLETIONS
Privately-owned housing completions in July were at a seasonally adjusted annual rate of 587,000. This is 32.8 percent (±6.8%) below the revised June estimate of 874,000 and is 25.4 percent (±7.3%) below the July 2009 rate of 787,000. Single-family housing completions in July were at a rate of 490,000; this is 27.5 percent (±7.6%) below the revised June rate of 676,000. The July rate for units in buildings with five units or more was 91,000.

The Producer Price Index for Finished Goods rose 0.2 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.5-percent decline in June and a 0.3-percent decrease in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 0.4 percent in July and the crude goods index rose 2.7 percent. On an unadjusted basis, prices for finished goods advanced 4.2 percent for the 12 months ended July 2010, their ninth consecutive 12-month increase.

In July, the increase in the index for finished goods can be traced to higher prices for finished goods other than foods and energy, which rose 0.3 percent. Also contributing to the advance in finished goods prices, the index for consumer foods moved up 0.7 percent. By contrast, the finished energy goods index fell 0.9 percent in July.

For the third consecutive week retailers experienced a sales decline despite consumer traffic remaining steady. Overall, for the week ending August 14, retailers saw their weekly sales decline by 1.3 percent, according to the ICSC and Goldman Sachs Weekly Chain Store Sales Index. On a year-over-year basis, the sales index continues to remain positive but slowed to 3.3 percent.

“Although customer traffic is holding up, the pricing environment has weakened and has constricted reported sales gains–especially over the last week,” said Michael Niemira, ICSC director of research and chief economist. “ICSC Research continues to expect monthly sales will grow by about 3.0 percent above year-ago levels for the fiscal month of August,” Niemira added.

Builder confidence in the market for newly built, single-family homes edged down for a third consecutive month in August, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI declined one point to 13, its lowest level since March of 2009.

Builders are expressing the same concerns that they are hearing from consumers right now, particularly the sense that the overall economy and job market aren’t gaining any traction. Meanwhile, many continue to report that problems with inaccurate appraisals, competition from the large number of distressed properties on the market, and tight consumer lending conditions are causing them to lose potential sales.

Today’s report reflects single-family home builders’ concerns about current and future economic conditions and about the increasing hesitancy they are seeing among potential home buyers. It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87 percent of respondents reporting that their market has been negatively impacted by foreclosures. Even so, NAHB continues to project that modest job gains, historically low mortgage rates and pent-up demand will ensure a better housing market in the second half of 2010 than in the first half.

Two out of three of the HMI’s component indexes fell in August. The component gauging current sales conditions declined one point to 14, while the component gauging sales expectations for the next six months declined three points to 18. The component gauging traffic of prospective buyers held unchanged at 10.

Meanwhile, three out of four regions posted HMI declines in August. A six-point decline to 18 in the Northeast partially offset a big gain in that region in the previous month, while the South and West each posted one-point declines to 13 and 8, respectively. The HMI for the Midwest held even at 15 in August.

The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for June 2010. Net foreign purchases of long-term securities were $44.4 billion.

Net foreign purchases of long-term U.S. securities were $33.9 billion. Of this, net purchases by private foreign investors were $16.6 billion, and net purchases by foreign official institutions were $17.3 billion. U.S. residents sold a net $10.4 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $23.5 billion.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $10.6 billion. Foreign holdings of Treasury bills increased $12.4 billion.

Banks' own net dollar-denominated liabilities to foreign residents decreased $40.9 billion. Monthly net TIC flows were negative $6.7 billion. Of this, net foreign private flows were $5.1 billion, and net foreign official flows were negative $11.8 billion.

The Empire State Manufacturing Survey indicates that conditions improved modestly in August for New York manufacturers. The general business conditions index rose 2 points from its July level, to 7.1. The new orders and shipments indexes both dipped below zero for the first time in more than a year, indicating that orders and shipments declined on balance; the unfilled orders index was also negative. The indexes for both prices paid and prices received inched down, while employment indexes were positive and higher than last month. The six-month outlook weakened; though future indexes were generally still positive, many fell in August, with the notable exceptions of the future employment and capital expenditures indexes, which climbed after falling last month.

In a series of supplementary questions, manufacturers were asked about their capital spending plans. Looking ahead to the next six to twelve months, 37 percent of respondents indicated that they expected to increase capital spending relative to its level in the past six to twelve months, while just 13 percent planned reductions. Of those predicting increased capital spending, 27 percent noted that "a considerable fraction" of the increase reflected investment that had been postponed because of the recession; 41 percent of respondents had given this same response in a similar survey back in January.

Another 46 percent of those surveyed this month attributed "some" of the spending increase to the recession. The most commonly cited factors behind increased investment were high expected growth in sales and a need to replace capital goods other than IT (information technology) equipment. The most widely cited factors behind steady or decreased capital investment in the current survey were low expected sales growth, low capacity utilization, and limited need to replace non-IT capital goods.

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers' shipments for June, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,080.5 billion, down 0.6 percent (±0.2%) from May 2010, but up 9.2 percent (±0.5%) from June 2009.

Manufacturers' and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,359.9 billion, up 0.3 percent (±0.1%) from May 2010 and up 0.2 percent (±0.4%)* from June 2009.

The total business inventories/sales ratio based on seasonally adjusted data at the end of June was 1.26. The June 2009 ratio was 1.37.

