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Pending House Sales Decline While Home Price Index Rises

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WASHINGTON (7/30/13)--Fewer Americans signed contracts to buy existing homes in June, an indication that the rising prices in the mortgage market are beginning to affect the housing market, according to the National Association of Realtors (Bloomberg.com. and Moody's Economy.com July 29).
 
The Pending Home Sales Index declined  0.4% to 110.9,  seasonally adjusted,  in June after climbing in May to the index's highest level since December 2006.  The median forecast of 40 economists surveyed by Bloomberg was for a 1% decline.  However, the index is still up 10.9% from its level in June 2012, with the housing recovery is still on track, said Bloomberg.
 
The South recorded the largest decline, falling 2.1% from May, and the Midwest declined 1%. The Northeast recorded no change from the previous month, and the West was the only region to mark increasing sales, which were up 3.3% from May, said Moody's.
 
Moody's noted that an improving employment market, strong investor demand and increasing confidence among homebuyers will "outweigh the negative impact of higher interest rates in coming quarters."

Fed Expected To Maintain Asset Purchase Policy This Week

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WASHINGTON (7/30/13)--Fed policymakers meeting today and Wednesday are expected to stay the course on monetary policy, which means no change is expected in either the federal target funds rate or the Fed's quantitative easing (QE3) policy of buying bond assets (Bloomberg.com).
 
The Federal Open Market Committee (FOMC), the Federal Reserve's monetary policymaking body, probably will maintain its benchmark federal funds interest rate at 0.25% when it makes its statement on Wednesday, according to economists surveyed by Bloomberg.  Economists also predict that the FOMC won't begin to reduce its $85 billion a month bond purchasing program, dubbed QE3, until September.
 
The Fed said after its last meeting that economic data--namely the unemployment rate and the inflation rate--will determine when it moves its forward guidance on interest or its asset purchases policy.
 
This week's meeting is the last FOMC meeting before September, the month many economists expect the Fed to announce it is tapering off the bond asset purchasing program.
 
Although no changes are predicted in this week's policy, the FOMC's commentary on the state of the economy could be significant, said Brian Gardner, senior vice president of Washington Research at Keefe, Bruyett & Woods. Any change in the committee's description of the economy may yield clues about when the tapering process will begin, he told MoneyMorning.com. (July 29).

Consumer Sentiment Up To Highest Level Since July 2007

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WASHINGTON (7/29/13)--U.S. consumer confidence in the economy unexpectedly climbed in July to the highest level in six years, according to the Thomson Reuters/ University of Michigan final index of consumer sentiment.
 
The index increased in July to 85.1 from a June reading of 84.1. The increase was attributed to expectations for inflation leveling off despite a recent jump in energy prices and consumers feeling more upbeat about the current economic climate even though they anticipate a slower growth rate in the year ahead (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com July 26).
 
Economists had anticipated the final July reading to remain little changed at 84, according to a Dow Jones Newswire survey.
 
Higher property values and stock portfolios are increasing personal wealth, buoying consumer confidence and elevating consumer spending, Bloomberg said. 
 
Also, the negative effects of higher payroll taxes are being mitigated by stronger personal finances and job gains that have risen from the second half of 2012, Bloomberg added.
 
The consumer confidence level, the highest since July 2007, suggests continued growth in consumer spending for the year ahead, Richard Curtin, director of the index's survey, said in a statement, the Times reported.
 

Jobless Claims Rise, But Four-Week Average Drops

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WASHINGTON (7/26/13)--Initial U.S. claims for unemployment benefits increased last week, but the four-week moving average of claims--which smooths out volatility--fell.
 
With annual automobile-plant temporary shutdowns and school closings this time of year continuing to impact jobs, last week's numbers indicate the recovery of the labor market remains uneven (The Wall Street Journal and Bloomberg.com July 25).
 
Last week's claims rose 7,000--to 343,000--for the week ended July 20 from the prior week, while the four-week moving average fell 1,250--to 345,250, the Labor Department said Thursday.
 
The job market is improving because job cuts are slowing and payrolls are rising--which enhances the prospects for accelerated consumer spending in the second half of 2013, Bloomberg said. 
 
The jobless-claims trend has been steady, Sean Incremona, a senior economist at 4Cast Inc. in New York, told Bloomberg.
 
Although the improvement has been sustained since late 2012, there hasn't been much recent momentum to add to that gain, he added.

