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Archive for the 'GDP' Category

Housing and Philly Fed

Posted by WARREN MOSLER on 17th July 2014

Note the Nov/Dec mini spike to capture year end tax credits (my story) followed by familiar down for the winter, then up, then back down some pattern.

Yes, you can have a low output gap without housing, and yes, manufacturing is chugging along nicely. But overall the charts show declining monthly growth rates of retail sales, industrial production, and housing starts, as what’s looking more and more like the macro constraint of the relentless demand leakages continue to take their toll.

Housing Starts

Fed Chair Janet Yellen was right to worry about the housing sector during Congressional testimony this week. Starts in June disappointed sharply, declining another monthly 9.3 percent after decreasing 7.3 percent in May. June starts came in at 0.893 million units annualized, up 7.5 percent on a year-ago basis. Expectations were for 1.026 million units.

The fall in the latest month was led by the multifamily component but closely followed by the single-family component. Multifamily family starts dropped 9.9 percent after falling 14.7 percent in May. The single-family component declined 9.0 percent in June, following a 2.6 percent dip the prior month.

Building permits also lost ground. Permits declined 4.2 percent after decreasing 5.1 percent in May. June’s 0.963 million units annualized was up 2.7 percent on a year-ago basis. Analysts forecast 1.038 million units for June.

The housing sector still needs propping up by the Fed. This sector is losing steam instead of improving. Recent NAHB HMI have pointed to start weakness with weak numbers on traffic.

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Posted in GDP, Housing | No Comments »

Industrial production, mtg purchase apps charts, homebuilder’s index

Posted by WARREN MOSLER on 16th July 2014

Slowed in Q1, rebound in Q2, H1 about the same old 4% rate IP usually grows at as previously discussed:

Industrial Production

As suggested by production worker hours, industrial production was soft in June. Industrial production slowed to a rise of 0.2 percent, following a jump of 0.5 percent in May. Expectations were for a 0.4 percent boost. The manufacturing component decelerated to a modest 0.1 percent gain after jumping 0.4 percent the prior month. The median market forecast was for 0.4 percent. Mining was healthy with a 0.8 percent increase, following a 1.1 percent surge in May. Utilities declined 0.3 percent, following a drop of 0.4 percent in May.

Manufacturing excluding motor vehicles increased 0.2 percent in June after a 0.3 percent rise in May.

Within manufacturing, the production of durable goods increased 0.4 percent in June and rose at an annual rate of 8.8 percent in the second quarter. In June, the gains were broad based among durable manufacturing industries, with increases of 1.0 percent or more in the indexes for nonmetallic mineral products, for primary metals, for fabricated metal products, for aerospace and miscellaneous transportation equipment, and for furniture and related products. The production of nondurable goods moved down 0.3 percent in June. In June, the output of petroleum and coal products fell 2.7 percent, in part because of a disruption at a major refinery; the production of apparel and leather declined 1.3 percent, and the index for food, beverage, and tobacco products moved down 0.6 percent.

The overall capacity utilization rate in June held steady at 79.1 percent. The latest number came in slightly lower than the consensus projection for 79.2 percent.

For the second quarter as a whole, manufacturing production rose at an annual rate of 6.7 percent after increasing 1.4 percent in the first quarter, suggesting that second quarter GDP will rebound nicely from the first quarter freeze shock.

We are seeing some volatility in manufacturing numbers recently. But on average, growth is healthy.

Mortgage purchase apps still way soft:

MBA Purchase Applications

The purchase index fell 8.0 percent in the July 11 week, more than reversing a 4.0 percent gain in the prior week. The refinance index was little changed, down 0.1 percent in the week. Rates were little changed in the week with the average 30-year rate for conforming loans ($417,500 or less) up 1 tenth to 4.33 percent. Watch for the housing market index later this morning at 10:00 a.m. ET.

MBA purchase applications:

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National Association of Home Builders index up:

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Posted in GDP, Housing | No Comments »

Warsaw conference

Posted by WARREN MOSLER on 30th June 2014

Posted in Deficit, GDP, Government Spending, Political | No Comments »

Big snap back in second quarter growth less likely

Posted by WARREN MOSLER on 26th June 2014

No mention yet of the deficit being too small…

At sub 3% we comply with the Maastricht limits.
Maybe the plan is to join the euro?
Why else would we allow this?