The outlook for growth in the U.S. economy looks weaker now than it did just three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters see real GDP growing at an annual rate of 2.3 percent this quarter, down from the previous estimate of 3.3 percent. On an annual-average over annual-average basis, the forecasters expect slower real GDP growth in 2010, 2011, and 2013.The forecasters see real GDP growing 2.9 percent in 2010, down from their prediction of 3.3 percent in the last survey. The forecasters predict real GDP will grow 2.7 percent in 2011, 3.6 percent in 2012, and 2.6 percent in 2013.

The downward revision to growth is accompanied by weaker conditions in the labor market. Unemployment is now projected to be an annual average of 9.6 percent in 2010, before falling to 9.2 percent in 2011, 8.2 percent in 2012, and 7.3 percent in 2013. These estimates are higher than the projections in the last survey. On the jobs front, the forecasters have revised downward the growth in jobs over the next four quarters. The forecasters see nonfarm payroll employment growing at a rate of 8,000 jobs per month this quarter and 114,100 jobs per month next quarter. The forecasters’ projections for the annual average level of nonfarm payroll employment suggest job losses at a monthly rate of 45,200 in 2010. Job gains in 2011 are seen averaging 143,800 per month. (These annual-average estimates are computed as the year-to-year change in the annual-average level of nonfarm payroll employment, converted to a monthly rate.)

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $362.7 billion, an increase of 0.4 percent (±0.5%) from the previous month, and 5.5 percent (±0.5%) above July 2009. Total sales for the May through July 2010 period were up 5.9 percent (±0.3%) from the same period a year ago. The May to June 2010 percent change was revised from -0.5 percent (±0.5%) to -0.3 percent (±0.2%).

Retail trade sales were up 0.4 percent (±0.5%)* from June 2010, and 5.9 percent (±0.7%) above last year. Nonstore retailers sales were up 12.6 percent (±2.5%) from July 2009 and gasoline stations sales were up 12.2 percent (±1.8%) from last year.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. (Before seasonal adjustment, the all items index was unchanged for the month.) Over the last 12 months, the index increased 1.2 percent before seasonal adjustment.

The energy index posted its first increase since January and accounted for over two thirds of the seasonally adjusted all items increase. Both the gasoline and household energy indexes turned up in July after a series of declines. The food index, in contrast, declined in July, largely due to the fourth consecutive decline in the fruits and vegetables index.

The index for all items less food and energy rose 0.1 percent in July after increasing 0.2 percent in June. The indexes for shelter, apparel, used cars and trucks, and tobacco all continued to increase in July. In contrast, the indexes for medical care and recreation turned down in July and the indexes for airline fares and household furnishings and operations continued to decline. The 12-month change in the index for all items less food and energy remained at 0.9 percent for the fourth month in a row.

Real average hourly earnings for all employees fell 0.2 percent from June to July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease stems from a 0.2 percent increase in average hourly earnings combined with a 0.3 percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings rose 0.2 percent over the month, as a result of a 0.3 percent increase in the average work week combined with the decrease in real average hourly earnings. Since reaching a recent low in October 2009, real average weekly earnings have risen 2.0 percent.

Real average hourly earnings rose 0.4 percent, seasonally adjusted, from July 2009 to July 2010. A 1.2 percent increase in average weekly hours, combined with the increase in real average hourly earnings resulted in a 1.6 percent increase in real average weekly earnings during this period.

For the week ending July 31, 2010, the DJ-BTMU U.S. Business Barometer experienced a small decline of -0.1 percent. The decline was concentrated, however, in a large drop in demand for electric utilities as a heat wave that plagued much of the country finally broke. All in all, July’s activity picked up markedly from June when the economy seemed to fall flat. Picking through the details we can see that it was the consumption side of the barometer that was responsible for July’s improvement; inflation-adjusted chain store sales remained healthy and mortgage application volume turned around. This is a fundamental change because up until now the consumer had been absent from the U.S. recovery with all of the responsibility for carrying the economy falling on manufacturing’s shoulders. The improvement in consumption mirrors recent comments by Fed Chairman Bernanke that spending “seems likely to pick up pace in coming quarters from its recent modest pace”, citing rising wages as a factor, and indeed wage growth looked much better in July as reported by the BLS in its August 6th payroll report.

U.S. import prices increased 0.2 percent in July, the U.S. Bureau of Labor Statistics reported today, following declines in each of the two previous months. The advance was led by higher fuel prices, which more than offset a second consecutive drop in nonfuel prices. In contrast, export prices decreased in July, falling 0.2 percent after falling 0.7 percent in June.

In the week ending Aug. 7, the advance figure for seasonally adjusted initial claims was 484,000, an increase of 2,000 from the previous week's revised figure of 482,000. The 4-week moving average was 473,500, an increase of 14,250 from the previous week's revised average of 459,250.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending July 31, a decrease of 0.1 percentage point from the prior week's unrevised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending July 31 was 4,452,000, a decrease of 118,000 from the preceding week's revised level of 4,570,000. The 4-week moving average was 4,518,500, a decrease of 64,500 from the preceding week's revised average of 4,583,000.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.018 million.

There were 2.9 million job openings on the last business day of June 2010, the U.S. Bureau of Labor Statistics reported today. The job openings rate was unchanged over the month at 2.2 percent. The hires rate (3.3 percent) and the separations rate (3.3 percent) were little changed. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector by industry and geographic region.