Mortgage Applications Drop, But New Home Sales Rise

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WASHINGTON (7/25/13)--Although U.S. mortgage applications decreased last week, new home sales in June rose 8.3% nationally. Sales increased to a five-year high--bolstering an important sector that is propelling the economic recovery (The Wall Street Journal July 24). 
 
Sales increased to a seasonally adjusted rate of 497,000--the highest level since May 2008--the Commerce Department said Wednesday. However, rising mortgage rates and home prices could slow sales in the coming months, the Journal said.
 
Mortgage applications decreased 1.2% from a week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending July 19.

The Market Composite Index, a measure of mortgage loan application volume, declined 1.2% seasonally adjusted from one week earlier. On an unadjusted basis, the index dropped 1% from the previous week. The Refinance Index fell 1%, driven by a 12% drop in the government refinance index while the conventional refinance index rose by 2%.

The refinance index is at its lowest level since July 2011. The adjustable-rate mortgage share of activity decreased to 7% of total applications. To see the MBA release, use the link.

Housing Prices Rose 7.3% Through May

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WASHINGTON (7/24/13)--With home-buyers competing for a limited pool of listings, U.S. house prices climbed 7.3% in the year through May, according to the Federal Housing Finance Agency (FHFA).
 
Prices rose 0.7% from April on a seasonally adjusted basis, FHFA said in a report released Tuesday (Bloomberg.com and Moody's Economy.com July 23).     
 
Economists had forecast a 0.8% gain in May, said Bloomberg data.
 
An improving employment environment is attracting buyers to the market for a constricted home inventory--which is causing real estate values to rise, Bloomberg said.  
 
Also, U.S. home values increased 2.4% in the second quarter from the first quarter--the largest gain since 2004, according to a separate report issued Tuesday by Seattle based property-research firm Zillow Inc.
 
Higher mortgage rates and a limited supply of homes may be holding back home purchases, Bloomberg said.

Sales of Existing Homes Slip In June

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WASHINGTON (7/23/13)--U.S. existing-home sales declined in June, but have stayed well above year-ago levels for the past two years. Also, the median price shows seven consecutive months of double-digit year-over-year increases, according to the National Association of Realtors (NAR).
 
Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--dipped 1.2% to a seasonally adjusted annual rate of 5.08 million in June from a downwardly revised 5.14 million in May. However, they are 15.2% higher than the 4.41 million-unit level in June 2012.   
 
There is enough momentum in the market, even with higher interest rates, said Lawrence Yun, NAR chief economist. "Affordability conditions remain favorable in most of the country, and we're still dealing with a large pent-up demand," he added. "However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market."    
 
To read the NAR release, use the link.

Moody's Revises U.S. Outlook On Deficit To Stable

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NEW YORK (7/22/13)--Moody's Investors Service has upwardly revised the U.S.'s Aaa credit-rating outlook to stable from negative.
 
The move was made because the federal government's deficit--or "debt trajectory"--has stabilized due to narrowing budget deficits (Bloomberg.com July 19).
 
"While moderate," growth in the economy is progressing in an environment in which the government has instituted spending reductions and tax increases, the New York-based Moody's said Friday in a statement.
 
The negative outlook was first assigned in August 2011 when Moody's warned it could downgrade the U.S. for the first time because of concerns the economy was weakening and fiscal discipline was dissipating, Bloomberg said.
 
This year's fiscal deficit will be the smallest since 2008. The economy is predicted to grow in 2014 at the fastest pace since 2006, said the Congressional Budget Office (CBO).
 
The U.S. budget deficit likely will fall to roughly 2.1% of gross domestic product in 2015 from 4% this year and 7% in 2012, owing to increased tax revenue and less spending, said the CBO.

Jobless Claims Drop

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WASHINGTON (7/19/13)--Initial U.S. claims for unemployment benefits fell 24,000 last week, to a seasonally adjusted 334,000--the lowest level in four months, the Labor Department said Thursday.
 
The decline, which resulted in the lowest reading since March, is due in part to an ebbing of the effects of seasonal auto-plant shutdowns. It is a positive development for hiring and the most recent indication of steady improvement in the labor market (The New York Times, The Wall Street Journal, Bloomberg.com and Moody's Economy.com July 18).     
 
Because many factories shut down to retool in July, the month's jobless-claims readings can be volatile, the Times said.  However, a four-week moving average of claims--which smooths out weekly volatility--still dropped 5,250 last week from the previous week.
 