Big snap back in second quarter growth less likely

By Patti Domm

(CNBC) — After a shocking contraction in first quarter GDP, economists on Thursday pared back growth forecasts for the second quarter due to weaker consumer spending.

Consumer spending in May rose just 0.2 percent, half of what was expected, after being flat in April. Spending by consumers accounts for more than two-thirds of U.S. economic activity, and the lowered growth forecasts now raise concerns that the economy will not be able to rebound to the more than a 3 percent growth rate widely expected for the balance of the year.

Goldman Sachs economists trimmed second quarter tracking GDP to 3.5 percent from 4.1 percent, and Barclays economists said tracking GDP for the second quarter fell to 2.9 percent from 4 percent. At a pace below 3 percent, the economy could show contraction for the first half due to the steep first quarter decline of 2.9 percent.

The median estimate for second quarter GDP fell by a half percent to 3 percent, according to the CNBC Rapid Update of economists forecasts.

Posted in GDP, Government Spending | No Comments »

charts and comments GDP, durables, mtg apps, etc.

Posted by WARREN MOSLER on 25th June 2014

>   On Wed, Jun 25, 2014 at 8:52 AM, Sheraz wrote:
>   Very weak US numbers

And not one ‘nice call’ email!!!

And yesterday’s stock market action suggests a possible data leak???

US 1Q GDP has been revised lower by far than expected. After having initially been reported as a 0.1% rise, then a 1% contraction, the third release shows that GDP growth is now reported as -2.9 QoQ% annualised, which leaves annual growth at just 1.5%YoY.

The consensus expectation was for a -1.8% reading. The damage was largely done through the private consumption component, which is now reported as rising just 1% versus 3.1% previously.

Also ‘smoothing’ from numbers that looked high to me in H2 and an adjustment to ACA related healthcare expenses previously booked as PCE:

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Gross private investment remained an 11.7% contraction

Maybe after a Q4 surge due to expiring tax credits?

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while government consumption was left at -0.8%. However, exports were revised down and imports revised up meaning that the contribution from net trade is to subtract 1.5% from GDP growth rather than 0.95% as previously announced.

Reversing a similar, prior blip up, as previously discussed:

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Nonetheless, reaction should be fairly muted given widespread expectations of a sharp bounceback in 2Q14 and the fact that the weather had such a damaging impact on 1Q activity. Indeed, we suspect that we could see GDP rise by more than 5% annualised in 2Q.

And if so, H1 would be +1% :(

High frequency numbers for the quarter have looked good while inventories should also make a significantly positive contribution after having been run down sharply.

After having been run up in H2. We’ll see where they go from here.

And, as previously discussed after the jump up in Q3, inventory accumulation seldom leads a boom:

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Mortgage purchase apps still dismal:

According to the MBA, the unadjusted purchase index is down about 18% from a year ago.

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And May durables not so good either:

Durables orders were much weaker than expected for May. Durables orders fell 1.0 percent in May after rising 0.8 percent in April. Analysts forecast 0.4 percent. Excluding transportation, orders slipped 0.1 percent, following a 0.4 percent gain in April. Market expectations were for 0.3 percent.

Transportation fell 3.0 percent after a 1.7 percent rise in April. The latest dip was from weakness in nondefense aircraft. Motor vehicles and defense aircraft orders rose.

Outside of transportation, gains were seen in primary metals, fabricated metals, and “other.” Declines were posted for machinery, computers & electronics, and electrical equipment.

On a positive note, there was improvement in equipment investment. Nondefense capital goods orders excluding aircraft rebounded 0.7 percent in May after decreasing 1.1 percent the month before. Shipments of this series rebounded 0.4 percent after a 0.4 percent dip in April.

The good news is this series is muddling along ok:

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The latest durables report is in contrast to recently positive regional manufacturing surveys and also the sharp jump in manufacturing production worker hours of 0.8 percent for May. But durables data are very volatile and we likely need a couple of more months of data before taking a negative tone on this sector.

The next leg to fall may be employment, as the 1.2 million people who lost long term benefits at year end may have been taking menial jobs at the rate of maybe 75,000/month or more for 6 months or so, which may have front loaded the monthly jobs numbers. If so, monthly job gains may fall into the 100,000 range soon.

So in general it was down for the winter, back up some, and we’ll see what happens next.

