arctic ice, July income & outlays, 2nd qtr household debt, June case-shiller, et al…

it has been an exciting week for those among us who have dedicated their lives to watching ice melt, since every day this past week has set a new record low for the amount of arctic ice remaining…arguably, the old 2007 record may have fallen on August 24th, when the japanese aerospace agency’s arctic sea ice monitor recorded their new low sea-ice extent of 4,189,375 square kilometers, but August 26th marks the date the record was broken according to our National Snow and Ice Data Center, when the arctic sea ice extent fell to 1.58 million square miles, or 4.10 million square kilometers, which was 70,000 square kilometers below the previous record low daily sea ice extent set on September 18 of 2007…to put those numbers in perspective, that is about a million more square miles of the arctic now open than was during the 1979-2000 average, or about an area as large as texas and alaska combined…this is remarkable in that the record was broken so early in the arctic ice melt season, and that ice will continue to melt and set new low extents every day at least till mid september, also remarkable in that the melting is accelerating this late in the season, ie, more ice has been melting each day than the day before, rather than slowing down as it usually would in late august, with a daily rate of loss 50% higher than it was in 2007, the year the old record was set; normally, at this time of year, we’re losing about 15,000 sq miles of ice a day; this year the rate of ice loss continues at 29,000 a day, nearly twice the average…of course, these newly opened areas in the arctic sea will absorb even more heat than iced over areas that would reflect the sun’s rays back into the atmosphere… the above illustration from the NSIDC graphs the ice extent during the melt seasons since 1979, the beginning of the satellite record, on the date the new record was set; this year to that date is in dark blue, the previous record year 2007 is a green dash, 1980 is orange, the average of all data is in light blue, with the 1979-2000 average as a solid black line, and the gray area indicating the two standard deviation range of the data; NSIDC also data shows that all 6 lowest ice extents in the satellite record have occurred over the past 6 yearsphysicist Stuart Staniford, observing that the annual change in arctic sea ice was not linear, fitted a quadratic equation to the rate of loss, which shows the arctic would hit zero ice in 2017; his further extrapolations show the Arctic ice free for six months out of the year by 2025Peter Wadhams, professor of ocean physics at Cambridge, believes arctic ice is on the brink of collapse and that it will be gone in 3 years….you may recall that we discussed one of the effects of a warmer arctic sea on methane release this past winter; that the arctic contains copious amounts of methane-hydrates frozen at high pressure on the seabed, and that as the ocean warmed, russian scientists observed massive plumes of methane bubbling to the surface of the arctic ocean, some as large as 1000 meters in diameter…methane is known to be a potent greenhouse gas, considered 25 times as potent a heat-trapping gas as CO2 over a 100 year time horizon, but 72 times as potent over 20 years, so the release of methane enhances the warming feedback, accelerating the process….to see this visually, we have 3 arctic projections showing methane releases from 2002, 2010 and 2011 at the end of our January 8th blog post; the change over just a few years is really quite stunning…

and it’s not just the ice in the arctic ocean that’s been melting…last week, analysis of satellite photographs confirmed that greenland had already also exceeded it’s one season melt record on August 8th, almost a full month before the normal end of the melt season on that large island…the record ice loss had been anticipated after an unprecedented 4 day thaw over 97% of the ice sheet in mid-july; also, a nearly obscure last item in the NSIDC’s first July Arctic Sea Ice News & Analysis bulletin noted that the snow cover in the northern hemisphere in June had melted to such an extent that it beat the 45 year record low a month early, breaking the 2010 record by 1 million square kilometers…much of this snowpack loss is from higher elevations, where downstream cities depend on a continuous release of ice-melt for their water supply…and arguably, the loss of seasonal of snow & ice on land masses is a more serious problem than over the arctic sea, because it adds to sea level rise, and most of the world’s major port cities are built at sea level; you might recall the illustration we used when discussing greenland’s ice-loss in 2010: if all the snow pack loss from greenland that year were to be dumped at once on low lying new jersey, it would cover new jersey with 257 feet of snowJames Hansen, the head of NASA’s goddard institute, believes that a 5 meter sea level rise is possible this century as the greenland & antarctic ice sheets rapidly melt…  

the big story on the economics blogs this week was the annual central banker shindig in Jackson Hole, Wyoming…since Bernanke used a speech at this same event in 2010 to suggest that a second round of quantitative easing was in the offing, there was quite a bit of speculation that he might do the same this year; then, after the event, the Fed watchers combed through every word spoken in an attempt to see what course the Fed might take…if you’re interested, links to a couple dozen posts on the speech, and on monetary policy, including other presentations at this symposium, are right at the beginning of this week’s global glass onion…this week also brought the second estimate of 2nd quarter GDP from the BEA (Bureau of Economic Analysis), which never gets as much coverage as the first take, despite that it’s  based on more complete source data than was the report a month ago…the seasonally adjusted growth rate reported for the second quarter was revised from 1.5% to 1.7%, as both consumer spending and exports were better than first estimatedgrowth in nonresidential and residential fixed investment were partly offset by reduced contributions from private inventories and government spending at all levels; despite the upward revision, growth in the 2nd quarter remained below the 2.0% annual growth rate of the 1st, mostly because personal consumption expenditures, the largest contributor to GDP overall, fell from an annualized growth of 2.4% in the 1st quarter to a gain of 1.7% in the second..

