What’s the Story?

by CC July 31, 2012 8:37 am • Commentary


Consumer spending in the U.S. fell slightly in June and marked the second straight decline even though wages rose sharply, according to the latest government data. Spending fell less than 0.1% last month on a seasonally adjusted basis, the Commerce Department said Tuesday. And spending for May was revised down slightly to a 0.1% decrease. Personal income, meanwhile, jumped 0.5% in June. Economists surveyed by MarketWatch had forecast a 0.1% increase in spending and a 0.4% rise in personal income. Since incomes rose faster than spending, the personal savings rate rose to 4.4% from 4.0%. That’s the highest level in a year. Also, inflation as gauged by the core PCE price index increased 0.2% in June, but it was unchanged on a year-over-year basis at 1.8%.


Moody’s Investors Service on Tuesday cut its forecast for the U.K. economy, saying the country’s economic and fiscal outlook have weakened due to the euro-zone crisis.

Moody’s kept its negative outlook and triple-A credit rating on the country.

In a regular review published following a 0.7% decline in second quarter gross domestic product reported last week, Moody’s said that contraction hadn’t led to a severe change in outlook for the U.K.’s credit rating. The country’s ability to post GDP growth has diminished, Moody’s said, and now forecasts U.K. GDP to grow just 0.4% over the course of 2012 and 1.8% in 2013.

“The U.K.’s Aaa sovereign rating continues to be characterized by a large, diversified and highly competitive economy, a particularly flexible labor market, and a banking sector that compares favorably to peers in the euro area,” Moody’s said.

“The negative outlook in part reflects concerns about the U.K.’s macroeconomic outlook for the next few years.”


the euro remained at a record high last month, official figures showed Tuesday, underlining the debilitating impact of Europe’s continuing debt crisison its economy.

The numbers from the European Union’s statistical agency, Eurostat, come ahead of the meeting Thursday of the European Central Bank’s governors, a gathering upon which many hopes of a decisive new intervention to stem the crisis have been pinned.

According to Eurostat the seasonally adjusted unemployment rate for the 17 nations that use the euro was 11.2 percent in June, stable compared with May’s revised statistics but significantly higher than the 10 percent recorded a year earlier. For the 27 nations of the E.U., the unemployment rate was also stable, at 10.4 percent.

Eurostat estimates that 25.1 million men and women were unemployed in the European Union in June, of whom 17.8 million are in the euro zone.

Naked Capitalism

The more news comes out, the more it looks like Mario Draghi’s pledge that the ECB would do all it would take to save the Euro was a bluff. The best guess is that he hopes to appease the market gods until September 12, when the German Constitutional Court will render its decision on whether the “permanent” rescue mechanism, the ESM, is permissible. The assumption, of course, is the the ESM will be approved. I’d be delighted to be proven wrong, but in parallel to the lack of a Plan B when a private bailout of Lehman failed, there does not seem to be any Plan B in the works if the German Constitutional Court nixes the ESM. And the odds of that are not trivial.


China will step up policy fine-tuning in the second half to support economic growth, although there are signs of stabilization in the economy, the official Xinhua news agency on Tuesday quoted Premier Wen Jiabao as saying.

Wen affirmed the government’s resolve to maintain its long-standing controls on the property sector.

The government will take steps to improve the domestic investment environment and diversify its export market, Xinhua cited President Hu Jintao as saying.

Hu was also quoted as saying that China would increase fiscal and monetary policy support to the economy in the second half of the year.


Apple Inc. (AAPL) is preparing to introduce the next version of the iPhone on Sept. 12 in what will be a design overhaul of its top-selling product, according to two people with knowledge of the company’s plans.

The people asked not to be named because an official announcement hasn’t been made. The new iPhone will have a larger screen and thinner body, and is expected to work with faster long-term evolution wireless networks being introduced by carriers such as Verizon Wireless and AT&T Inc. (T), according to analysts such as Piper Jaffray Cos.’ Gene Munster.

The design change will be Apple’s first for the best- selling smartphone since 2010, when it unveiled the iPhone 4. Last year’s update, the 4S, had the same look as the prior version. Anticipation for the new model has led to a drop in sales for the current devices, causing Apple to miss analysts’ sales and profit targets for three months that ended in June. The iPhone accounted for 46 percent of the company’s revenue in the quarter.