The Nation’s international trade deficit in goods and services increased to $49.9 billion in June from $42.0 billion (revised) in May, as imports increased and exports decreased.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total June exports of $150.5 billion and imports of $200.3 billion resulted in a goods and services deficit of $49.9 billion, up from $42.0 billion in May, revised. June exports were $2.0 billion less than May exports of $152.4 billion. June imports were $5.9 billion more than May imports of $194.4 billion.

In June, the goods deficit increased $7.7 billion from May to $62.0 billion, and the services surplus decreased $0.2 billion to $12.1 billion. Exports of goods decreased $2.3 billion to $105.0 billion, and imports of goods increased $5.4 billion to $167.0 billion. Exports of services increased $0.3 billion to $45.5 billion, and imports of services increased $0.6 billion to $33.3 billion.

The goods and services deficit increased $22.8 billion from June 2009 to June 2010. Exports were up $22.6 billion, or 17.7 percent, and imports were up $45.3 billion, or 29.2 percent.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 6, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 0.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.4 percent compared with the previous week.

The Refinance Index increased 0.6 percent from the previous week and the seasonally adjusted Purchase Index increased 0.3 percent from one week earlier. The unadjusted Purchase Index decreased 0.3 percent compared with the previous week and was 34.1 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 1.2 percent. The four week moving average is up 1.8 percent for the seasonally adjusted Purchase Index, while this average is up 1.0 percent for the Refinance Index.

The refinance share of mortgage activity increased to 78.1 percent of total applications from 78.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent from 5.4 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.57 percent from 4.60 percent, with points decreasing to 0.89 from 0.93 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This was the lowest 30-year contract rate ever recorded in the survey. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.95 percent from 4.03 percent, with points increasing to 1.08 from 1.01 (including the origination fee) for 80 percent LTV loans. This was the lowest 15-year contract rate ever recorded in the survey. The effective rate also decreased from last week. The average contract interest rate for one-year ARMs decreased to 7.00 percent from 7.10 percent, with points increasing to 0.22 from 0.21 (including the origination fee) for 80 percent LTV loans.

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee's ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve's holdings of longer-term securities at their current level was required to support a return to the Committee's policy objectives.

The U.S. Census Bureau announced today that June 2010 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $347.4 billion, down 0.7 percent (+/-0.5%) from the revised May level, but were up 12.9 percent (+/-1.6%) from the June 2009 level. The May preliminary estimate was revised downward $0.8 billion or 0.2 percent. June sales of durable goods were down 0.2 percent (+/-0.9%) from last month, but were up 16.1 percent (+/-1.8%) from a year ago. Sales of lumber and other construction materials were down 3.2 percent from last month, while sales of motor vehicle and motor vehicle parts and supplies were up 2.9 percent. Sales of nondurable goods were down 1.1 percent (+/-1.1%) from last month, but were up 10.3 percent (+/-2.1%) from last year. Sales of petroleum and petroleum products were down 5.5 percent from last month.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $399.2 billion at the end of June, up 0.1 percent (+/-0.4%) from the revised May level, but were down 0.3 percent (+/-1.2%) from a year ago. The May preliminary estimate was revised downward $0.1 billion. End-of-month inventories of durable goods were up 0.3 percent (+/-0.4%) from last month, but were down 2.6 percent (+/-1.4%) from last June. Inventories of electrical and electronic goods were up 2.4 percent from last month. End-of-month inventories of nondurable goods were down 0.2 percent (+/-0.9%) from May, but were up 3.5 percent (+/-2.1%) compared to last June. Inventories of farm product raw materials were down 4.7 percent from last month, while inventories of chemicals and allied products were up 3.5 percent.

The June inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.15. The June 2009 ratio was 1.30.

Nonfarm business sector labor productivity decreased at a 0.9 percent annual rate during the second quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output and hours rising 2.6 percent and 3.6 percent, respectively. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The decline in output per hour follows five quarters of strong productivity growth. The second-quarter gain in hours worked was the largest since the first quarter of 2006 when hours rose 4.1 percent. From the second quarter of 2009 to the second quarter of 2010, both productivity and output increased 3.9 percent; hours were unchanged.

Unit labor costs in nonfarm businesses edged up 0.2 percent in the second quarter of 2010, the result of productivity declining more than hourly compensation. Over the last four quarters, unit labor costs fell 2.8 percent as output per hour increased faster than hourly compensation.

August began where July left off for retailers as sales declined once again this past week. According to the ICSC and Goldman Sachs Weekly Chain Store Sales Index, weekly sales were down by 0.2 percent for the week ending August 7, 2010. On a year-over-year basis, the sales index weakened a bit as yearly sales slowed by 3.7 percent.

“Sales moderated a tad during the first week of the August fiscal month,” said Michael Niemira, ICSC director of research and chief economist. “Back-to-school sales state tax holidays kicked in late in the week for a number of states, which helped to drive customer traffic in those states, but that was not enough to provide a nationwide lift to the sales pace from the prior week. For the fiscal month of August, sales are likely to increase by 3.0 percent as back-to-school demand will drive sales by the end of the month,” Niemira added

The Index of Small Business Optimism lost 0.9 points in July following a sharp decline in June. The persistence of Index readings below 90 is unprecedented in survey history. The performance of the economy is mediocre at best, given the extent of the decline over the past two years. Pent up demand should be immense but it is not triggering a rapid pickup in economic activity. Ninety (90) percent of the decline this month resulted from deterioration in the outlook for business conditions in the next six months. Owners have no confidence that economic policies will “fix” the economy.

