GDP, Profits, Pending home sales, Mtg purchase apps

First revision has the consumer a bit weaker than expected, which means the savings rate isn’t quite as weak as initially reported. The savings rate, however, is still unsustainable weak, meaning either consumer spending falls further or personal income growth reverses its deceleration. The other revisions include an increase in already too high inventories that have already turned negative in Q4, and a smaller trade deficit that is now showing increases in q4. And the hurricane assisted boost in auto sales has more recently reversed as well:

Highlights

Third-quarter GDP proved even more solid than the first estimate, revised 3 tenths higher in the second estimate to an as-expected 3.3 percent annualized rate. Nonresidential investment and inventory growth added a little more in the second estimate while residential investment and net exports subtracted a little less. These offset a slightly smaller contribution from consumer spending, at a 2.3 percent rate vs 2.4 percent in the first estimate and expectations for 2.5 percent. The drop off on the consumer side was centered in durables which, despite a slight downgrade, still grew at an 8.1 percent rate getting a boost from hurricane-replacement demand for autos.

Turning back to inventories, whether builds are actually positive or negative for the outlook are always difficult to assess, but given this year’s general strength in consumer and business demand, the third-quarter build is probably a positive for the outlook, suggesting that businesses were stocking up for strength ahead including for the holiday shopping season.

Consumer spending, despite auto sales, wasn’t on fire in the third quarter though the outlook for the fourth quarter, given what are very high expectations for holiday spending, are positive. Early expectations for fourth-quarter GDP are once again in the 3 percent range.


This is being held up by consumers dipping into savings to sustain their spending:


This is from two weeks ago:


Hurricane story, sales still very weak historically:

Highlights

Led by a hurricane bounce in the South, the pending home sales index jumped a much sharper-than-expected 3.5 percent in October which points to continued gains for final sales of existing homes. Pending sales in the South jumped 7.4 percent in October after falling 3.0 percent during the hurricane swept month of September. The index level in the South, at 123.6, far outdistances all other regions and compares against 109.3 for the total index. October’s overall gain follows two months of sharp increases in new home sales and will boost confidence that housing, after a mostly flat year, is pivoting higher at year end.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but is still 0.6 percent below a year ago.
Read more at http://www.calculatedriskblog.com/#vRbrDXSwqADlwL5M.99

And no sign of a sudden spike in mtg purchase apps here:

New home sales, Bank lending, Philly Fed state coincident index

A better than expected, but somewhat peculiar details, and note the approximate average over the last 4 months. And maybe some tax related buying?

Last month, new single-family homes sales soared 30.2 percent in the Northeast to their highest level since October 2007. Sales in the South increased 1.3 percent also to a 10-year high. There were also strong gains in sales in the West and Midwest last month.

More than two-thirds of the new homes sold last month were either under construction or yet to be started.

Despite the rise in sales in October, the inventory of new homes on the market increased 1.4 percent to 282,000 units, the highest level since May 2009.

Total year-on-year sales are up 18.7 percent for a nearly 2 percentage point gain from September. But not the entire housing sector is showing this kind of strength as sales of existing homes are actually down 0.9 percent on the year. But new homes, boosted by the strong labor and stock markets, are definitely moving and look to be a significant contributor to fourth-quarter growth.


Still working its way lower just like it’s done with every recession but GDP estimates telling me there’s some major credit expansion somewhere I’m missing?

Nice bounce up to 42. Note the prior, similar bounces:

Mtg purchase apps, Durable goods orders

I don’t see any convincing evidence of a housing market revival, particularly with the growth of real estate lending remaining well below that of last year:

Highlights

Purchase applications for home mortgages rose a seasonally adjusted 5 percent in the November 17 week, though overall mortgage activity was only barely higher (by 0.1 percent) than in the prior week as the increase in buyers was offset by a 5 percent decline in refinancing activity. On an unadjusted basis, the purchase index rose only 1 percent from the prior week, putting the year-on-year gain at 4 percent, down a sharp 14 percentage points from last week’s reading due to an outsized weekly jump higher in the index in the comparable week last year. The slowdown in refinancing took its share of mortgage activity down 1.4 percentage points from the prior week to 49.9 percent. Mortgage rates rose slightly though remaining at historically low levels, with the average interest rate on 30-year fixed-rate mortgages ($424,100 or less) up 2 basis points to 4.20 percent. Today’s report shows home-buyers quite active and adds to recent evidence of a housing market reviving in the fourth quarter, though the year-on-year gain, now at just 4 percent after much stronger readings for most of the year, suddenly looks much less impressive.