Continuing claims for unemployment benefits for the week ended July 6 increased 91,000--to 3.11 million.

Key U.S. 30-Year Mortgage Rate Declines

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WASHINGTON (7/19/13)--The benchmark rate for U.S. 30-year fixed-rate mortgages dropped to an average of 4.37% this week from a two-year high of 4.51% the previous week, Freddie Mac said Thursday.
 
"Fixed-mortgage rates fell as Federal Reserve Chairman  [Ben] Bernanke helped ease market concerns about the Fed reducing its bond purchases ... indications of a slowing in the economic recovery also placed downward pressure on mortgage rates," said Frank Nothaft, Freddie Mac's chief economist (MarketWatch July 18).
 
Since early May and including this week's decline, the average rate for the 30-year fixed-rate mortgage has risen slightly more than one percentage point, sparking concern about the effect of higher rates on the recovery of the housing market, MarketWatch said.  
 
Also, the 15-year, fixed-rate mortgage fell to 3.41% in the week ended July 18 from 3.53% the previous week, Freddie said Thursday.
 
In a related matter, Bernanke said Wednesday before a congressional panel that the Fed's proposed timeline for scaling back its $85 billion-a-month bond-buying program has not been finalized (MarketWatch July 17). 
 
"I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course," Bernanke told the House Financial Services Committee.
 
If the economy progresses as forecast, the Fed anticipates it would taper the pace of the $85 billion asset-purchase plan "later this year" and end it "around midyear" in 2014, Bernanke said, repeating remarks he made in mid-June, MarketWatch said.

Economy Increasing At 'Modest To Moderate Pace,' Says Beige Book

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WASHINGTON (7/18/13)--The U.S. economy continued to increase at a "modest to moderate pace" in the past few weeks, according the Federal Reserve's Beige Book, an informal scan of economic conditions in the 12 Fed Districts.

The increase was bolstered by expansions in a number of industries, including manufacturing, transportation, tourism,  housing and commercial real estate markets, as well as increases in consumer spending and auto sales, said the Beige Book, which was compiled by the Federal Reserve Bank of St. Louis and released Wednesday afternoon.
 
Reports on banking conditions were "generally positive across the districts," the book said. "Overall loan demand increased modestly across most reporting districts. New York district bankers reported mixed but generally steady loan demand. Some bankers in the Cleveland, Chicago, and Dallas districts noted competitive pressures to reduce loan pricing. Bankers in the Philadelphia, Richmond, Cleveland, Atlanta, and Chicago districts noted a shift toward new home mortgages and away from financing  (which was led, in part, by increases in interest rates)," said the report.

Credit quality reports indicated "slight to moderate improvements across the reporting districts," said the Fed. New York, Philadelphia, Kansas City and Dallas reported improvements. Credit standards remained largely unchanged, but Atlanta and Philadelphia reported increased competition to ease credit standards.
 
Manufacturing expanded in most districts since the last report, with increases in new orders, shipments or production. Activity in nonfinancial services was either stable or had increased in most reporting districts. Transportation also was stable or increased in most districts.

Overall consumer spending increased in most districts, with New York reporting softer retail sales in May and June. New York, Cleveland, Atlanta and St. Louis indicated sales in their districts were not meeting expectations. Weather conditions were unfavorable for retail activity in several districts.

Most districts reported increased auto sales, with strong sales in Philadelphia, Richmond, Atlanta, Chicago and San Francisco.  Dallas reported slightly softer sales while the remainder of the districts indicated steady to moderate sales growth.

Tourism remained strong, but some districts--Boston, Philadelphia and Minneapolis--reported bad weather had softened tourism in their districts.

All districts reporting said that residential real estate and construction activity increased at a "moderate to strong pace," the report said.

Hiring stayed steady or rose at a measured pace in most of the districts; however, some noticed a reluctance by employers to hire permanent or full-time workers.  Wage pressures were generally contained, although some districts saw "modest or moderate wage growth." Price pressures for input and final goods were stable or modest.

To read the full report, use the link.

Housing Starts Drop 9.9% In June

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WASHINGTON (7/18/13)--Housing starts and permits for future home construction in the U.S. unexpectedly dropped in June--with starts at their lowest level in 10 months, the Commerce Department said Wednesday. 
 
