Major Market Movers: Income & Spending

The American public just seems eager to hold on to those extra cents earned, as they say keeping their good greens for bad days to come. The American economy is still not doing well and seemingly the Feds relentless efforts to save the economy need more time and thought...

Consumer spending is at very low levels rising in December a modest 0.2% which marks the slowest pace in six months, and well below November's gain of 1 percent. Income though for the same period gained above expectations with 0.5% yet with increasing obligations of higher oil prices and tightened mortgage payments the public is spending much less.

The is adding to the damage the economy is already battling from, and when consumers spend less meaning while they have income, then they are fearing spending now for what to come, they are barely making it through, and then new employment is slowing thereby adding to cash limitations.

The ECI is still stable at 0.8% as the gauge of rising prices pressers from employers that they are welling to give to their working force means it's to be finally reflected in the headline figures. Inflation is now the last thing on mind of Mr. Bernanke and his crew as they see it to moderate by falling growth and obviously if people are not spending then one threat is crossed of the list.

The PCE on the core level which the fed examines thoroughly stayed steady in December at the same pace of growth seen in the previous month of two tenth of a percent on the month and 2.2% on the year.

As we said after a sluggish 0.6% growth in the fourth quarter which is the least of the worries as the economy is to reflect further weakness in the first three months of this year. The Feds were quite clear in their statement last night accompanying their decision “downside risks” to growth are appreciating as the labor market their pride and joy, that once was sought to be the savior is now expressed to be slowing. Tomorrow's jobs jamboree will be the final K.O while today the last week's claims for unemployment benefits inclined above expectations to 375 thousand from 301 thousand the prior week.

The manufacturing sector is as well slowing in the US even though the sector is now depending heavily on the exports, as American goods are now tempting to buy as they are cheaper than others with the depreciating dollar. Chicago's PMI slowed to 51.5 from 56.6 way below the previous and expectations of 56.6 and 53 respectively. The markets seem to absorb the unpleasant data rather badly as the dollar at first sight seems to be strengthening, yet the truth is the yen is as investors are buying it back trimming carry trades; the American economy in the market seemingly is not off course of heading to recession especially after the spike seen in those unemployment benefits.

The housing breakdown in the US has officially spread and is contagious and mainly till now we can't say that any is safe from the plague. The Fed provided the official antidote in dosages of basis points yet more is needed to survive as the economy is on its death bed taking those last gasps of air, and counting the days...

Crown Forex

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