Weekly Economic Update: September 10-14, 2012

Sep 17 2012

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The Fed announced QE3, a program of open-ended, $40 billion per month mortgage backed securities purchases. Industrial production dropped 1.2% in August. Consumer credit declined $3.3 billion to $2.705 trillion in July. The topline CPI rose 0.6% in August while the core CPI increased 0.1%. The topline PPI jumped up 1.7% in August while the core PPI increased 0.2%. Retail sales rose 0.9% in August. The U.S. trade deficit was essentially unchanged at $42 billion in August. Business inventories rose 0.8% in July. Initial jobless claims increased 15,000 to 382,000 for the week ended 9/8.

• The FOMC announced a third round of quantitative easing (QE3), including open-ended monthly purchases of $40 billion in mortgage backed securities (MBS), and also extended the duration through which it plans to keep rates exceptionally low until at least mid-2015 (previously through late 2014). The FOMC also announced its plans to continue “operation twist” through the end of the year, and to continue reinvesting principal holdings of agency debt and agency MBS in agency MBS.

• Industrial production fell by a greater-than-expected 1.2% in August. This marks the largest decline in production since March 2009 (three months before the official end of the recession). Hurricane Isaac caused 0.3% of the 1.2% decline while a decline in major manufacturing output played a significant role in the decline.

• Consumer credit unexpectedly declined $3.3 billion to $2.705 trillion in July. Revolving credit (i.e., credit cards) fell $4.8 billion while non-revolving credit (i.e., auto loans) rose $1.5 billion.

• The topline consumer price index increased 0.6% in August while the core CPI was up just 0.1%.

• The topline producer price index jumped up 1.7% in August while the core PPI was up 0.2%.

• Retail sales increased 0.9% in August. Excluding autos, sales were up 0.8%.

• The U.S. trade deficit was essentially unchanged in August, at a level of $42 billion.

• The U.S. Treasury reported a deficit of $190.5 billion for August.

• Business inventories increased 0.8% in July.

• Initial jobless claims increased 15,000 to a level of 382,000 for the week ended September 8th.

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