The decline indicated an unsettled housing market--with rising mortgage rates potentially dampening new activity--and a significant slowdown in second-quarter U.S economic activity (The New York Times, Bloomberg.com, The Wall Street Journal and Moody's Economy.com July 17).
 
Starts dropped 9.9% to a seasonally adjusted annual rate of 836,000 units--the lowest level since August 2012. Economists had forecast a gain up to a 959,000-unit rate last month, according to a Reuters poll.
 
Also, permits to build homes decreased 7.5% in June to a 911,000-unit pace. Economists had forecast a 1.1 million-unit pace, the Times said.
 
Last month's decline was spearheaded by a downward slide in multifamily construction projects--which sometimes are volatile, Bloomberg said.
 
There will be setbacks as construction gears up, but June's slump should not be of immediate concern because the housing market will drive economic growth, Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLP in Philadelphia, told Bloomberg.

Homebuilders' Confidence Up To Highest Since 2006

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WASHINGTON (7/17/13)--U.S. homebuilder confidence in July rose to its highest level since January 2006 because home-building companies became more positive about their sales prospects, said the National Association of Home Builders (NAHB).
 
The NAHB/Wells Fargo index of builder sentiment increased six points--to 57--this month, trumping consensus expectations of a slight decline, NAHB reported Tuesday (Bloomberg.com and Moody's Economy.com July 16). Readings above 50 indicate more respondents said conditions were good rather than bad.
 
A job market that is strengthening, limited inventories and mortgage rates that still hover near historic lows are helping builders while the housing market is adding to economic growth this year, Bloomberg said.

Inflation Advances With Consumer Price Index Gain

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WASHINGTON (7/17/13)--A sharp increase in gasoline prices has led to U.S. consumer prices in June recording their steepest rise in five months.
 
That increase is a potential sign that inflation is stabilizing while the Federal Reserve is considering scaling down quantitative-easing policies related to buying bond assets (The Wall Street Journal July 16).  
 
The seasonally adjusted 6.3% rise in June gasoline prices helped spark a 0.5% seasonally adjusted gain in the consumer price index, the Labor Department said Tuesday.
 
Prices have mostly leveled off since last fall, after building early in the economic recovery, the Journal said. 
 
Moderating inflation is a manifestation of modest U.S. consumer demand for goods and services and a letup of energy prices, said the Journal
 
The Fed is closely watching inflation gauges as it contemplates scaling back its bond-buying program. Weak inflationary pressures could prompt some officials to ask for a delay in the cutting back of bond buying until December or later, the Journal said. The Fed also keeps an eye on the unemployment rate as the central bank considers its monetary policy.
 
Consumer prices are up 1.8% from a year earlier--nearly matching the Fed's 2% target, the Journal added.

Mixed Reports On Consumer Sentiment

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MADISON, Wis. (7/15/13)--Two separate reports last week indicate mixed consumer sentiment about the state of the U.S. economy and personal finances during July.
 
Consumer confidence unexpectedly fell in July because U.S. citizens became less upbeat about the economy's outlook, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment, which was released Friday (Bloomberg.com and Moody's Economy.com July 12). 
 
The index dropped to 83.9 in July from 84.1 in June, after the median forecast in a Bloomberg survey of analysts predicted a gain to 84.7. 
 
Consumers' views on the economy in the next six months may have been dampened by increases in gasoline prices and mortgage interest rates, Bloomberg said. 
 
However, consumer sentiment rose for a fourth consecutive week in the week ended July 7--to its highest level in more than five years--because Americans became more positive about their personal finances, according to the Bloomberg Consumer Comfort Index released Thursday (Bloomberg.com and Moody's Economy.com July 11).
 
The index increased to -23.7--its highest level since January 2008--from -25.7 the prior week. A subcomponent of the index--a gauge of personal finances--rose to the second-best reading since April 2008,  and the measure of the buying climate improved to a nine-week high, Bloomberg said. 
 
Consumers' confidence in the durability of the recovery was bolstered by a slower pace of job cuts and steady improvement in hiring--and that durability should maintain consumer confidence near present levels, Joseph Brusuelas, a senior economist at Bloomberg LP in New York, told Bloomberg.

Jobless Claims Increase

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WASHINGTON (7/12/13)--Initial claims for U.S. unemployment benefits--a proxy for layoffs--jumped 16,000 last week, the Labor Department said Thursday.
 
The gain in first-time claims, which total a seasonally adjusted 360,000 for the week ended July 6--is at a level that still indicates job growth. It also suggests that the checkered nature of the labor market's recovery shows it remains in the healing process (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's economy.com July 11).
 
