Office of Management and Budget - Midseason review - 10:20am

Released today from the Office of Management and Budget Tuesday, August 25th, 2009 at 9:30 am Mid-Session Review Peter R. Orszag, Director Today, OMB released the Mid-Session Review (MSR) which updates the Administration’s economic forecast, last done in February, and its budget projections. The MSR shows a smaller 2009 deficit but larger out-year deficits than previously projected. Overall, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path. First, let’s consider this year’s deficit. We now expect that the policies put in place to repair the financial system are likely to cost taxpayers less than previously anticipated. In particular, we have decided to remove from the budget a placeholder for further financial stabilization efforts that seemed prudent earlier this year. And we have lowered our estimate of the expected costs of FDIC bank rescues. The net result is a $262 billion improvement in the projected 2009 deficit. The 2009 deficit is now projected to be $1.58 trillion – or 11.2 percent of GDP – down from a previously projected $1.84 trillion or 12.9 percent of GDP. Second, with regard to the out-year deficits, the changes are primarily driven by changes in our economic assumptions. In line with the current consensus among professional forecasters, the Administration’s economic projections show that we inherited a deeper recession than projected in February. These revisions are based on new data on the severity of the recession that weren’t available last winter. As a result of a deeper-than-expected recession, certain spending programs (such as unemployment insurance and food stamps) are projected to automatically increase and revenues are projected to automatically decline, compared to our previous projection. Although these effects help to ameliorate the economic downturn by stimulating demand, they also lead to higher medium-term deficits both directly and indirectly (through higher interest costs on a higher level of public debt). Over the next 10 years, the net impact is to add $2 trillion to the projected deficit, compared to our last projection made based on February’s economic assumptions. That brings the projected 10-year deficit for 2010-2019 to $9.05 trillion – in line with CBO’s June projection. It is worth noting, however, that by 2019, the difference between non-interest spending and revenue, which is also known as the "primary deficit," is only 0.6 percent of GDP. Interest payments, which almost entirely represent the cost of the debt accumulated due to the policies of past adminis­trations and the need to run short-run deficits to help the economy recover from the worst downturn since the Great Depression, are 3.4 percent of GDP. During an economic downturn, one wants to allow the deficit to increase, so deficit reduction should be focused on the out-years – after the economy has recovered. That said, the out-year deficits hover in the range of 4 percent of GDP, which is higher than desirable. Getting the out-year deficit under control is a top priority of the Administration. We are in the midst of the policy process surrounding the FY 2011 budget, and that process will include proposals to put the nation back on a fiscally sustainable path. In the meantime, we have to stop making these longer-term deficits worse – which is why the Administration supports statutory pay-as-you-go legislation, so that any new tax or entitlement initiatives are fully paid for. (If pay-go rules had been followed over the past eight years, the projected deficit would be $5 trillion lower over the next decade.) In addition to avoiding making the problem any worse, we need to address the key driver of our long-term deficits: health care costs. The federal government simply cannot be put on a fiscally sustainable path without slowing the rate of health care cost growth in the long run. That is why the Administration is insistent that health care reform not only be deficit neutral over the next ten years, but also incorporate changes that will help reduce the deficit thereafter. There’s no doubt that additional steps will be necessary to reduce our out-year deficits (including continuing our effort to reduce spending and reform government contracting), and the Administration will have more to say about all that as part of the FY 2011 Budget. On inauguration day, the Administration inherited the greatest economic crisis and the largest deficits since the end of World War II. The economic freefall has been arrested, and, while too many people remain out of work, the consensus among private forecasters is that the economy will return to positive growth in the second half of this year. As the economy recovers, the Administration is committed to putting the nation on a fiscally sustainable path.

