Curve Watcher’s Anonymous has its eye on the yield curve following a disappointing (to those who believe consumption drives the economy) consumer spending report.

Let’s start with a look at the department of commerce spending report on Personal Income and Outlays.

  • Personal income increased $58.8 billion, 0.4 percent in May.
  • In April, personal income increased $49.9 billion, or 0.3 percent.
  • Real DPI increased 0.2 percent in May, the same increase as in April.
  • Disposable personal income (DPI) increased $55.6 billion, 0.4 percent, in May. 
  • Personal consumption expenditures (PCE) increased $18.3 billion, 0.2 percent in May.
  • DPI increased $50.8 billion, or 0.4 percent.
  • PCE increased $2.3 billion, or less than 0.1 percent, based on revised estimates.
  • Real PCE – adjusted to remove price changes – decreased 0.1 percent in May, compared with a decrease of 0.2 percent in April.

Durable Goods and Autos

  • Purchases of durable goods increased 1.0 percent, in contrast to a decrease of 0.9 percent in April. 
  • Purchases of motor vehicles and parts accounted for more than half of the [durable goods] increase in May, and more than accounted for the decrease in April. 
  • Purchases of nondurable goods decreased 0.3 percent in May, compared with a decrease of 0.1 percent in April.  
  • Purchases of services decreased 0.2 percent, compared with a decrease of 0.1 percent.

Services down two months in a row as are nondurable goods.
Was the weather bad in April and May too?

What little strength left in the economy is related to autos. Auto sales bounced back after a decline in April.  How long can this last?


Yield on the 10-Year treasury is above where it was a year ago, below where it was 2 years ago.

If the yield is here in July, there will have been no change from July of 2013 or July of 2011, but significantly higher than July of 2012.


It was the increase from 1.394% in July of 2012 (or 1.614% in April of 2013) that helped put the damper on housing.

Housing affordability is down for two reasons:

  1. Interest rates are higher
  2. Prices are higher

If  wages stay down or interest rates high, housing is not going anywhere. There was a nice discussion along these lines on the Daily Ticker with Fannie Mae Chief Economist Doug Duncan. 

Mike “Mish” Shedlock