Just one bit of meaningful economic data so far this week: The American service sector grew in September for the first time in a year. The Institute for Supply Management’s nonmanufacturing index scored 50.9 last month, just 9/10ths of a point above the growth/contraction tipping point. That certainly isn’t a booming service sector, but having contracted for the last 11 months… we’ll take it.
Naturally, at the focus of renewed market pessimism is a struggling financial: CIT Group. (NYSE:CIT) The company — a hundred-year-old staple of small/medium business lending — is no stranger to walking the credit tightrope. They narrowly averted fiscal meltdown late last year with $2.3 billion in TARP bucks… then again in July by goosing bondholders with a $3 billion a debt-to-equity deal. Back then we joked, “Look for this crisis to repeat in a couple weeks.” We were wrong… it took a couple months.
Personal spending soared 1.3% in August, the biggest monthly leap since 2001, the Commerce Department announced today. Of course, this $129 billion jump in consumption “shows strength in August, indicating some economic improvement,” as CNN writes. A quick look at the chart reveals that the once sober American consumer is starting to fall off the wagon yet again.
The American economy contracted only 0.7% in the second quarter, the government finalized today. That’s down from its previous projection of 1% and practically seals the deal for a positive GDP number when Uncle Sam gives his initial third-quarter guess in late October.
The U.S.’ potential conflict with Iran might pale in comparison to a fight brewing between China and India, says Chris Mayer. “This one doesn’t seem to get much attention in the Western media, but I’ve read some dire stuff from the Eastern media. By their lights, the Sino-Indian border hasn’t been this tense since 1986-87, when the skirmishes broke out between Indian and Chinese troops.
Pop quiz: what happened a year ago today?
“The real danger — economically, socially or politically speaking — in the 1930s was loads of young men without jobs.”
We’ve said it before, more than once: Jobs and housing will be the real indicators for how the depression pans out. Housing led us into this mess, it is one of the worst performing asset classes in America, it’s most people’s biggest investment, and bad mortgages (and their subsequent securitizations) have rendered our financial system impotent — at best. And jobs, well… people gotta work. When they don’t, all kinds of craziness ensues.
After piddling about for the last two days, markets might actually take a significant direction in the next 48 hours.
Looks like another government arm will soon be knocking on the Treasury’s door: “We are currently considering all options, including borrowing from the Treasury,” said FDIC chairwoman Sheila Bair. As we’ve forecast many times, the steady collapse of banks around the U.S. has put an irreparable dent in the FDIC deposit insurance fund.