The ‘survey’ numbers and professional forecasts look promising, however it still looks to me like we are under the macro constraint of a too low govt deficit that’s struggling to keep up with the unspent income/demand leakages, with scant evidence of help from growth in private credit expansion.

And I tend to agree with Fed Chair Yellen here, which would tend to keep rates lower/longer if she gets her way. However I don’t agree that low rates somehow support aggregate demand, so I don’t see the likelihood of any call from the Fed or other forecasters for the fiscal relaxation I’ve been proposing.

Yellen may be poised to rewrite Fed’s rule book on wages, inflation

June 25 (Reuters) — “My own expectation is that, as the labor market begins to tighten, we will see wage growth pick up some to the point where … nominal wages are rising more rapidly than inflation, so households are getting a real increase in their take home pay,” Federal Reserve Chair Janet Yellen said last week, adding: “If we were to fail to see that, frankly, I would worry about downside risk to consumer spending.” Over the last year Fed staff changed their main model for forecasting wage and price inflation to reflect evidence that companies were adjusting prices more slowly than in prior years.

My immediate proposals remain 1) A full FICA suspension, which raises take home pay by 7.6%, and, for businesses that are competitive, lowers prices as well, restoring sales/output/employment in short order 2) A $10/hr federally funded transition job for anyone willing and able to work to promote the transition from unemployment to private sector employment 3) A permanent 0 rate policy with Tsy issuance limited to 3 mo bills. 4) Unrestricted campaign contributions, however, say, 40% of any contribution goes to the opposition…

Posted in Employment, Fed, GDP, Government Spending, Political | No Comments »

Recent charts

Posted by WARREN MOSLER on 12th June 2014

I’m starting to believe my own narrative…

Soft for the winter, up some, then moderating again.

All under the ongoing macro constraint of aggressive automatic stabilizers that brought the deficit down even with a negative GDP quarter, and some degree of path dependency with weakness taking something away from subsequent periods.

Not to mention the story about 1.2 million who lost benefits at year end taking menial jobs, boosting headline employment, not adding to personal income as their pay was about the same as the lost benefits, and front loading job growth as ultimately more headcount isn’t a function of benefits lost. We’ll see.

And a world getting tougher to export to. Weaker CNY isn’t helping, for example.

First, another firm revises Q1 down further, and Q2 up some as well:

GOLDMAN: “… we are taking our tracking estimate for Q1 [GDP] down to -1.9% [and] raising our tracking estimate for Q2 by 0.3pp to 3.8%”

If these turn out to be correct, it implies H1 GDP will come in under 1%, and also implies 2014 somewhere around 2% of H2 can print over 3%.

The fiscal noose tightens. If the deficit is going to average 2.8% of GDP for the year and started higher than that and has been coming down, it means it’s running lower than that ‘instantaneously’- maybe around 2% of GDP or so:

Treasury: Budget Deficit declined in May 2014 compared to May 2013

By Bill McBride

June 11 (Calculated Risk) — The Treasury released the May Monthly Treasury Statement today. The Treasury reported a $130 billion deficit in May 2014, down from $138 billion in May 2013. For fiscal year 2014 through May, the deficit was $436 billion compared to $626 billion for the same period in fiscal 2013.

In April, the Congressional Budget Office (CBO) released their new Updated Budget Projections: 2014 to 2024. The projected budget deficits were reduced for each of the next ten years, and the projected deficit for 2014 was revised down from 3.0% to 2.8%. Based on the Treasury release today, I expect the deficit for fiscal 2014 to be lower than the current CBO projection.

Retail sales showing the down for the winter, up, then lower growth pattern, in the context of the longer term drift lower in growth:

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The retail sales ‘control group’ (ex food, autos, building materials, and gas stations) shows the same pattern even more clearly:

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Lastly, keep an eye on crude prices. Looked to me like the spike in 2008 might have been the catalyst for the collapse in demand…

Posted in GDP | No Comments »

Nomura revises Q1 down to -2.4%

Posted by WARREN MOSLER on 11th June 2014

And the risk is we may be more path dependent than most realize with the deficit this low. That is, for example, if income dips due to ‘weakness’ such as weather, there is then that much less income to spend in the next period.