The Conference Board Employment Trends Index™ (ETI) increased in July for the 14th month in a row. The index now stands at 97.0, up from June’s figure of 96.7. The index is up 9.8 percent from a year ago.

The growth rate of the Employment Trends Index slowed sharply in the past three months, suggesting that employment growth will remain too weak to keep up with the increase in the working age population. The disappointing employment numbers may indicate that the low levels of household spending and confidence are making businesses more cautious when it comes to hiring.

This month’s increase in the Employment Trends Index was driven by positive contributions from six out of the eight components. The improving indicators were: Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now, Part-Time Workers for Economic Reasons, Job Openings, Industrial Production and Real Manufacturing and Trade Sales.

Consumer credit decreased at an annual rate of 3-1/4 percent in the second quarter. Revolving credit decreased at an annual rate of 9-1/2 percent, and nonrevolving credit was about unchanged. In June, onsumer credit decreased at an annual rate of 3/4 percent, revolving credit decreased at an annual rate of 6-1/2 percent, and onrevolving credit increased at an annual rate of 2-1/2 percent.

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Both the number of unemployed persons, at 14.6 million, and the unemployment rate, at 9.5 percent, were unchanged in July.

For the week ending July 24, 2010, the DJ-BTMU U.S. Business Barometer gained back a tiny bit of the -0.6 percent drop experienced in the prior week. Auto production is still normalizing since the typical seasonal patterns in auto production were interrupted when GM and others decided to forgo the annual summer shutdown period in July, citing the need to meet strong demand. The summer shutdown period occurs around the same time every year when automakers conduct model changeovers. The decision resulted in a seasonally adjusted surge in production early in the month followed by losses later in the month. Outside of auto production the barometer was fairly strong in the latest week with nice gains in inflation-adjusted chain store sales and mortgage applications. A heat wave across much of the country also caused a jump in demand for utilities.

In the week ending July 31, the advance figure for seasonally adjusted initial claims was 479,000, an increase of 19,000 from the previous week's revised figure of 460,000. The 4-week moving average was 458,500, an increase of 5,250 from the previous week's revised average of 453,250.

The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending July 24, unchanged from the prior week's unrevised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending July 24 was 4,537,000, a decrease of 34,000 from the preceding week's revised level of 4,571,000. The 4-week moving average was 4,575,500, an increase of 25,750 from the preceding week's revised average of 4,549,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.028 million.

Economic activity in the non-manufacturing sector grew in July for the seventh consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The NMI (Non-Manufacturing Index) registered 54.3 percent in July, 0.5 percentage point higher than the 53.8 percent registered in June, indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 0.7 percentage point to 57.4 percent, reflecting growth for the eighth consecutive month. The New Orders Index increased 2.3 percentage points to 56.7 percent, and the Employment Index increased 1.2 percentage points to 50.9 percent, reflecting growth after one month of contraction. The Prices Index decreased 1.1 percentage points to 52.7 percent in July, indicating that prices are still increasing but at a slower rate than in June. According to the NMI, 13 non-manufacturing industries reported growth in July. Respondents' comments are mixed. They vary by industry and company, with a tilt toward cautious optimism about business conditions.

Private sector employment increased by 42,000 from June to July on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month.

Today’s ADP National Employment Report shows continued weakness in the jobs market, which is in part caused by the uncertainty in the economy and general business climate. American businesses are on the cusp of recovery, but more effective incentives are needed to encourage business investment resulting in the creation of more jobs. July’s rise in private employment was the sixth consecutive monthly gain. However, over those six months increases have averaged a modest 37,000, with no evidence of acceleration.

July’s ADP Report estimates nonfarm private employment in the service-providing sector rose by 63,000. Employment in the goods-producing sector declined 21,000 during July. Manufacturing employment declined by 6,000, the first decrease in six months. Construction employment dropped 17,000, the smallest decline since November 2007.

Large businesses, defined as those with 500 or more workers, saw employment remain flat and employment among medium-size businesses, defined as those with between 50 and 499 workers increased by 21,000. Employment among small-size businesses, defined as those with fewer than 50 workers, increased by 21,000 in July.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 30, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.4 percent compared with the previous week.

The Refinance Index increased 1.3 percent from the previous week. The seasonally adjusted Purchase Index increased 1.5 percent from one week earlier. This third straight weekly increase in the Purchase Index was driven by government purchase applications which increased 3.4 percent from last week, while conventional purchase applications were essentially flat. The unadjusted Purchase Index increased 1.5 percent compared with the previous week, was up 7.1 percent relative to four weeks ago, but was 33.7 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 0.3 percent. The four week moving average is up 0.9 percent for the seasonally adjusted Purchase Index, while this average is up 0.2 percent for the Refinance Index.

The refinance share of mortgage activity remained flat at 78.0 percent of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4 percent from 5.7 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.60 percent from 4.69 percent, with points increasing to 0.93 from 0.88 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.03 percent from 4.12 percent, with points increasing to 1.01 from 0.83 (including the origination fee) for 80 percent LTV loans. This is the lowest 15-year contract rate ever recorded in the survey. The effective rate also decreased from last week. The average contract interest rate for one-year ARMs decreased to 7.10 percent from 7.15 percent, with points decreasing to 0.21 from 0.23 (including the origination fee) for 80 percent LTV loans.