State Street Investor Confidence - 10:10am

Investor Confidence Index Rises from 119.4 to 122.9 in August 25/08/2009 Boston, August 25, 2009 – State Street Global Markets, the investment research and trading arm of State Street Corporation (NYSE:STT), today released the results of the State Street Investor Confidence Index® for August 2009. Global Investor Confidence rose by 3.5 points to 122.9 from July’s level of 119.4. Looking across the regions, the confidence of North American institutional investors declined slightly by 2.2 points from 120.6 to 118.4, a decline echoed among Asian investors, whose confidence fell 2.3 points from 94.1 to 91.8. By contrast, European institutional investors displayed increased risk appetite, and their confidence benchmark rose 4.3 points to 109.2 from 104.9 last month. Developed through State Street Global Markets’ research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Director Paul O’Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence. “This month’s increase represents the eighth consecutive improvement in Global Investor Confidence, and places the risk appetite of institutional investors firmly in the range that is associated with accumulation of risk exposures,” commented Froot. “At the same time, the rate of increase in the Index has moderated relative to some months ago, suggesting that institutions are being somewhat selective in their allocations.” “This month we note some increased regional variation across the Indices,” added O’Connell. “While European institutional investors continued to ‘catch up’ with their North American counterparts, in terms of reallocating out of cash, North American and Asian institutions displayed some ambivalence about further reallocations, given trends over the last six months. Keeping in mind that a level of 100 denotes ‘neutral’ for the Index – the level at which investors are neither reducing nor increasing their allocations to risky assets – we can see European confidence remains somewhat below that of North American institutions, and that caution prevails in Asia.” Full report here About State Street Global Markets State Street Global Markets provides specialized investment research and trading in foreign exchange, equities, fixed income and derivatives. Its goal is to enhance and preserve portfolio values for asset managers and asset owners. From its unique position at the crossroads of the global markets, it creates and unlocks value for its clients with original flow-based research, innovative portfolio strategies, trade process optimization, and global connectivity across multiple asset classes and markets. State Street Global Markets’ research team of leading academic and industry experts is committed to continually advancing the science, including theory and application of its proprietary investor behavior research and innovative portfolio & risk management technologies to help its clients challenge conventional thinking, shape ideas, make more informed investment decisions and deliver measurable results. About the State Street Investor Confidence Index® The index is released globally at 10 a.m. Eastern time in Boston on the last Tuesday of each month. More information on the State Street Investor Confidence Index is available at http://www.statestreet.com/investorconfidenceindex. About State Street State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $16.4 trillion in assets under custody and administration and $1.6 trillion in assets under management at June 30, 2009, State Street operates in 27 countries and more than 100 geographic markets worldwide. For more information, visit State Street’s web site at www.statestreet.com.

Consumer Confidence Survey® Press Release - 10:00am

Full report here THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION. The Conference Board Consumer Confidence Index ® Bounces Back August 25, 2009 The Conference Board Consumer Confidence Index ®, which had retreated in July, rebounded in August. The Index now stands at 54.1 (1985=100), up from 47.4 in July. The Present Situation Index increased slightly to 24.9 from 23.3 last month. The Expectations Index improved to 73.5 from 63.4 in July. The Consumer Confidence Survey ® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for August's preliminary results was August 18th. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer confidence, which had posted back-to-back monthly declines, appears to be back on the mend. The Present Situation Index increased slightly, mainly the result of an improvement in consumers' assessment of the job market. The Expectations Index improved considerably and is now at its highest level since December 2007 (Index, 75.8). Consumers were more upbeat in their short-term outlook for both the economy and the job market in August, but only slightly more upbeat in their income expectations. And, as long as earnings continue to weigh heavily on consumers' minds, spending is likely to remain constrained." Consumers' assessment of current conditions improved slightly in August. Those claiming business conditions are "bad" decreased to 45.6 percent from 46.5 percent, however, those claiming conditions are "good" decreased to 8.6 percent from 8.9 percent. Consumers' appraisal of the job market was more favorable this month. Those saying jobs are "hard to get" decreased to 45.1 percent from 48.5 percent, while those claiming jobs are "plentiful" increased to 4.2 percent from 3.7 percent. Consumers' short-term outlook was much improved from last month. Those expecting an improvement in business conditions over the next six months increased to 22.4 percent from 18.4 percent. Those anticipating conditions to worsen decreased to 15.8 percent from 19.0 percent. The labor market outlook was also more upbeat. The percentage of consumers expecting more jobs in the months ahead increased to 18.4 percent from 15.5 percent, while those expecting fewer jobs decreased to 23.3 percent from 26.1 percent. The proportion of consumers expecting an increase in their incomes increased slightly to 10.6 percent from 10.1 percent. For further information contact: Lynn Franco at +1 212 339 0344 lynn.franco@conference-board.org

Case-Shiller Home Price Index - 9:10am

Home Prices on an Upswing in the Second Quarter of 2009 According to the S&P/Case-Shiller Home Price Indices New York, August 25, 2009 – Data through June 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the second quarter of 2009. Full report here The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index – which covers all nine U.S. census divisions – recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year. The 10-City and 20-City Composites recorded annual declines of 15.1% and 15.4%, respectively. These are also improvements from their recent respective record losses of -19.4% and -19.1%. “For the second month in a row, we’re seeing some positive signs,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The U.S. National Composite rose in the 2nd quarter compared to the 1st quarter of 2009. This is the first time we have seen a positive quarter-over-quarter print in three years. Both the 10-City and 20-City Composites posted monthly increases, as did most of the cities. As seen in both seasonally adjusted and unadjusted data, as well as the charts, there are hints of an upward turn from a bottom. However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.” More at link with more charts