>   (email exchange)
>   In the race to see who can revise their Q1 estimates the lowest, I think Nomura is in the
>   lead so far at -2.4%…

Nomura Economists revise down First Quarter US GDP to -2.4%

Incorporating relevant information from Quarterly Service Survey which was released today, we revised down our Q1 GDP tracking estimate by a full percentage point to -2.4% from -1.4%. Personal consumption on services was much weaker than BEA has assumed. We haven’t revised Q2 GDP tracking estimate because we don’t know how the montyly profile of personal consumption for Q1 will be revised in reaction to QSS. That being said, the fact that personal consumption lost some traction in Q1 appears to be negative.

Posted in GDP | No Comments »

downward revisions for Q1

Posted by WARREN MOSLER on 11th June 2014

who would have thought?

U.S. Economy’s First-Quarter Contraction Could Be Even Worse Than You Thought

By Ben Leubsdorf

June 11 (WSJ) — The U.S. economy may have contracted more than previously thought during the first three months of 2014, private economists said Wednesday based on new health care-sector data from the government.

One analyst said economic output may have contracted at a 2% pace in the first quarter. That would be its worst performance since the recession.

The Commerce Department’s latest estimate of gross domestic product, the broadest measure of output across the economy, said GDP shrank at a seasonally adjusted annual rate of 1% in the first quarter. A revised estimate will be released June 25, and it could show an even larger contraction.

That’s based on the Commerce Department’s Quarterly Estimates for Selected Service Industries report for the first quarter, released Wednesday. It showed that revenue in the U.S. health-care and social-assistance sector fell 2% in the first quarter from the fourth quarter of 2013, not adjusted for seasonal variations or price changes. Hospital revenue fell a seasonally adjusted 1.3% from the prior quarter.

The Commerce Department’s last GDP report, though, said inflation-adjusted spending on health-care services surged to a seasonally adjusted annual level of $1.848 trillion in the first quarter from $1.808 trillion in the fourth quarter of 2013. That estimate for spending on health care boosted overall GDP growth by 1.01 percentage point, keeping the 1% contraction from being even worse.

J.P. Morgan Chase economist Daniel Silver and Pierpont Securities economist Stephen Stanley both cautioned that it’s not clear exactly how the Commerce Department will adjust GDP to account for the new data.

But they both downgraded their estimates for the first quarter based on the new survey, as well as other recently released data. Mr. Silver predicted GDP declined at a 1.6% pace in the first three months of the year, and Mr. Stanley predicted contraction at a 2% pace.

“Ouch,” Mr. Stanley said in a note to clients.

Posted in GDP | No Comments »

Review of last weeks data

Posted by WARREN MOSLER on 2nd June 2014

So my narrative is:

The Federal budget deficit is too small to support growth given the current ‘credit environment’- maybe $400b less net spending in 2014. The automatic fiscal stabilizers are ‘aggressive’, as they materially and continually reduce the deficit it all turns south. The demand leakages are relentless, including expanding pension type assets, corporate/insurance accumulations, foreign CB $ accumulation, etc. etc.

The Jan 2013 FICA hike and subsequent sequesters took maybe 2% off of GDP as they flattened the prior growth rates of housing, cars, retail sales, etc. etc. Q3/Q4 GDP was suspect due to inventory building, a net export ‘surge’, and a ‘surge’ in year end construction spending/cap ex etc. I suspected these would ‘revert’ in H1 2014. It was a very cold winter that slowed things down, followed by a ‘make up’ period. The question now is where it all goes from there. For every component growing slower than last year, another has to be growing faster for the total to increase.

The monthly growth rate of durable goods orders fell off during the cold snaps and the worked it’s way back up, though still not all the way back yet, and the ‘ex transportation’ growth rate was bit lower:

And of note:

Investment in equipment eased after a robust March. Nondefense capital goods orders excluding aircraft dipped 1.2 percent, following a 4.7 percent jump in March. Shipments for this series slipped 0.4 percent after gaining 2.1 percent the prior month.

In general the manufacturing surveys were firm.

Mortgage purchase applications continued to come in substantially below last year, even with the expanded, more representative survey:

According to the MBA, the unadjusted purchase index is down about 15% from a year ago.

MBA Mortgage Applications

Mortgage applications for home purchases remain flat, down 1.0 percent in the May 23 week to signal weakness for underlying home sales. Refinancing applications, which had been showing life in prior weeks tied to the dip underway in mortgage rates, also slipped 1.0 percent in the week. Mortgage rates continue to edge lower, down 2 basis points for 30-year conforming loans ($417,000 or less) to 4.31 percent and the lowest average since June last year.

