Jobless claims rise to 386,000. After last week's drop to 350,000 this is now in line with the current trend. The employment picture continues to be weak.
The Philly Fed Index reported at -12.9, Capacity Utilization was flat at 78.9%, and retail sales fell. These economic indicators continue to suggest economic contraction in manufacturing and purchasing. Our economy boomed for years driven by increased spending and expansion of credit. Now that the bubble has popped, we are experiencing lower consumption which is largely driven by a natural demographics cycle and the contraction of credit. Expect this to continue for many years ahead until the Echo Boomers ramp up their spending which doesn't start until about 2023.
Housing starts were at 760,000 for June which was a positive sign however dampened by the drop in existing home sales. The housing starts are largely due to starter homes and multi-family units which is to provide for the needs of Echo Boomers who are starting to leave the nest.
Consumer Price Index was flat for the month and up 1.7% year over year. These low inflation numbers continue to point to the increased likelihood that The Fed will come up with another round of monetary stimulus or QE3. At the same time the drought in much of the country will cause prices of many crops such as corn to rise and continued tensions in the Middle East should keep Oil prices high. Food and Oil will likely boost the inflation number by the end of summer and more for food near the end of the year.