Claims typically are volatile the first two weeks of July, stemming from temporary closures of plants in auto manufacturing and other industries, and the July 4 holiday usually distorts unemployment readings, the Journal said.
 
Auto-plant shutdowns skew the July claims numbers, concurred Brian Jones, senior U.S. economist at Societe Generale in New York. The labor market is making consistent progress and the hiring pace is decent, he told Bloomberg.  
 
The four-week moving average of claims--which smooths out weekly volatility--rose 6,000--to 351,750 last week from the prior week's 345,750.
 
Continuing claims for unemployment benefits increased 24,000--to nearly 2.98 million--for the week ended June 29.

New Zealand Bank Ties Mortgage Rates To Facebook 'Lottery'

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WELLINGTON, N.Z. (7/12/13)--In a new approach using social media, one of New Zealand's largest banks has turned its mortgage rates into a social media lottery.

Every Wednesday for four weeks, ASB's "Like Loan" promotion will provide its Facebook users a chance to win a reduced fixed-rate home loan. The rate is based on the number of Facebook "Likes" the promotional app accumulates for the day (FinancialBrand.com July 1).

Before launching the promotion, ASB's Facebook page had 66,970 "Likes." After the launch, it added 6,000 more--a 9% increase.  The response helped drive down the first week's Like Loan rate to 2.4732%, compared with its 5.19% advertised rate for that type of loan.

The promotion created a lot of buzz, with 6,387 users talking about it. On the first day of the promotion, more than 800 of its Facebook users shared the app with friends.

Nearly Half Of Fed Policymakers Back Ending QE3 In Late 2013

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WASHINGTON (7/11/13)--Nearly half of the members of the Federal Open Market Committee (FOMC)  support ending the Federal Reserve's quantitative easing policy late this year, but many say they want to see more signs of improvement in employment first, according to minutes of the Fed monetary policymakers' June 18-19 meeting.
 
The FOMC minutes, released Wednesday afternoon, said that many participants "anticipated it would be appropriate to end assets purchases late this year," while "many other participants anticipated that it likely would be appropriate to continue purchases into 2014."
 
Regarding the outlook for policy, "many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases," said the minutes, referring to the Fed's policy of purchasing $45 billion a month in Treasuries and $40 billion a month in agency mortgage-backed securities.
 
"However, several members judged that a reduction in asset purchases would likely soon be warranted, in light of the cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls, which had increased their confidence in the outlook for sustained improvement in labor market conditions," the minutes said. 
 
Two members indicated that the FOMC should "begin curtailing its purchases relatively soon in order to prevent the potential negative consequences of the program from exceeding its anticipated benefits."
 
The minutes also noted that most members anticipated that growth of real gross domestic product (GDP) would pick up somewhat during the second half of 2013. [Editor's note: A week after the FOMC meeting, the Commerce Department announced that the GDP increased more slowly than economists originally estimated (News Now June 27).]
 
Also, "most participants expected inflation to begin to move up over the coming year as economic activity strengthened, but many anticipated that it would remain below the committee's 2% objective for some time."
 
The Fed has kept its targeted federal funds rate at 0% to 0.25% and has said that range will be appropriate as long as the unemployment rate remains above 6.5%, and inflation between one and two years ahead is projected to be no more than a half percentage point above its 2% longer-run goal and longer-term inflation expectations continue to be well-anchored.
 
The committee includes the seven members of the Board of Governors and the presidents of the 12 Federal Reserve Banks and has 12 voting members. For the full FOMC Minutes and summary of economic projections, use the link.

NEW: About Half Of FOMC Members Back Ending QE3 In Late 2013

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WASHINGTON (7/10/13, UPDATED 3:40 p.m. ET)--About half of the members of the Federal Open Market Committee (FOMC)  support ending the Federal Reserve's quantitative easing policy late this year, but many say they want to see more signs of improvement in employment first, according to minutes of the Fed monetary policymakers' June 18-19 meeting.

The FOMC minutes, released this afternoon, said that many participants "anticipated it would be appropriate to end assets purchases late this year," while "many other participants anticipated that it likely would be appropriate to continue purchases into 2014."

Regarding the outlook for policy, "many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases," said the minutes, referring to the Fed's policy of purchasing $45 billion a month in Treasuries and $40 billion a month in agency mortgage-backed securities.