And then there was the Q1 revised GDP release:

What drove it negative was a decline in inventories, net exports, and construction/cap ex:

The largest revisions to the headline number were from inventories (revised downward by -1.05%) and imports (down -0.36%), and although exports improved somewhat from the prior report, they still subtracted -0.83% from the headline. Fixed investments in both equipment and residential construction continued to contract.

PCE growth was revised up to +3.1% (adding 2.09% to GDP) but seems over 1% of that came from ACA (Obamacare) related and other non discretionary expenditures like heating expenses, etc. The question then is whether the increases will continue at that rate and whether the increased ACA related expenses will eat into other, discretionary expenditures.

The contribution made by consumer services spending remained essentially the same at 1.93% (up 0.36% from the 1.57% in the prior quarter). As mentioned last month, the increased spending was primarily for non-discretionary healthcare, housing, utilities and financial services – i.e., increased expenses that stress households without providing any perceived improvement to their quality of life.

And seems this Chart is consistent with my narrative:

And not that it matters, but just an interesting observation:

And lastly, for this report the BEA assumed annualized net aggregate inflation of 1.28%. During the first quarter (i.e., from January through March) the growth rate of the seasonally adjusted CPI-U index published by the Bureau of Labor Statistics (BLS) was over a half percent higher at a 1.80% (annualized) rate, and the price index reported by the Billion Prices Project (BPP – which arguably reflected the real experiences of American households while recording sharply increasing consumer prices during the first quarter) was over two and a half percent higher at 3.91%. Under reported inflation will result in overly optimistic growth data, and if the BEA’s numbers were corrected for inflation using the BLS CPI-U the economy would be reported to be contracting at a -1.52% annualized rate. If we were to use the BPP data to adjust for inflation, the first quarter’s contraction rate would have been a staggering -3.64%.

And looks like this will be limiting the next quarter:

Real per-capita annual disposable income grew by $95 during the quarter (a 1.03% annualized rate). But that number is down a material -$227 per year from the fourth quarter of 2012 (before the FICA rates normalized) and it is up only about 1% in total ($359 per year) since the second quarter of 2008 – some 23 quarters ago.

And remember this?

So the question is, how strong will the Q2 recovery be, and where does it go from there?

Again, looks to me like the deficit is having trouble keeping up with the demand leakages, and it keeps getting harder with time?

Jobless claims continue to work their way lower, but they are a bit of a lagging indicator and even with 0 claims there aren’t necessarily any new hires, either, for example.

And there’s another couple of issues at work here.

First, 1.2 million people lost benefits at year end, and it’s expected up to half of them will find ‘menial’ jobs during H1. However, corporations don’t add to head count just because unskilled workers lose benefits, so the employment numbers may thus be ‘front loaded’ with higher numbers of hires in H1, followed by fewer hires in H2.

Second, seems the new jobs don’t pay a whole lot, and a lot of higher paying jobs continue to be lost, so the increased employment isn’t associated with the kind of subsequent growth multipliers of past cycles.

Corporate profits were down over 10% in the Q1 GDP report, and mainly in the smaller companies as the S&P earnings saw a modest increase. Hence the small caps under performing, for example? Not mention earnings also tend to up and down with the Federal deficit:

This year over year pending home sales chart speaks for itself:

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Another series following the pattern- down for the winter weather, then back up some, and this time then backing off some:

Personal income & spending, up 0.3 percent and down 0.1 percent, fell back in April following especially strong gains in March. Wages & salaries slowed to plus 0.2 percent vs a 0.6 percent surge in March while spending on durables, reflecting a pause in auto sales, fell 0.5 percent vs gains of 3.6 and 1.3 percent in the prior two months. Spending on services, however, also fell, down 0.2 percent on a decline in utilities and healthcare after a 0.5 percent rise in March. In real terms, spending fell 0.3 percent following the prior month’s 0.8 percent surge. Price data remain muted, up 0.2 percent overall and up 0.2 percent ex-food and energy. Year-on-year price rates are at plus 1.6 percent and 1.4 percent for the core.

