Consumer Sentiment at Lowest Level of the Year

Earlier today, Thomson Reuters and the University of Michigan reported that consumer sentiment experienced its sharpest decline in 10 months, falling from 79.3 in May to 74.1 in the first of two readings for June, as a weakening labor market and concern over financial markets both in the U.S. and abroad appear to be weighing on Americans.

This marks a sharp reversal to what was the highest reading on consumer sentiment since October of 2007 as shown below and follows a plunge in the other major survey on the mood of the consumer, the Conference Board’s consumer confidence index, reported earlier in the month.

The current conditions index fell from 87.2 in May to 82.1 in June and the expectations index fell about an equal amount, from 74.3 to 68.9, both now at their lowest levels of the year.

Despite falling gasoline prices, one-year inflation expectations were unchanged at 3.0 percent and the five-year outlook for consumer prices shows inflation at 2.9 percent, up 0.2 percent from last month.


Is Canada’s Housing Bubble Finally About to Pop?

Amid all the concern over banking troubles in Spain, elections in Greece, France, and Egypt, and the Federal Reserve’s policy meeting next week where expectations vary widely about what they may or may not do to support a weakening U.S. economy and a worsening recession/financial crisis in other parts of the world, it would appear that Canada’s housing bubble just might be veering toward its pin, at least according to a number of reports this week that have a distinctly early-2007 U.S. feel to them.

Those last two are particularly scary since, whenever you have a bank with a rosy outlook while the central bank warns of a correction, the odds are pretty good that something bad is about to happen.

Whether or not recently lower prices in Canada’s hottest housing markets turn into something more than just a little dip in prices remains to be seen, however, based on the two curves in the chart to the right courtesy of Sober Look, it would appear that there is far more room to move down than up.

Moreover, with commodity prices tumbling lately - their sharpest sell-off since, um, 2008 -  Canada’s natural resource dependent economy may be undergoing some dramatic changes that are only beginning to filter through to the housing market.

Having visited Vancouver, Calgary, and Toronto in recent years, it’s clear that our neighbors to the north have had housing fever for some time now, many outlying areas in Calgary looking a lot like outlying areas of Los Angeles in 2005 and the condo craze in Vancouver and Toronto resembling that of Miami seven years ago.

According to the report by Scotia Bank, the world’s other once-thought-to-be-un-poppable housing bubble in Australia has seen prices fall more than six percent over the last year and Canada’s modest two percent decline is said to be a sign of “steady” markets.

I wouldn’t be too sure of that, particularly if the situation in Europe worsens and the U.S. economy continues its slowing growth track toward a possible recession this year.


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New York Manufacturing Index Plunges

The Federal Reserve Bank of New York reported that the Empire State Manufacturing Index dropped to its lowest level in seven months, down from 17.1 in May to just 2.3 in June as shown below via Econoday, still indicating a modest expansion.

The important new orders component also tumbled, down from 8.3 to 2.2, and shipments plunged from 24.1 to 4.8 while employment dropped from 20.5 to 12.4.

Note that all of these readings continue to indicate expansion, however, the expansion appears to be quickly losing steam, last month’s Philadelphia manufacturing survey already indicating a modest contraction as indicated above. 


Friday Morning Links

ECB ready to act ‘where needed’ - BBC
Central banks reach for their guns over Greek vote - Reuters
Central Banks Warn Greek-Led Euro Stress Threatens World - Businessweek
Why Joint Central Bank Action Is Unlikely and Won’t Work - CNBC
The EU Smiled While Spain’s Banks Cooked the Books - Bloomberg
Moody’s downgrades ratings of 5 Dutch banks - AP
Bank of England moves to boost British economy - CNN/Money
Reagan’s PR Director ‘Our Political System Is Basically Dysfunctional’ - Spiegel
Positioning For The Weekend: BofA’s Risk Cheat-Sheet - Zero Hedge
Debt and Deficit: A Public Opinion Dilemma - Pew Research
Where Paul Krugman, Keynes are vulnerable - MarketWatch
Dangerous being short? - The Big Picture

Oil edges above $84 on hopes for global stimulus - AP
Gold holds above $1,620/oz ahead of Greek vote - Reuters
Wall of worry remains quite strong - MarketWatch
Markets on edge of seat before Greek vote - Globe & Mail
OPEC to leave oil production unchanged - CNN/Money
Fear of dollar collapse will make Chinese biggest Gold buyers - BullionStreet
Indian gold ETF and e-gold investment swell as rupee remains weak - Mineweb
Two Questions About Gold, Gold Mining Shares, and QE - Tocqueville Gold
Gold Traders Bullish as Hedge Funds Increase Wagers - Bloomberg
Gold hedging now just for project finance - GFMS - Mineweb

Inflation likely to continue to fall - CNN/Money
Uncertain times, again, for U.S. economy - MarketWatch
Cost to Raise a Child: Around $300,000, Not Including College - WSJ
Why Greek People Are Voting For Leftist Syriza - CNBC
The Bank of England’s Zombie Economy - WSJ
Ex-Soros Adviser: Japan May Default by 2017 - Bloomberg
Canadian housing market headed for a correction, BoC says - Vancouver Sun
Spring selling season blooms for California: DataQuick - Housing Wire
Foreclosure Spike Is Positive Sign For Housing - CNBC
Fed Board Members Gave Their Own Banks $4 Trillion in Bailouts - AllGov
Helicopter money, Inflation targets and Quantitative Easing - mainly macro
Bernanke Confronts Fizzling Recovery - Bloomberg