Market Statistics On Friday a surprise drop in Consumer Sentiment for July caught traders off guard and the Dow lost ground for the fourth consecutive week. Consumer Sentiment for July fell unexpectedly to 64.6 from 70.0 and increased fears of a double dip recession. The July decline was led by a sharp drop in the expectations component from 69.2 to 60.9. The present conditions component fell from 73.2 to 70.4. The drop in the headline number erased gains from the last two months and knocked the index back to levels not seen since late March. The accelerated drop in non-farm payrolls we saw last week and continued high weekly jobless claims appear to he weighing on consumers. We saw a sharp drop in weekly same store sales and mortgage loan applications are falling. Credit card companies are continuing to lower available credit and raising interest rates and payment terms on existing balances. The stage is set for a double dip recession if something does not happen soon.
Consumer Sentiment Chart The other two reports on Friday were lagging reports and were ignored. The International Trade deficit narrowed slightly from $26 billion in May from $28.8 billion in April. Import prices rose for the seventh consecutive month in June by +3.2% but the majority of the surge was due to the rise in crude prices. The economic calendar for next week is very heavy with several critical events. Tuesday will headline with the Producer Price Index (PPI) and will show the impact of inflated prices at the producer level. Prices are actually expected to have declined in June with the exception of crude prices. The excess capacity in the system is preventing anyone from raising prices. Because of the energy impact the headline number should rise about +0.8% but the core rate could be negative. On Wednesday the Consumer Price Index (CPI) is expected to show an increase in prices of +0.5%, again an increase due to the price of oil. Also on Wednesday are the FOMC minutes from the June 24th meeting. Because of the lengthy post meeting statement I don't expect any material impact from the minutes unless the Fed expresses concern for another drop in economic activity. This was not evident in the post meeting statement but could be discussed in the minutes. They had to talk about the possibility but we don't know that it was enough to include in the minutes. Thursday is the first of the regional activity reports with the Philly Fed survey. This report is expected to show a drop in activity with a headline number falling to -10.0 from -2.2 in June. If this comes in as expected it will be one more indicator that the economy is losing traction over the summer months.
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