Truck Sales Weak, Inventories Up

“We thought that this year would bring back the kind of economic activity that would translate into us selling more trucks. It’s not happening.” Mark Frost, general manager of Jim Ellis Chevrolet in Atlanta

July 6, 2011

Stocks are opening slightly weaker today after the People’s Bank of China raised rates by 25bps, the third increase of the year. The one-year lending rate rose to 6.56%. The China Securities Journal is expecting lending to decline from $1.23 trillion to $1.04 trillion.

The ISM Non-Manufacturing composite came in at 53.3 vs. expectations of 53.7 for June and versus 54.6 in May.

Bloomberg reported this morning that deal volume in the US gas distribution industry is already $21.3 billion this year, the highest since 2006.

The ECB, led by Germany, is expected to increase rates this week in spite of slow economic activity gripping much of the continent. Meanwhile, 10-year yields in Portugal surged 142 bps yesterday to 12.44% after Moody’s cut the debt rating of Portugal’s debt to junk status. Credit default swaps on European debt are soaring to all-time highs of 247, while contracts in Portugal rose 99bps to 870.

The recent treasury auction, the first since the end of QE2, was weak with a yield of 2.43% on the 7 year and a bid to cover of 2.62, well below the 12 month average of 2.89 and the lowest since March 2010. Direct and indirect bidders took the smallest amount since April ’09.

Last week RealtyTrac reported that foreclosure filings were reported on 215K properties in May, a 2% decrease from April and a 33% decrease from May 2010. One in every 605 homes received a foreclosure filing.

USA Today is reporting that foreign buyers have been entering the US home market, lured by falling prices and the weaker dollar. Florida and Arizona have been the biggest beneficiaries of these foreign flows due to their warm weather and extreme home price deflation.

One of the Fed’s conundrums (among many) has been the persistence in public opinion polls showing the majority of Americans feel we are still in a recession. A recent US Bancorp survey of small companies, those with $10 million or less of revenues, found that 70% of them will not add employees over the next year because they feel the recession never ended. Small business still drives this country, hopefully someone in Washington and the state capitals will get on board and help the small business owner.

Youth unemployment in the US has been especially weak during this economic crisis. Teen employment rates are running about 50% of normal this summer. Some have cited the minimum wage increase from $5.15 to $7.25 and higher in many states (in CA it is $8.00). The wage increase certainly contributes, but is only part of the issue. With unemployment higher, consumer prices up, and retail sales soft, the typical summer jobs in leisure, retail and restaurant are either filled by older workers or aren’t available due to lack of demand. The higher wage rate exacerbates the problem by constraining employer’s ability to hire and also making the jobs more attractive to the “un” and under-employed.

According to Charles Schwab, independent RIAs posted record revenues in 2010. The study noted that after 2008, many advisors left the big firms to set up independent shops.

In an effort to control social media for the 2012 election, President Obama will be taking questions on Twitter in the first “Twitter Town Hall.” Sounds like a great title for a cartoon to me.

A study published in the American Journal of Hypertension found that lowering salt consumption had no impact on reducing death rates or cardiovascular events. Cutting back on salt did help lower blood pressure. Bring on the fries!!!

The Tour de France began over the weekend. It gets an hour each evening on the Vs. Channel, and if you enjoy cycling at all, this is the time to watch. It runs through July 24^th.

Have a great day.

Ned