And again, the ACA and other non discretionaries added about 1% in Q1. So, again, it’s down for the winter, then up and this time back down to begin Q2 (with the growth of healthcare expenses backing off some):

Posted in Deficit, Economic Releases, Employment, GDP, Government Spending, Housing | No Comments »


Posted by WARREN MOSLER on 29th May 2014

Posted in GDP | No Comments »

Real final sales domestic product

Posted by WARREN MOSLER on 7th May 2014

Real final sales domestic product chart not looking good

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Posted in GDP | No Comments »

housing starts and manufacturing

Posted by WARREN MOSLER on 16th April 2014

Another anemic ‘bounce’- down 5.9% from last year. And more reason to believe the much touted November/Dec ‘spike’ had something to with expiring tax credits. And with mtg purchase applications still running almost 20% lower year over year the housing contribution to GDP in general is so far looking lower than last year.

Housing Starts

Housing starts picked up in March but not as much as expected. However, strength was in the single-family component while it was expected to be in the multifamily component. So, the expectations shortage really is not bad. Overall starts rose 2.8 percent after a 1.9 percent increase in February. The March annualized pace of 946,000 fell short of analysts’ forecast for 965,000 and was down 5.9 percent on a year-ago basis.

Single-family starts jumped 6.0 percent, following a 2.9 percent rise the month before. Multifamily starts slipped 3.1 percent in March after no change the month before.

Overall permits dipped 2.4 percent in March after surging 7.3 percent the prior month. The annualized rate of 990,000 was up 11.2 percent on a year-ago basis. The median market forecast was for 1.010 million. The softness came from the multifamily component which declined 6.4 percent after a 22.8 percent spike in February. The single-family component rebounded 0.5 percent, following a 1.7 percent dip in February.

Overall, the headline number was below expectations but the fact that moderate strength was in the single-family component is encouraging. Last month’s data in permits suggested more strength in the multifamily component. But the multifamily component is volatile and based on recent permits, there still is strength in that component. The gain in the single-family component is a bonus.

Somewhat volatile but over time just chugs along at a steady pace.

It’s generally the rest of gdp that’s does the moving and shaking:

Posted in GDP, Housing | No Comments »

retail sales charts

Posted by WARREN MOSLER on 14th April 2014

Headline retail sales y/y with 3 mma:

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3 month moving average nudged up to 2.5% which is a relished move as sales catch up from losses due to weather. But it’s going to take more months like this one to reverse what looks like a longer term trend towards lower levels.

Note however that Red Book and Goldman retail sales reports, though ‘minor’ indicators, haven’t shown much strength.

You can see the dip and recovery of the monthly prints on this graph:

Posted in GDP | No Comments »

wholesale sales and inventories

Posted by WARREN MOSLER on 10th April 2014

Just noticed wholesale sales didn’t bounce much yet either. The Hope now is for gradual improvement

Wholesale inventories 0.5% in February a slower pace in February than in the 0.8% gain the prior month, which could support views that restocking will not help the economy in the first quarter. Wholesale Sales rebounded 0.7% in February after a 1.8% decline in January.

Posted in GDP | No Comments »

consumer credit and a few comments

Posted by WARREN MOSLER on 8th April 2014

Note the year over year rate of growth:

As previously discussed, in order for GDP to grow at last year’s pace all the pieces, ‘on average’ have to do same.

And so far, housing and cars are well below last year’s growth rates.

And the contribution of net govt spending is well below last year’s contribution.

And so far net export growth isn’t coming to the rescue.

Nor is consumer credit driving spending.

Even capex just took a hit.

And the personal income growth rate isn’t looking like it’s ‘bounced’ any.

Employment growth, a lagging indicator that’s largely a function of sales, if anything looks a tad less as well.

The ‘surveys’ are still showing positive growth, and maybe they’ll turn out to be correct. But I have noticed a tendency for their responses to be influenced by the stock market.

Hopefully we’ve just had a weather pause, and the consumer and business celebrate spring with a material surge of spending that exceeds their incomes to off set the ongoing ‘demand leakages’.

But if not, growth slips into reverse until the federal deficit again gets large enough to stop the slide.

Posted in Credit, Employment, GDP, Government Spending | No Comments »

Economy Knocking At Recession’s Door

Posted by WARREN MOSLER on 6th April 2014

See charts
Must be reading my blog

Economy Knocking At Recession’s Door

Posted in GDP | No Comments »

Charts from the last few days

Posted by WARREN MOSLER on 3rd April 2014

Total vehicle sales year over year showed some post winter bounce.

The narrative was that March started off slow but picked up due to large incentives for the last week.