probably the most important economic release of the past week was the BEA’s Personal Income and Outlays for July, which reports on various measures of income, savings, and personal consumption expenditures (PCE), which accounts for around 70% of GDP, and also produces a price index which the Fed uses to guide monetary policy; for July, personal income increased at seasonally adjusted annual rate of $42.3 billion over June, a 0.3% gain, as wages and salaries increased $16.1 billion in July, compared with their increase of $28.5 billion in June, proprietors’ income increased $5.7 billion, rental income increased $4.7 billion, and transfer payments increased $10.3 billion, of which $6.9 billion was medicaredisposable personal income (DPI), which is income after taxes. increased $39.9 billion, also a 0.3% gain over June…for July, personal consumption expenditures (PCE) increased $46.0 billion, or 0.4%, the largest increase in consumer spending in 5 months…of course, with the increase in spending being greater than the increase in income, the savings rate, the percentage of DPI not spent, dropped for the first time in 5 months, to 4.2%…but we would hesitate to discern a trend out of one month of this income and spending data, as this has been a historically noisy series, in which relatively large changes in one month are often reversed the next, as you see in the above 13 month bar graph from J Picerno at the capital speculator, where monthly changes in DPI are shown in black, and monthly changes in PCE are in red…as noted, this report also generates a PCE price index, which is the index the Fed now follows; since it’s subject to revision, BEA only reports one significant digit, and for July they report the PCE price index increased “less than 0.1%”. after increasing 0.1% in June, and that the core PCE price index, which excludes food and energy, also increased less than 0.1%, compared to an increase of 0.2% last monthdoug short, recognizing the importance of smaller changes to these indexes to monetary policy, computes both to two decimal places; he reports the headline PCE index up 1.30% over last year, a decrease from the 1.52% YoY price increase shown last month, and the Core PCE price index up 1.65% year over year, a decrease from the 1.79% core rate he computed in June…

Total Household Debt

another measure of the health of household finances came from the NY Fed, who released the 2nd Quarter Report on Household Debt and Credit (pdf); for the most part, this report shows that households are continuing to pay down their debts, and with the exceptions of student and home equity loans, delinquency rates have been falling…from the first quarter to the second, overall household debt fell by $53 billion to $11.38 trillion, a decline of 0.47%, led by a decline in the amount of mortgage debt outstandingdelinquency rates for mortgage related debts were reported to have declined 6.3%, while credit card delinquencies fell 10.9%, and auto loans were 4.2% less overdue; meanwhile, the delinquency rate for student loans increased 8.9% and the overdue rate for home equity lines of credit rose 4.9%…the above graph from p 4 of the NY Fed pdf shows the composition of the total household debt quarterly since the 1st quarter of 2003; reading the bars from the bottom, mortgage debt, at 72% of the total is in orange, home equity loans at 5% are in violet, auto loans at 7% are in green, credit card debt at 6% is in dark blue, student loans at 7% are in red, and grey is “other” at 3%…page 7 of the pdf has a graph showing the percent of debt in delinquency;in general, the percent of delinquent debt is declining, but what stands out in the graph is the percent of debt more than 90 days delinquent, as shown on in yellow, orange & red, which amounts to more than 7% of the total…the NY Fed also has a set of interactive charts that accompany this report, showing decomposition of mortgage debt, quarterly debt change other than charge-offs, total debt balance similar to the one included here except interactive, and percent of balance over 90 days past due by type of debt, all quarterly from Q1 2003…

as was anticipated, the release of the Case-Shiller Home Price Indices for June (covering prices for april may & june) showed the first year over year home price increases since the home buyer’s tax credit briefly spiked price in 2010; home prices for the 10 city index were up 0.1%, the 20 city index gained 0.5%, and the national price index, which is reported quarterly, showed a 1.2% increase in the 2nd quarter of this year over prices in 2011’s 2nd quarter…over May’s index, the 10 city index showed a 2.2% price gain, while the 20 cities showed a 2.3% gain, and for the 2nd month in a row, every city tracked by the indexes gained in price month over month13 of the 20 cities also showed year over year increases prices increases; only Atlanta, Chicago, Las Vegas, Los Angeles, New York and San Diego had annual price declines, while the index for Boston was unchanged…the graph we have here, from Barry Ritholtz, is of all 20 cities covered by Case Shiller, and it shows the path of their prices since the inception of the 20 city index in 2000 (the 10 city index dates to 1987); you can see phoenix prices in green nearly tripled at the top of the boom, and almost continuously falling prices for homes in detroit in yellow at the bottom of the chart, but you’ll really have to click on it for a bigger version to see the tracks of all the cities prices over 12 years…the wall street journal economics blog also has an interactive sortable table of the 20 cities covered by case-shiller, which gives the June 2012 price index for each city, and both the monthly and annual percentage change as of this report…some of the June price increases are seasonal, as home prices normally rise in the spring, and as we’ve discussed, some of the price increase reflects a smaller percentage of foreclosed homes going on the market than a year ago…coincidental with the release of the case shiller indexes, RealtyTrac reported that sales of bank owned foreclosed homes fell sharply in the 2nd quarterCoreLogic also reported that 58,000 foreclosures were completed in July, down from 62,000 in June and 69,000 in July a year ago…LPS also released their “First Look” at the conditions of mortgages for July; for the first time in 4 months, they reported a slight decrease in delinquencies, with a total delinquency rate of loans not in foreclosure at 7.03%; the foreclosure inventory rate in July stood at ​4.08%, virtually unchanged over the past yearthe administration’s monitor for the foreclosure fraud whitewash released a report crediting banks for providing mortgage relief under the settlement, but on closer examination all the real relief was quoted in millions of dollars, while the “relief” in the form of completed short sales amounted to $8.669 billion; moreover, most of those were going to non-recourse states that bar deficiency judgments, so the banks really had no alternative but to take what they could get anyway….

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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