New orders for manufactured goods in June, down two consecutive months, decreased $5.1 billion or 1.2 percent to $406.4 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent May decrease. Excluding transportation, new orders decreased 1.1 percent.

Shipments, also down two consecutive months, decreased $3.5 billion or 0.8 percent to $411.2 billion. This followed a 1.8 percent May decrease.

Unfilled orders, down slightly following two consecutive monthly increases, decreased $0.3 billion to $802.8 billion. This followed a 0.3 percent May increase. The unfilled orders-to-shipments ratio was 5.60, down from 5.61 in May.

Inventories, down two consecutive months, decreased $0.5 billion or 0.1 percent to $520.0 billion. This followed a 0.4 percent May decrease. The inventories-to-shipments ratio was unchanged at 1.26.

Pending home sales edged down with near-term sales expected to be notably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, declined 2.6 percent to 75.7 based on contracts signed in June from an upwardly revised level of 77.7 in May, and is 18.6 percent below June 2009 when it was 93.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said lower home sales are expected in the short term. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” he said. “Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”

Yun expects mortgage interest rates to remain historically low for the balance of the year, with very modest growth in employment. “We really need to see stronger job creation to have a meaningful recovery in the housing markets,” he added.

The PHSI in the Northeast dropped 12.2 percent to 58.8 in June and is 25.4 percent lower than June 2009. In the Midwest the index fell 9.5 percent to 64.1 and is 27.8 percent lower than a year ago. Pending home sales in the South rose 3.7 percent to an index of 85.8, but are 13.3 percent below June 2009. In the West the index slipped 0.2 percent to 85.1 but is 14.2 percent below a year ago.

Personal income increased $3.0 billion, or less than 0.1 percent, and disposable personal income (DPI) increased $5.1 billion, or less than 0.1 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $2.9 billion, or less than 0.1 percent. In May, personal income increased $40.5 billion, or 0.3 percent, DPI increased $36.9 billion, or 0.3 percent, and PCE increased $8.6 billion, or 0.1 percent, based on revised estimates.

Real disposable income increased 0.2 percent in June, compared with an increase of 0.4 percent in May. Real PCE increased 0.1 percent, compared with an increase of 0.2 percent.

With the fiscal month of July coming to a close this past Saturday, retailers saw their sales decline a bit as they are in the middle to two selling periods summer clearance and back-to-school. As a result, weekly retail sales were a tad softer and fell slightly by 0.1 percent according to the ICSC and Goldman Sachs Weekly Chain Store Sales Snapshot. On a year-over-year basis, the sales index improved and rose by 3.9 percent.

"The retail fiscal month ended on a slightly softer note as retailers are in a shoulder period between summer clearance and back-to-school," said Michael Niemira, ICSC director of research and chief economist. "The lingering hot weather continues to be a negative for back-to-school and fall merchandise demand. For the fiscal month of July sales are likely to increase between 3.0 to 4.0 percent with increased unevenness across the industry," Niemira added.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2010 was estimated at a seasonally adjusted annual rate of $836.0 billion, 0.1 percent (±1.6%)* above the revised May estimate of $834.8 billion. The June figure is 7.9 percent (±1.6%) below the June 2009 estimate of $907.7 billion.

During the first 6 months of this year, construction spending amounted to $389.6 billion, 11.2 percent (±1.1%) below the $438.7 billion for the same period in 2009.

Economic activity in the manufacturing sector expanded in July for the 12th consecutive month, and the overall economy grew for the 15th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Manufacturing continued to grow during July, but at a slightly slower rate than in June. Employment, supplier deliveries and inventories improved during the month and reduced the impact of a month-over-month deceleration in new orders and production. July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries. The prices that manufacturers paid for their inputs were slightly higher but stable, with only a few items on the short supply list.

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER rebounded, marking a tenth month of growth.

BUSINESS ACTIVITY:
Five of seven Business Activity indexes grew in July, while all seven reached positive territory;
EMPLOYMENT continued June’s growth;
PRODUCTION, NEW ORDERS, ORDER BACKLOGS, and INVENTORIES marked increases;

BUYING POLICY:
Lead times for MRO SUPPLIES reached the highest level in three decades.

Confidence tumbled in July due to heightened concerns about personal financial prospects as well as the overall economic outlook. Income and job prospects were extraordinarily weak and those bleak prospects have made consumers more cautious spenders. Rather than the economy gaining strength, consumers now anticipate a slowing pace of growth, and rather than economic policies acting to improve prospects, the policies of the Obama administration have increased economic uncertainty among consumers. Overall, the data suggest that the current slowdown in spending is likely to persist well into 2011 as it reflects a widespread and general realignment of job and wage expectations. While a double dip is still unlikely, it now has a non-ignorable 25% probability.

Grim Outlook for Personal Finances
Nearly a year after the economic recovery began, the financial situation of consumers has continued to weaken mainly due to the loss of jobs and work hours as well as stagnating incomes. Half of all consumers reported that their finances had worsened this July as well as in last July’s survey. The smallest proportion ever recorded in the sixty year history of the surveys anticipated an increase in their household’s income during the year ahead. Moreover, eight-in-ten consumers expected no improvement in the unemployment rate during the year ahead.

Consumers sensed a slowdown in economic growth. The backslide meant that six-in-ten consumers judged prospects for the economy unfavorably, and just one-in-three consumers anticipated uninterrupted economic growth during the next five years. Confidence in economic policies fell to the lowest level in the July survey since the start of the Obama administration. While the effectiveness of Obama’s policies in creating jobs remained the top concern, the rising level of federal debt and prospects for higher future taxes have gained a foothold as well.

