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Thursday, June 29, 2006

Initial Claims, MBA, GDP, Chain Deflator, FOMC

Initial Claims +11K to 308K. - A little cold

Inside the number: The number of people remaining on benefit rolls rose to 2.439M during the week ended June 10 from 2.421M.

MBA Mortgage Applications - Getting Chilly

Applications for mortgage loans at U.S. banks -6.7% last week to the lowest level seen on a seasonally adjusted basis since May 2002. The number of mortgage applications -31% compared with a year ago.

Applications for mortgages to purchase homes -6.2%, hitting the lowest level since November 2003. Purchase applications -19% in the past year. Applications for refinancing -7.5%. Refinance applications -47% in the past year.

The average rate for a 30-year fixed loan UP to 6.86% from 6.73% on a week-to-week basis; it's the highest rate since April 2002.

The spread between the rate on a one-year ARM and a 30-year fixed mortgage dropped to 50 bps, one of the narrowest in the past five years.

A narrow spread means buyers cannot reduce their monthly payment very much by choosing an adjustable-rate loan. No place to hide on those ARM bumps.

Q106 Final GDP +5.6%; GDP Deflator +3.1% - Hot for the haves, not so for the have nots.

Inside the number: a nominal 8.9% increase to the highest level in three years. Final sales +5.9% vs Q405 -0.2%. The have nots: Employees' share of national income fell to 63.5%, the lowest share since 1968.

The have nots are spending: Consumer spending was the main engine of growth in the quarter, rising at a 5.1% pace. Durable goods +20.3% vs -16.6% in Q405.

The haves: over the last year, Corporate profits +28.5% the fastest YOY growth in 22 years. Profits are at 14.4% of GDP, the largest % since 1950.

The haves are spending: Business investment +14.2% in Q106, the fastest growth in six years. Government spending +4.8%, federal spending +10.5%. Goods exports +18.5%, the biggest gain in nine years.

The big lie: GDP Deflator revised lower to 3.1% from 3.3%, core consumer price inflation measures were unrevised. Core consumer price inflation rose at a 2.0% annual rate vs Q405 +2.4%.

FOMC Statement: Status Quo

There are energy pass through and tightening economic slack inflation dangers, the housing market is cooling, we will firm if necessary based on the incoming data.

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