“The ability to deal with people is as purchasable a commodity as sugar or coffee and I will pay more for that ability than for any other under the sun.”
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Two boxes each hold four hot sauce packets and four soy sauce packets. Without looking, you take one packet from each box. What are the chances that at least 1 of the packets you draw is a hot sauce packet?
Last month’s riddle:
Last month’s answer:
Levi is Michael’s son.
THE MONTH IN BRIEF
DOMESTIC ECONOMIC HEALTH
As July ended, we were getting a portrait of a very weak recovery. Personal spending retreated 0.2% in June after advancing only 0.1% in May, and the jobless rate was 9.2% in June with a net job gain of just 18,000. The Commerce Department also told us that the economy expanded by only 1.3% in the first half of 2011. The University of Michigan’s final July consumer sentiment survey seemingly reflected some of this: it came in at 63.7, a low unseen in 28 months. The Conference Board’s monthly survey managed to advance 1.9 points to 59.5.3,4,5,6
Tighter wallets and pocketbooks tend to encourage lower prices, so a dip in inflation wasn’t exactly a surprise. In June, the Consumer Price Index retreated 0.2% to match the pullback in personal spending. It was the first decline in CPI in a year. However, core CPI rose 0.3% for the second straight month. Annual inflation was running at 3.6%, with annual core inflation at 1.6%. The Producer Price Index dipped 0.4% in June, its first negative month in a year. Retail sales ticked up 0.1% in June; Ford (+6.0%), Chrysler (+20.0%) and GM (+7.6%) recorded big increases in auto sales in July. 7,8,9
While the Institute for Supply Management’s manufacturing and service sector indices simply amount to surveys of purchasing managers, they are among the nation’s most-watched economic indicators. Both indices disappointed investors in July: the manufacturing PMI dropped 4.4% to just 50.4 (barely indicating growth) while the service sector PMI also went south 0.6% to 52.7. For that matter, the June readings on factory orders (-0.8%) and durable goods orders (-1.9%) also showed declines.10,11
GLOBAL ECONOMIC HEALTH
China’s manufacturing sector barely grew in July, with the nation’s official PMI edging down to 50.7 from the 50.9 reading in June. That PMI hasn’t been so low since March 2009. The pullback also happened in other nations in the region. India’s manufacturing activity gauge went south to 53.6 from 55.3 in June; Taiwan’s PMI contracted for the second month in a row, falling to 46.1. South Korea’s manufacturing sector bucked the trend; its PMI improved a bit to 51.3.14
Mortgage interest rates remained at rock-bottom levels, and didn’t move much from the end of June. In Freddie Mac’s July 28 Primary Mortgage Market Survey, the monthly movement looked like this: 30-year FRMs, +0.04% to 4.55%; 15-year FRMs, -0.03% to 3.66%; 5/1-year ARMs, +0.03% to 3.25%; 1-year ARMs, -0.02% to 2.95%.26
LOOKING BACK…LOOKING FORWARD
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How will August play out? You have to look hard to find some optimism; some bearish analysts are wondering if a double-dip recession is forthcoming, or already here. They point to the mediocrity of the 1Q and 2Q GDP and the stalled housing market as key signals. However, you have to consider that Japan’s hub economy suffered three disasters, and that turmoil in the Middle East and North Africa helped drive energy costs higher in the first half of the year. If the consumer can regain enthusiasm as a byproduct of lower energy prices, decent job generation, improved corporate profits, corresponding bullishness in the stock market and any added geopolitical stability, the second half of 2011 may provide a lift for equities.
UPCOMING ECONOMIC RELEASES: Here is the data stream for the rest of August. Ahead of us, we have the July unemployment figures (8/6), an FOMC meeting (8/9), a report on June wholesale inventories (8/10), July retail sales figures, June business inventories and the initial University of Michigan August consumer sentiment survey (8/12), July building permits and housing starts (8/16), the July PPI (8/17), the July CPI, July’s existing home sales and the Conference Board’s LEI index for August (8/19), July new home sales (8/23), July durable goods orders (8/24), the final August consumer sentiment poll from the University of Michigan and the second take on 2Q GDP (8/26), July consumer spending and June pending home sales (8/29), the June Case-Shiller home price index and the Conference Board’s August look at consumer confidence (8/30), and lastly a report on July factory orders (8/31).
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27 – usatoday.com/money/index [7/29/11]
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