The Sentiment Index was 67.8 in the July 2010 survey, down sharply from the 76.0 in June, erasing the entire gain since 66.0 was recorded last July. The Expectations Index, a component of the Index of Leading Indicators, declined by 10.7% in July, falling to the lowest level since March of 2009. The Current Conditions Index also posted a double digit decline, but it remained above last year’s 70.5.

Scarce jobs and stagnating incomes have been the top concerns of consumers for some time. What changed in July was their recognition that the anticipated slowdown in the economy will keep jobs scarce for some time, while their uncertainties about future prospects were increased by the policies of the Obama administration. Rather than itching to resume old spending habits, consumers have begun to actively embrace a more defensive outlook, making them more likely to further pare their debt and increase saving and reserve funds. This new defensive posture could result in even slower economic growth and fewer jobs in the future.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.

Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending June 2010, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.4 percent while benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent.

Tenth District manufacturing activity rebounded moderately in July, and expectations for future production remained positive. However, plans for future hiring and capital spending were essentially flat. Price indexes were mostly unchanged.

The net percentage of firms reporting month-over-month increases in production in July was 14, up from 3 in June and 5 in May. The increase in production occurred among both durable and nondurable goods producing plants, with the exception of aircraft producers, who reported a slight downturn. Other month-over-month indicators generally increased as well. The shipments, new orders, and order backlog indexes continued to climb higher, and the employment index moved back into positive territory. In contrast, the new orders for exports index decreased from 3 to 0, and the supplier delivery time index also fell for the second straight month. The raw materials inventory index inched up from -4 to -1, while the finished goods inventory index edged down.

For the week ending July 17, 2010, the DJ-BTMU U.S. Business Barometer reversed course by dropping -0.6 percent after jumping by +0.9 percent in the prior week. The production side of the barometer has been on a roller coaster ride as typical seasonal patterns in auto production were interrupted when GM and others decided to forgo the annual summer shutdown period that had been scheduled for June 28 through July 9, citing the need to meet strong demand. The summer shutdown period occurs around the same time every year when automakers conduct model changeovers. The move also caused weekly initial jobless claims to be unusually volatile in July.

In the week ending July 24, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 11,000 from the previous week's revised figure of 468,000. The 4-week moving average was 452,500, a decrease of 4,500 from the previous week's revised average of 457,000.

The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending July 17, an increase of 0.1 percentage point from the prior week's unrevised rate of 3.5 percent.

The advance number for seasonally adjusted insured unemployment during the week ending July 17 was 4,565,000, an increase of 81,000 from the preceding week's revised level of 4,484,000. The 4-week moving average was 4,548,250, a decrease of 18,000 from the preceding week's revised average of 4,566,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.037 million.

Economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City Districts reported that the level of economic activity generally held steady. Among those Districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two Districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently.

Manufacturing activity continued to expand in most Districts, although several Districts reported that activity had slowed or leveled off during the reporting period. Districts also noted improved conditions in the services sector. The five Districts reporting on transportation noted increased activity. Tourism activity also increased across the Districts, although the Atlanta District noted concerns about decreased leisure travel to the Gulf Coast. Retail sales reports generally indicated a continued rise in spending, and several Districts noted that necessities continued to be strong sellers, while big-ticket items moved more slowly. However, most Districts that reported on auto sales noted declines in recent weeks. Activity in residential real estate markets was sluggish in most Districts after the expiration of the April 30 deadline for the homebuyer tax credit. Commercial real estate markets, especially construction, remained weak. Banking conditions varied across the Districts, with some Districts noting soft or decreased overall loan demand; credit standards remained tight in most reporting Districts. Recent rains had mixed effects on crop conditions, while activity in the natural resources sector increased. Overall labor market conditions improved modestly across the Districts, with several reports of temporary hiring. Consumer prices of goods and services held steady in most reporting Districts. Input prices also held largely steady, with only a few reports of cost increases. Wage pressures continued to be contained on the whole.

New orders for manufactured durable goods in June decreased $2.0 billion or 1.0 percent to $190.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 0.8 percent May decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 0.7 percent. Transportation equipment, down four of the last five months, had the largest decrease, $1.1 billion or 2.4 percent to $45.9 billion. This was due to nondefense aircraft and parts, which decreased $1.8 billion.

Shipments of manufactured durable goods in June, down two consecutive months, decreased $0.7 billion or 0.3 percent to $195.0 billion. This followed a 0.7 percent May decrease. Computers and electronic products, down four of the last five months, had the largest decrease, $1.3 billion or 4.1 percent to $31.3 billion.

Unfilled orders for manufactured durable goods in June, down following two consecutive monthly increases, decreased $0.1 billion to $802.9 billion. This followed a 0.3 percent May increase. Transportation equipment, down three of the last four months, had the largest decrease, $2.7 billion or 0.6 percent to $476.8 billion.

Inventories of manufactured durable goods in June, up six consecutive months, increased $2.8 billion or 0.9 percent to $308.2 billion. This followed a 1.1 percent May increase. Transportation equipment, up six consecutive months, had the largest increase, $0.8 billion or 1.1 percent to $80.0 billion.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 23, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 4.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4.2 percent compared with the previous week.