We’ll see if it all holds up for April.

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Factory orders ‘bounced’ from large declines but not yet enough to ‘make up’ for the declines.

And regarding capital goods, as with construction measures, I remain concerned that what looked like a year end spike was tax driven and ‘borrowed’ from this year.

Factory orders bounced back strongly in February, up 1.6 percent to edge above the high end of the Econoday consensus. The month got a major lift from a 13.4 percent upswing in commercial aircraft orders. A 3.0 percent gain in motor vehicle orders also helped the total. But the total excluding transportation orders, which is a closely tracked reading, is also healthy, up 0.7 percent following 0.1 percent declines in the prior two months.

There is, however, a negative in the February numbers and that’s a sizable 1.4 percent decline in nondefense capital goods orders excluding aircraft. This is considered a core reading on the outlook for business investment. February’s decline more than reverses a 0.8 percent rise in January. Orders for this reading were especially weak in December, at minus 1.6 percent.

Other data include a weather-related bounce in shipments, to plus 0.9 percent following January’s 0.7 percent decline. Inventories rose 0.7 percent, in line with shipments and keeping the factory sector’s inventory-to-shipment ratio unchanged at 1.30. Unfilled orders are a positive, up 0.3 percent.

This report is mostly positive if it weren’t the decline underway in core capital goods orders, a decline that points to weakness in the business outlook. Early indications on the manufacturing for March have also been mostly positive, with the exception of yesterday’s slowing in the ISM employment index.

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Global manufacturing has softened in recent months. At 52.4 in March, down from 53.2 in February, the J.P.Morgan Global Manufacturing PMI fell to a five-month low, but remained above its average for the current 16-month sequence of expansion.

Global manufacturing production increased for the seventeenth consecutive month in March. However, the rate of expansion eased to a five-month low, mainly on the back of a slowdown in Asia. Growth of total new orders also eased slightly, despite improved inflows of new export business.

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Employment, generally a lagging indicator, was up some, but the chart still seems ‘uninspiring’ at best:

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Not to give this all that much weight, and they are limited surveys with Easter distortions as well, but the year over year lines aren’t showing any rebound yet:

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Purchase Mortgage applications up 1% for the week but down 19% vs last year.

What I’m saying is that Jan and Fed were weather depressed. And with the federal deficit now running maybe below 3% of GDP, down several % from last year, some pro active and some from the auto stabilizers, my concern is that the underlying support for a bounce is no longer there and the rate of growth continues to decelerate. Yes, lending is up some, but it could be the financing of utility bills and inventory/reduced cash flow growth, which takes away from future sales.

Posted in Economic Releases, Employment, GDP | No Comments »

Mtg purchase apps, New Home Sales, Durable goods orders still not performing

Posted by WARREN MOSLER on 26th March 2014

MBA Purchase Applications

Purchase applications rose 3.0 percent in the March 21 week but failed to lift the year-on-year rate which is down a very sharp 17.0 percent. The year-on-year rate is a reminder of how important cash buyers are right now in the housing market and also a reminder that mortgage rates this year are less favorable than this time last year. The refinance index fell 8.0 percent in the week. Rates rose in the week with the average 30-year mortgage for conforming loans ($417,500 or less) up 6 basis points to 4.56 percent.

Durable Goods Orders

The latest durables orders report was mixed with the headline strong and the core slowing. New factory orders for durables in February rebounded 2.2 percent, following a decrease of 1.3 percent in January. Analysts projected a 1.0 percent rise. Excluding transportation, durables orders slowed to a 0.2 percent rise in February, following a 0.9 percent boost the prior month.

The transportation component jumped a monthly 6.9 percent after dropping 6.2 percent the month before. Within transportation, the gain was led by increases in orders for defense aircraft although nondefense aircraft and motor vehicles also were strong.

Outside of transportation, orders were up slightly but very mixed by subcomponents. Gains were seen in primary metals, fabricated metals, computers & electronics, and “other.” Notably offsetting were declines in machinery and electrical equipment.

There was slippage in investment plans. Nondefense capital goods orders excluding aircraft decreased 1.3 percent in February, following a rebound of 0.8 percent the month before. Shipments for this series advanced 0.5 percent, following a 1.4 percent drop in January.

The latest durables report suggests that manufacturing is not as strong as indicated by recent manufacturing surveys.