"However, several members judged that a reduction in asset purchases would likely soon be warranted, in light of the cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls, which had increased their confidence in the outlook for sustained improvement in labor market conditions," the minutes said.

Two members indicated that the FOMC should "begin curtailing its purchases relatively soon in order to prevent the potential negative consequences of the program from exceeding its anticipated benefits."

The minutes also noted that most members anticipated that growth of real gross domestic product (GDP) would pick up somewhat during the second half of 2013. [Editor's note: A week after the FOMC meeting, the Commerce Department announced that the GDP increased more slowly than economists originally estimated (News Now June 27).]

Also, "most participants expected inflation to begin to move up over the coming year as economic activity strengthened, but many anticipated that it would remain below the committee's 2% objective for some time."

The Fed has kept its targeted federal funds rate at 0% to 0.25% and has said that range will be appropriate as long as the unemployment rate remains above 6.5%, and inflation between one and two years ahead is projected to be no more than a half percentage point above its 2% longer-run goal and longer-term inflation expectations continue to be well-anchored.

The committee includes the seven members of the Board of Governors and the presidents of the 12 Federal Reserve Banks and has 12 voting members. For the full FOMC Minutes and summary of economic projections, use the link.

Bankruptcy Filings Down 14% In First Half Of 2013

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ALEXANDRIA, Va. (7/10/13)--Total U.S. bankruptcy filings reached 544,390 nationwide during the first half of 2013, a 14% decrease from the 632,541 filed during the same period a year ago, according to data provided by Epiq Systems Inc. to the American Bankruptcy Institute (ABI).

"Today's figures confirm a new normal of reduced bankruptcies, as consumers and businesses continue to deleverage in a sustained low-interest-rate environment," said ABI Executive Director Samuel J. Gerdano. "We expect the trend to continue through the end of 2013."

The 520,919 total noncommercial filings in first half 2013 represented a 13% drop from the noncommercial filings totaling 601,453 for the first half of 2012.

Total commercial filings were 23,471--a 25% decrease from 31,088 filed during the same period in 2012. Commercial Chapter 11 filings also fell to 3,445 filings, a 16% decrease from the 4,120 Chapter 11s in the first six months of 2012.

The 83,580 total bankruptcy filings in June were a 16% decrease from 99,162 filings in June 2012. The 80,122 total noncommercial filings for June constituted a 15% drop from June 2012's total of 94,485. Commercial filings for June 2013 totaled 3,458,  a 26% decrease from the 4,677 filings for that period in 2012. Commercial Chapter 11 filings registered a 9% drop, to 547 filings from 496 in June 2013.

The average nationwide per capita bankruptcy filing rate for the first six months of 2013 decreased slightly to 3.51 total filings per 1,000 population, from a 3.57 rate for the first five months. Average total filings per day in June were 2,786, a 16% decrease from the 3,305 total daily filings in June 2012.

States with the highest per capita filing rate (total filings per 1,000 population) through the first six months of 2013 were:
  1. Tennessee (6.69);
  2. Georgia (5.83);
  3. Alabama (5.69);
  4. Illinois (5.40); and
  5. Nevada (5.38).

Hampel To Wash. Post: Trade Balance May Impact GDP Growth

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WASHINGTON (7/9/13)--A recent dip in the U.S. foreign trade balance may impact the second-quarter gross domestic product (GDP) growth, a Credit Union National Association economist told The Washington Post Wednesday.
 
"The slight worsening of the balance of trade suggests our economy is growing faster than those of our trading partners," Bill Hampel, CUNA chief economist, told the Post in the article, "Drop in inventory sends U.S. crude oil prices over $100 a barrel,"  by Steven Mufson and Katerina Sokou.
 
The decline in exports may have a minor negative impact on second-quarter GDP growth this year or "at best have a neutral effect," he added.
 
U.S. imports rose to $232.1 billion in May--second only to record-level $234.3 billion in March 2012, the Post said.
 
Also, U.S. exports dropped 0.3%, to $187.1 billion in May from $187.6 billion in April, a decline prompted by economic weakness abroad, analysts said.

Consumer Borrowing Surges In May, Credit Up At CUs

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WASHINGTON (7/9/13)--U.S. consumer credit in May surged by the biggest amount in a year,  and borrowing in all areas at credit unions also increased, according to the Federal Reserve's Consumer Credit  report released Monday.
 
