Morning Economic News - Tuesday February 3, 2009

Commentary and Overnight Trading

Bad news Monday brought a down stock market (except the NASDAQ) and overnight trading looks to be adding to the losses with Dow Jones Industrial Average, S&P 500 and NASDAQ futures all trading down. There was actually some good news buried in the numbers themselves yesterday. The Purchasing Managers Index still shows manufacturing activity contracting, but at a slower pace than December and the same report showed inventories falling faster. Falling inventories mean a shorter time until at least some of those inventories will have to be replenished, so quicker depletion is a good sign for the economy. The Conference Board reported very bad news on online job ads with roughly a million less vacancies advertised in January compared to October. What they didn't put in the headline was that the January 2009 number was virtually identical to the January 2008, calling into question whether the big drop may be a flaw in their seasonal adjustment. Personal spending fell again, but real disposable personal income rose another 0.3% in December, bringing further relief to the 93% of consumers with jobs.

Asian markets are following a down Monday with a slightly down Tuesday. Oil has regained a little less than 1/3 of Monday's losses. The dollar is up against the yen and the pound, down against the euro and the Canadian dollar.

Monday's Economic Numbers

Construction Spending - December 2008

• Monthly Change: Down 1.4%


• Year-to-year Change: Down 3.6%

Help Wanted Online Data Series - January 2009

• Monthly Change: Down 15% (Not seasonally adjusted)


• Year-to-year Change: Down 0.3% (10,200 fewer job ads)

Manufacturing Report on Business - January 2009

• Purchasing Managers Index (PMI): 35.6


• 50+ represents growing economic conditions


• Monthly Change: Up 2.7

Personal Income and Outlays - December 2008

• Personal Income: Down $25.3 billion


• Monthly Change: Down 0.2%


• Real Disposable Personal Income: Up 0.3%

What I'm Reading

Consumers Keep Recovery at Bay

U.S. manufacturing activity contracted at a slower rate
than expected, but steep declines in consumer spending suggest a
recovery in that sector is premature.

Australia Cuts Key Rate to 45-Year-Low 3.25% as Government Boosts Spending Australia’s central bank cut its
benchmark interest rate to the lowest level in 45 years and the
government announced it will spend a further A$42 billion ($27
billion) to ward off a recession.

Bank of Japan to Buy Shares in Companies Held by Banks to Shore Up Capital The Bank of Japan will buy 1 trillion
yen ($11.1 billion) of shares owned by financial institutions to
shore up their capital, which has been decimated by the global
stock-market rout.

Homeowners in U.S. Lost $3.3 Trillion in Property Value in 2008 Amid Slump The U.S. housing market lost $3.3
trillion in value last year and almost one in six owners with
mortgages owed more than their homes were worth as the economy
went into recession, Zillow.com said.

Pending U.S. Home Resales Probably Unchanged, Signaling Slump to Persist The number of Americans signing
contracts to buy previously owned homes was probably unchanged
in December, snapping a three-month drop, economists said
before a report today.

South Korea's Economy Will Shrink 4% in 2009 and Rebound in 2010, IMF Says The International Monetary Fund
expects South Korea’s economy will contract this year for the
first time since the Asian financial crisis a decade ago,
according to a statement from the nation’s finance ministry.

Rupee to Strengthen This Quarter on India Growth Outlook, DBS's Wee Says India’s rupee will strengthen this
quarter as growth outperforms most emerging markets and
foreigners resume purchases amid waning risk aversion, according
to DBS Group Holdings Ltd.

Asia Needs Global Economic Recovery for Region to Exit Slowdown, IMF Says Asian nations will need a recovery in
the global economy before the region can exit a slowdown as its
trade and financial linkages have increased with the rest of the
world, International Monetary Fund Managing Director Dominique
Strauss-Kahn said.

Japan's Wages Slide for Second Month as Companies Cut Costs Amid Losses Japan’s wages fell for a second month
in December as manufacturers slashed production and overtime pay
amid mounting losses.