Offsetting The Stimulus Package
An interesting tidbit from Rosie’s am commentary. He points out that between commodity inflation (gas prices), the pounding in mortgages (drop in mortgage refis and implied housing net worth) and dropping wages (yes, the skyrocketing unemployment rate does tend to do that), and there go the purported stimulus package benefits. U.S. retail gasoline prices are now up a full buck from the lows, to $2.62 a gallon (up 41 days in a row) — the equivalent of a $130 billion drag on discretionary spending at an annual rate. Tack on the 60bps bounce in mortgage rates too, which has triggered a near-60% collapse in mortgage refinancings. Then tack onto that the 0.2% decline in average weekly earnings in May — down now in two of the last three months — and a consumer relapse could well be in the offing and end up snuffing out this ballyhooed inventory-led recovery that has underpinned equities and undermined Treasuries over the last 3-4 months. Have a look at the article Relentless Rise of Treasury Yields Could Choke Nascent Recovery on page 23 of the FT
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Offsetting The Stimulus Package