The Refinance Index decreased 5.9 percent from the previous week. The seasonally adjusted Purchase Index increased 2.0 percent from one week earlier and is the highest Purchase Index observed in the survey since the end of June. The unadjusted Purchase Index increased 2.4 percent compared with the previous week and was 34.3 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 1.6 percent. The four week moving average is flat for the seasonally adjusted Purchase Index, while this average is up 2.0 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 78.0 percent of total applications from 79.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.7 percent from 5.2 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.59 percent, with points decreasing to 0.88 from 1.04 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.12 percent from 4.05 percent, with points decreasing to 0.83 from 0.88 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week. The average contract interest rate for one-year ARMs decreased to 7.15 percent from 7.17 percent, with points decreasing to 0.23 from 0.24 (including the origination fee) for 80 percent LTV loans.

The Chicago Fed Midwest Manufacturing Index (CFMMI) decreased 0.5% in June, to a seasonally adjusted level of 79.4 (2007 = 100). Revised data show the index rose 1.7% in May to 79.7. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) decreased 0.3% in June. Regional output in June rose 13.2% from a year earlier, and national output increased 8.9%.

Two of the four regional industry sectors increased in June:
• Regional steel sector output grew 0.9%;
• Regional machinery sector production went up 0.6%;
• Regional auto sector production edged down 0.2%; and
• Regional resource sector output declined 1.4%.

The Conference Board Consumer Confidence Index® which had declined sharply in June, retreated further in July. The Index now stands at 50.4 (1985=100), down from 54.3 in June. The Present Situation Index decreased to 26.1 from 26.8. The Expectations Index declined to 66.6 from 72.7 last month.

Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.

Consumers’ assessment of current conditions was more downbeat in July. Those saying conditions are “bad” increased to 43.6 percent from 41.0 percent, however, those saying business conditions are “good” increased to 9.0 percent from 8.4 percent. Consumers’ appraisal of the job market was also more negative. Those claiming jobs are “hard to get” increased to 45.8 percent from 43.5 percent, while those saying jobs are “plentiful” remained unchanged at 4.3 percent.

Consumers’ short-term outlook also deteriorated further in July. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 15.9 percent from 17.1 percent, while those anticipating conditions will worsen rose to 15.7 percent from 13.9 percent.

Consumers were also more pessimistic about future job prospects. Those expecting more jobs in the months ahead decreased to 14.3 percent from 16.2 percent, while those anticipating fewer jobs increased to 21.1 percent from 20.1 percent. The proportion of consumers expecting an increase in their incomes declined to 10.0 percent from 10.6 percent

In July, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — declined seven points to 16 from June's reading of 23. Among the index's components, shipments lost nine points to 22, new orders dropped 12 points to finish at 13, while the jobs index moved up six points to 15.

Other indicators also suggested somewhat slower activity. The backlog of orders measure moved down two points to 1, and the index for capacity utilization fell eight points to 13. The delivery times index retreated 13 points to end at 4. Our gauges for inventories were somewhat higher in July. The finished goods inventory index edged up one point to 8, and the raw materials inventory index moved up seven points to finish at 11.

Data through May 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the annual growth rates in 15 of the 20 MSAs and the 10- and 20-City Composites improved in May compared to those reported for April 2010. The 10-City Composite is up 5.4% and the 20-City Composite is up 4.6% from where they were in May 2009. While 19 MSAs and both Composites reported positive monthly changes in May over April, only 12 of the MSAs and the two Composites saw better month-over-month growth rates in May than those reported in April.

The annual returns of the 10-City and 20-City Composite Home Price Indices show increases of 5.4% and 4.6%, respectively, in May 2010 compared to the same month last year. While still positive, Boston, Charlotte, Cleveland, Dallas and Denver reported weaker annual growth rates compared to their reports from last month. Seven of the 20 MSAs are still reporting negative annual growth rates with May’s data.

While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery. Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites have improved between 5 and 6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat.

The May 2010 data for 15 of the 20 MSAs and the two Composites show an improvement in annual returns compared to April’s report. With the month-over-month data, while 19 of the 20 MSAs and the two Composites were positive, we are in a strong seasonal period for home prices, so that was largely expected. In addition, there may still be some residual impact from the homebuyers’ tax credit, since they affect any purchase that closes through June 30th 2010. We need to watch where the housing markets will go after these temporary stimuli go away. June’s existing and new home sales and housing starts data do not show much real improvement in those statistics either. It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy.

As of May 2010, average home prices across the United States are back to the levels where they were in the autumn of 2003. Measured from June/July 2006 through May 2010, the peak-to-date figures for the 10-City Composite and 20-City Composite are -29.6% and -29.1%, respectively.

In May, Las Vegas posted a new index low as measured by the current housing cycle, where it peaked in August 2006. The peak-to-trough figure is -56.4%, with that market generally returning any gains it had posted since 2000. Detroit is the only market that is worse off. Its index is at levels last seen in late 1994, indicating that any appreciation in value during the past 15 years is now gone.

Nineteen of the 20 MSAs and both Composites showed month-over-month increases in May. The 10- and 20-City Composites were up 1.2% and 1.3%, respectively. San Diego continues to improve, with its 13th consecutive positive monthly increase. Miami and New York, the two markets that had declined in April, posted positive monthly changes in May 2010, increasing 0.9% and 0.8%, respectively. Las Vegas on the other hand, showed a drop in index level by 0.5% in May as compared to April 2010.