Overall borrowing increased $19.6 billion--following a $10.9 billion gain in April--to reach nearly $2.84 trillion, seasonally adjusted.
 
Total revolving debt hit $856.5 billion--a $6.6 billion gain from 849.9 billion in April. Total nonrevolving debt--which comprises student and auto loans but not real estate loans--increased $13 billion to nearly $1.93 trillion in May.
 
At credit unions, members borrowed $252.8 billion in May, up from $251.2 billion in April and $231.2 billion at the end of the second quarter, not seasonally adjusted. 
 
Revolving data show that credit union members borrowed $39.9 billion in May, up from $39.5 billion in April and $37.4 billion at the end of the second quarter.
 
Nonrevolving debt at credit unions hit $212.9 billion in May, up from $211.8 billion in April and $193.8 billion at the end of the second quarter.

NEW: May Consumer Credit Hits Year's High, Credit Up At CUs

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WASHINGTON (7/8/13, UPDATED: 4:35 p.m. ET)--U.S. consumer credit in May surged by the biggest amount in a year,  and borrowing in all areas at credit unions also increased, according to the Federal Reserve's Consumer Credit  report released today.
 
Overall borrowing increased $19.6 billion--following a $10.9 billion gain in April--to reach nearly $2.84 trillion, seasonally adjusted.
 
Total revolving debt hit $856.5 billion--a $6.6 billion gain from 849.9 billion in April. Total nonrevolving debt--which comprises student and auto loans but not real estate loans--increased $13 billion to nearly $1.93 trillion in May.
 
At credit unions, members borrowed $252.8 billion in May, up from $251.2 billion in April and $231.2 billion at the end of the second quarter, not seasonally adjusted.  
 
Revolving data show that credit union members borrowed $39.9 billion in May, up from $39.5 billion in April and $37.4 billion at the end of the second quarter.
 
Nonrevolving debt at credit unions hit $212.9 billion in May, up from $211.8 billion in April and $193.8 billion at the end of the second quarter.

Chase Halts Sales Of Card Debt, Braces For Regulators' Crackdown

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NEW YORK (7/8/13)--JPMorgan Chase has halted most of its sales of consumer credit card debt to collection agencies, indicating more sales would further damage its reputation on its collections practices and that it didn't want to give regulators more reason to probe its practices, according to Bloomberg News (July 1).
 
Bloomberg said court records indicate third-party collectors' lawsuits over Chase debts have dropped significantly since January, but sources disagree on whether sales stopped completely or were restricted.
 
The nation's largest bank has come under increasing scrutiny over how it pursues payments from credit card customers who fall behind in paying their debts. Two years ago, the bank stopped filing its own credit card collection lawsuits amid rising pressure.
 
In May, the bank was sued by California Attorney General Kamala Harris over "procedural shortcuts" and illegal robo-signing it allegedly took to sue thousands of borrowers.  Also, since 2011, the Office of the Comptroller of the Currency has been looking into the collections practices of the bank. JP Morgan is expecting a formal enforcement action stemming from nonmortgage consumer collections practices, said Bloomberg.

The Consumer Financial Protection Bureau, which now oversees  large debt collectors, began examining such practices earlier this year.

What To Watch For As QE3 Winds Down

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PLANO, Texas (7/5/13)--With the Federal Reserve's quantitative easing program perhaps winding down as early as mid-2014, credit unions can expect pressure to raise dividend and certificate rates to accompany increasing interest  rates, which will reduce earnings growth, said a Catalyst Corporate FCU analyst.
 
The impact of a slower infusion of stimulus on the economy means that "as the Fed slows down its purchases and even begins selling bonds it holds, bond prices will have to come down to meet the level of demand," said  Mark DeBree, Catalyst Strategic Solutions' director of asset liability analysis. "And when prices go down, yields go up, and interest rates will follow."
 
A slowing of the bond-buying stimulus could impact credit union earnings, loan demand, deposits and level of interest-rate risk. "If interest rates go up and the economy is strong enough to absorb the shock, consumers will continue to spend," he said. "But if the economy is as fragile as it appears, it could contract.
 
"We're looking at an environment in which loan growth is improving, but not significantly," DeBree said.

"A rise in interest rates would make the cost of borrowing higher. Mortgage rates are on the rise, and prepayments are already slowing down. This has been an examiner concern, since mortgages typically represent credit unions' largest loans and generally have the longest repayment horizons. As rates rise, we can expect to see the average lives of mortgages held on the balance sheet extend out further," he said.
 
