8/4/09

Good morning. Yesterday things were pretty bad rate-wise, with rates shooting up the most in over two months. Fixed-rate prices improved slightly overnight as the market settled down. We will see some pending home sale numbers later today, but for now the market is digesting the Personal Income and Consumption numbers. Consumer spending rose slightly more than expected in June, in spite of incomes having their biggest drop in four-and-a-half years. Personal Income was -1.3%, and Personal Consumption (Spending) was +.4% after a revised 0.1% increase in May. Adjusted for inflation, however, spending fell 0.1 percent after being flat in May. Personal Income was worse than market expectations of -1.0%, and the two numbers combined (remember, if you’re spending more than you are making, you’re not saving!) led to a decrease in savings during the month. Savings fell to an annual rate of $505 billion, with the saving rate slipping to 4.6 percent versus 6.2 percent in May.