The ICSC-Goldman Sachs (ICSC-GS) chain store sales index for the week ending July 24 again rose on a week-over-week basis up 0.6%. On a year-over-year seasonally-adjusted basis, the pace of spending moderated to 3.8% in the latest week. Easy comparisons continue to lift sales — though not as much as the prior weekwhile the abnormally hot weather helped drove some customer traffic in regions. But the retail industry is in a transition period between summer clearance and back-to-school, which makes it difficult for retailers to leverage the hot-weather for sales.

Back-to-school will kick in during early August as a wave of states have their state sales tax holidays to help consumers as they head back to school. (Mississippi will be the first state with its sales tax holiday — July 30-31 — on clothing and footwear to usher in the back-to-school state tax holidays. A majority of states have their sales tax holidays beginning on or about August 6.) According to Weather Trends International (WTI) unseasonably hot weather lingered for its ninth consecutive week “with temperatures trending both much hotter than last year and above average for the nation as a whole with the month on pace to be the hottest in 115+ years.” Lingering hot weather may likely delay the launch of the consumers’ back-to-school spending. For the latest week, WTI also reported that the national temperature average was +4.2F warmer than last year and +2.5F above its long-term average. Meanwhile, gasoline prices have begun to edge up again. According to the U.S. Energy Information Administration the average price of a gallon of regular-grade gasoline at the pump rose to $2.749 — up about three cents from the prior week and nearly 10% higher than the same week of the prior year.

Texas factory activity rebounded slightly in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key indicator of state manufacturing conditions, rose from –2 to 5, suggesting output expanded slightly in July after contracting in June.

Several indexes for factory activity continued to fall in July. The new orders and growth rate of orders indexes pushed deeper into negative territory, indicating a further contraction of demand. The index for capacity utilization dipped to –1, its first negative reading in nine months. The shipments index stabilized in July, rising from –9 to –1, with nearly equal shares of respondents noting an increase or decrease.

The general business activity index fell sharply to –21, its lowest level since July 2009. Thirty-one percent of firms reported a worsening of activity, up from 22 percent in June. The company outlook index also fell to a 12-month low, as only 13 percent of manufacturers said their outlook had improved over the previous month, compared with 24 percent who said it had worsened.

The employment index edged up and was positive for the fifth consecutive month, with 20 percent of firms reporting new hires. The wages and benefits index also rose, but overall wage pressures remained minimal, as 90 percent of respondents noted no change in compensation costs. The hours worked index dipped into negative territory, with 23 percent of manufacturers reporting a decrease in the average employee workweek.

The index for raw materials prices fell from 30 in June to 12 in July, suggesting the upward pressure on raw materials prices continued to moderate. Two-thirds of manufacturers reported no change in input costs, the highest share in six months. Downward pressure on finished goods prices intensified again in July, driving the index further into negative territory. The future raw materials prices index remained positive but slid to its lowest level in a year, while the future finished goods prices index fell to zero.

Optimism regarding firms’ six-month outlook continued to wane in July, although the indexes remained positive. The future production, capacity utilization and shipments indexes fell again this month, while the future indexes for new orders and growth rate of orders inched up but remained below the levels seen earlier this year. The future general business activity index decreased but remained in positive territory. The future company outlook index moved down from 22 to 16, with 32 percent of respondents expecting improved conditions six months from now.

Sales of new single-family houses in June 2010 were at a seasonally adjusted annual rate of 330,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 23.6 percent (±15.3%) above the revised May rate of 267,000, but is 16.7 percent (±10.9%) below the June 2009 estimate of 396,000.

The median sales price of new houses sold in June 2010 was $213,400; the average sales price was $242,900. The seasonally adjusted estimate of new houses for sale at the end of June was 210,000. This represents a supply of 7.6 months at the current sales rate.

Led by deterioration in production- and employment-related indicators, the Chicago Fed National Activity Index declined to –0.63 in June, down from +0.31 in May. Three of the four broad categories of indicators that make up the index made negative contributions in June, while the sales, orders, and inventories category made the lone positive contribution.

The index’s three-month moving average, CFNAI-MA3, decreased to –0.05 in June from +0.31 in May. The CFNAI-MA3 suggests that growth in national economic activity returned very close to its historical trend in June after reaching its highest level since March 2006 in May. With regard to inflation, it indicates subdued inflationary pressure from economic activity over the coming year.

Production-related indicators made a contribution of –0.11 to the index in June, down from +0.61 in May. Industrial production edged up 0.1 percent in June after increasing 1.3 percent in May; manufacturing production declined 0.4 percent in June after increasing 1.0 percent in the previous month.

Employers took 1,647 mass layoff actions in June that resulted in the separation of 145,538 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer. The number of mass layoff events in June increased by 235 from the prior month, and the number of associated initial claims increased by 9,749. In June, 298 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 29,384 initial claims.

During the 31 months from December 2007 through June 2010, the total number of mass layoff events (seasonally adjusted) was 61,852, and the associated number of initial claims was 6,213,880. (December 2007 was the start of a recession as designated by the National Bureau of Economic Research.)

The national unemployment rate was 9.5 percent in June, seasonally adjusted, down from 9.7 percent the prior month and unchanged from a year earlier. In June, total nonfarm payroll employment decreased by 125,000 over the month and 170,000 from a year earlier.

With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of Realtors®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.

Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said.

“Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74 percent in June from 4.89 percent in May; the rate was 5.42 percent in June 2009.

The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.