For credit unions with large mortgage portfolios, slowing prepayment speeds and resulting longer average lives will reduce the level of asset reinvestment, because cash flows coming in each month will be less.
 
Overall, the Fed's transition away from quantitative easing will likely impact credit unions in four main areas:
  • Tightening of liquidity, because mortgage prepayments will slow and funds may begin leaving credit unions;
  • Narrowing gross margins with asset yields slow to move up;
  • Pressure to raise funding costs in response to rising interest rates; and
  • Rising levels of interest-rate-risk exposure.
"This is the scenario that many have been talking about for a while, but now signs are visible on the horizon," DeBree said.

Because exact timing of the Fed's actions is unknown, DeBree said credit unions should be proactive in reviewing their balance sheet compositions and be selective in choosing products to add. Overall, credit unions need to understand their risk exposures and create a plan to position both sides of the balance sheet for a more dynamic interest rate and market environment.
 
 
 

Home Finance Write-offs Down 30%

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ATLANTA (7/3/13)--Year-to-date home-finance write-offs through May totaled $69.7 billion--a five year low and more than a 23% drop from $90.8 billion for the same period in 2012, according to Equifax's latest National Consumer Credit Trends Report.
 
The total is nearly 45% lower than the $126-billion high set in the first five months of 2010, said Equifax in a press release.
 
Non-home finance write-offs totaled $33.9  billion for the period, a 3% increase over the $32.8 billion for the same time in 2012.
 
Home finance 30-day delinquency rates decreased for each type of loan from 2012 to 2013 by:
  • First mortgage loans: More than 22% (to 6.40% from last year's 8.26%);
  • Home equity revolving loans: More than 22%--to 2.67% from 3.43% last year; and
  • Home equity installment loans: 18%, to 5.24% from last year's 6.39%.
"Improving payment behavior and decreasing delinquencies has brought some stability to the home-finance sector," said Equifax Chief Economist Amy Crews Cutts.

"While there is still concern over the high volume of existing severely delinquent loans, otherwise known as the shadow inventory, rising home values are bringing more and more borrowers into positive equity and decreasing the likelihood that they will fall into trouble."
 
She noted that low mortgage rates, which recently began rising to 4% on 30-year fixed-rate mortgages, have supported strong refinance activity and pushed affordability to new highs.

May's Pending Home Sales At Highest Level Since 2006

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WASHINGTON (7/2/13)--Pending home sales for May rose to the highest level since late 2006, increasing 6.7% to 112.3 from a downwardly revised 105.2 in April, said the National Association of Realtors Friday.
 
The Pending Home Sales Index is 12.1% greater than May 2012's 100.2 reading. The index data are based on contract signings, not closings. The pace of the activity was the strongest since December 2006, when it reached 112.8, said NAR.
 
The contracts come as mortgage interest rates began to rise. "Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher," said Lawrence Yun, NAR chief economist.
 
"This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand," he added.
 
The national median existing-home price is expected to go up more than 10% to nearly $195,000 in 2013--the strongest increase since a 12.4% hike in 2005, Yun said. NAR projected that existing-home sales would increase 8.5% to 9% and reach about 5.07 million in 2013, the highest level in seven years.

Consumer Spending Rebounds As Jobless Claims Decrease

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WASHINGTON (7/1/13)--After the largest decline in more than three years, U.S. consumer spending bounced back in May, while initial claims for unemployment benefits fell for the week ended June 22.

Purchases by households, which constitutes roughly 70% of the U.S. economy, increased 0.3% in May after a 0.3% decline in April--the largest since September 2009, the Commerce Department said Thursday (Bloomberg.com, The Wall Street Journal and The New York Times June 27).

An improving job market and escalating home prices, combined with quicker income gains, could help bolster consumer spending in the second half of 2013, Bloomberg said.

Meanwhile, initial claims for unemployment benefits decreased by 8,000--to 346,000--for the week ended June 22 from the previous week, the Labor Department said Thursday (The New York Times and Moody's Economy.com June 27).

The four-week moving average of claims, which smooths out volatility, fell 2,750--to 345,750. Continuing claims for unemployment benefits for the week ended June 8 dipped 1,000--to 2.97 million.

The lack of a pullback in consumer spending has likely kept businesses confident enough to keep hiring steadily--albeit slowly--entering the middle of this year, Moody's said.