Note the year over year line:

From yesterday, the charts looks like sales were rising nicely before being flattened by the tax hikes and spending cuts:

Still too early to tell, but so far charts aren’t showing much of a ‘bounce’ from the weather yet.

Posted in Economic Releases, GDP, Housing | No Comments »

Wholesale trade

Posted by WARREN MOSLER on 11th March 2014

Worse than expected, and only one number subject to revision, with the govt deficit at only 3% of GDP this kind of slowdown can turn pro cyclical:

Wholesale Trade

Rising inventories, tied in part to weather-related shipping snags, are a rising threat to economic growth. Wholesale inventories rose 0.6 percent in January against a 1.9 percent plunge in sales, a heavy mismatch that drives the sector’s stock-to-sales ratio up 2 notches to 1.20 which is one of the heaviest readings of the recovery.

Details show large builds in autos, metals, and machinery, three groups where January sales were weak. Nondurable goods show especially large builds against especially soft sales including paper, drugs and petroleum.

Data on factory inventories, which were released last week with the factory orders report, showed an unwanted build and a dip in sales that pushed the stock-to-sales ratio near its heaviest level of the whole recovery. Inventories in the retail sector, with December the latest available report, are the heaviest of the recovery and are building at a time when sales are slowing — not accelerating. Retail data for January will be posted with the business inventories report on Thursday.

Market Consensus before announcement
Wholesale inventories showed a 0.3 percent build in December and were well matched by a 0.5 percent rise in wholesale sales that left the stock-to-sales ratio for the wholesale sector unchanged at 1.17. This ratio has held between 1.18 and 1.17 since May.

Posted in GDP, Government Spending | No Comments »

Factory orders- another Dec print revised down

Posted by WARREN MOSLER on 6th March 2014

Frigid weather in January didn’t help the factory sector where orders fell 0.7 percent following a downwardly revised 2.0 percent decline in December. Also revised lower is the ex-transportation reading for January, to a slim plus 0.2 percent vs an initial reading (in last week’s durable goods report) of plus 1.1 percent. Non-durables are the new data in today’s report which show a 0.4 percent decline on weakness in chemical products.

Orders for primary metals show a third month of contraction, at minus 1.2 percent in January, with transportation equipment a second month of contraction, at minus 5.7 percent vs a 12.1 percent plunge in December. The bulk of the weakness in transportation is tied to the ups and down of commercial aircraft orders but also to motor vehicles, where orders fell 0.9 percent following December’s 1.2 percent decline. Machinery also shows a decline in January along with electrical equipment and furniture, the latter two of which are tied to housing. The plus side shows a big gain for fabricated metals, one however that follows a big loss in December, and a gain for computer equipment that doesn’t offset a much larger December decline.

Shipments fell 0.3 percent for a second month in a row while inventories rose 0.2 percent, a moderate build but enough, given the weakness in shipments, to raise the inventory-to-shipments ratio one notch to the heavy side to 1.30. Unfilled orders were unchanged in the month.

There is a positive in the report and that’s capital goods orders excluding aircraft, a core reading on business investment that rose 1.5 percent. Still, the gain isn’t enough to offset a 1.6 percent decline for this reading in the prior month.

Factory orders are a choppy series, sometimes up and sometimes down, but the trendline has been flat at best. Anecdotal indications on February point to another month of weakness for shipments, weakness tied to heavy weather, but, in what hopefully points to a bounce back for the spring, respectable strength for orders.

Chart looks like the weather turned bad in May:

Lots of talk about ‘wage inflation’ but not showing up for real so far:

Productivity in the fourth quarter rose a revised1.8 percent after a 3.5 percent boost the prior quarter. Expectations were for 2.4 percent increase. Unit labor costs declined an annualized 0.1 percent, following a decrease of 2.1 percent in the third quarter. The market forecast was for a 0.5 percent decline.

The rise in productivity reflected a 3.4 percent jump in non-farm output, following a boost of 5.4 percent in the third quarter. Hours worked increased 1.6 percent in the fourth after rising an annualized 1.9 in the third quarter. Compensation firmed to a 1.7 percent rate after rising 1.3 percent in the third quarter.

Year-on-year, productivity was up 1.3 percent in the fourth quarter versus up 0.5 percent in the third quarter. Year-ago unit labor costs were down 0.9 percent, compared to up 1.9 percent in the third quarter.

Posted in GDP, Inflation | No Comments »