Consumer spending: Real personal consumption expenditures dropped .1%. The primary reason for the decrease is a drop in both non-durable and durable goods expenditures, which was caused by a drop in auto purchases. Real PCEs have now dropped the last two months, after a strong rise starting in early 2009. Consumer sentiment is still weak, as evidenced by both a drop in the Conference Board's number and the University of Michigan consumer sentiment number.
Manufacturing: The ISM number surprised on the upside, but the new orders number was weak, as was the overall production number. In addition, the Chicago PMI also surprised on the upside. However, as I'll show later today, emerging economies are raising short-term interest rates, thereby slowing their respective economies. We've also seen signs of a slowdown at the global level in manufacturing, leading me to conclude this months numbers were abberations in an otherwise slowing manufacturing environment.
Real Estate: The good news here is the Case Shiller number increased, indicating the housing market may be bottoming. As I noted last week (see also here and here) -- and as NDD has also pointed out (see this post as well)-- it appears the housing market is closer to a bottom than conventional wisdom implies.
While the good news last week was Greece avoiding a default, the overall tenor of most reports was negative. Consumer sentiment is slipping, causing a drop in spending. Since this is 70% of US GDP, this is hardly a good development. Globally, manufacturing is in a slowdown, largely caused by emerging economies raising interest rates to control inflation.
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This report has me genuinely borderline-terrified for the well-being of the global economy:
http://www.nytimes.com/2011/07/05/business/global/05iht-euro05.html?_r=1
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The effects of a Greek default would be felt around the world. The country's debt of €330 billion might not be large enough in itself to set off a renewed financial crisis, but once the precedent of a euro-zone default had been set, investors would likely abandon the debts of other struggling members, including Portugal and Spain.
More worryingly, Western banks, including the giants of Wall Street, have built a tower of credit default swaps —essentially insurance —on the debts of those countries, and the cost of paying up in a default would be huge. While the French and German banks have the biggest direct exposure to Greek's debt, it is American banks and insurance companies that would have the largest obligations to cover payments to those holding the swaps.
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Did you catch that last part?
"...it is American banks and insurance companies that would have the largest obligations to cover payments to those holding the swaps."
Those insidious, unregulated, unsecured "credit default swaps" that damn near brought down the entire global financial system in 2008 are back... and could very well finish the job this time.
Damn the Anti-Regulators. Just damn them all to abject poverty.
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