Less than expected but still showing modest year over year growth:

Highlights

Durable goods orders, down 1.2 percent in October, couldn’t post three straight gains but there are positives in the report. But first the negatives which include a 33 percent reversal for commercial aircraft orders and a 0.5 percent decline for core capital goods orders (nondefense ex-aircraft). These two components have been very strong in recent months so a step back isn’t a surprise, and aircraft orders appear certain to jump sharply in next month’s report given Boeing’s major success at this month’s Dubai Air Show.

Ex-transportation offers an underlying reading and this is solid with a 0.4 percent gain. The revision to this reading for September is also positive, up 4 tenths to 1.1 percent. And core capital goods get an even bigger revision, an 8 tenths upgrade to 2.1 percent in September which helps offset October’s decline. Shipments of core capital goods, which are direct inputs into GDP, are also revised higher, up 5 tenths in September to 1.2 percent with October coming in at a constructive plus 0.4 percent. Other positives in the report are a 1.7 percent rise in vehicle orders and a 1.5 percent increase in vehicle production, both of which follow the ex-hurricane spike in vehicle sales.

Other readings are mixed including very modest 0.1 percent gains for both total shipments and total inventories and a disappointing no change for unfilled orders.

This report isn’t a step forward but the factory sector, nevertheless, still looks to be a positive contributor to fourth-quarter growth.

Modest growth recently but still not back on track since the collapse in oil capex at the end of 2014. And these charts are not adjusted for inflation:

Industrial production, Household debt, Business sales and inventories, Container counts, Animal trophies

A dip and a recovery due to the hurricane (as per vehicle sales data), chugging along at modest rates of growth, and still down from high a couple of years back, not adjusted for inflation:


The NY Fed reports household debt growth decelerated in q1, in line with the deceleration in bank lending:


Note the deceleration since January for both of these charts, inline with decelerating bank loan growth:

Analyst Opinion of Business Sales and Inventories

This was a worse month for business sales compared to last month – and inventories remain elevated. Our primary monitoring tool – the 3 month rolling averages for sales – declined and remains in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series.

Now he’s gone too far…
;)

The Trump administration reversed an Obama-era policy today banning the import of elephant trophies from Zimbabwe and Zambia. Americans hunting in the African countries will now be permitted to bring back their trophies of the killed animals, a U.S. Fish and Wildlife Service official told ABC News.

Retail hiring, Container count, Truck sales

October Retail Hiring Lowest In Six Years

from Challenger Gray and Christmas

Fewer major retailers have announced large-scale hiring announcements so far this year, which reflects the drop in the number of October employment gains in the sector. Gains fell 8 percent from last year to 136,700, the lowest October gain since 2011, when the sector added 134,200 jobs.

Imports up and exports down doesn’t help US GDP:

Port of Long Beach: Another Record Month in October

By Bill McBride

Read more at http://www.calculatedriskblog.com/#TgvZqc4qb4gZ5jQb.99

Inbound containers destined for retailers jumped 14.3 percent to 339,013 TEUs. Export boxes decreased slightly, 0.5 percent, to 126,150 containers. Empty containers sent overseas to be refilled with goods increased 28.9 percent, to 204,055 TEUs.

Read more at
http://www.calculatedriskblog.com/#IHELvURAYYMpHj9O.99

Credit check, Commercial real estate index, Unemployment, Margin debt

Still no sign of a rebound:

Home prices rising about 6% annually and loans now growing at under 4% annually looks in line with at best flat housing sales:


Looks like the blip up as hurricane destroyed vehicles were replaced has run its course:


This had looked like it peaked a couple of years ago, but since went back up to new highs:

JOLTS, Consumer credit, Tax cuts, Market cap chart, 55+ housing index, MMT conference closing remarks

Note that hires and quits have stopped growing, and historically both lead job openings, in yet another indication that this cycle has reversed:

Highlights

September job openings edged up slightly to a very abundant 6.093 million from a revised 6.090 million in August. Over the month, hires and separations were also little changed at 5.3 million and 5.2 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.2 percent, respectively.

Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising. These totals include workers who may have been hired and separated more than once during the year.


Looks a lot like a one time event to finance vehicles to replace those lost in the hurricane, and maybe some borrowing on credit cards as incomes fell short for the same reason, but in any case the chart shows it’s been decelerating since the election:

Highlights

Consumer credit rose a greater-than-expected $20.8 billion in September. Both revolving and non-revolving credit posted sharp gains. Revolving credit which is where credit-card debt is tracked rose a sizable $6.4 billion after increasing $5.5 billion in August. The gain for the non-revolving component, where auto financing and also student loans are tracked, jumped $14.4 billion after $7.6 billion. This report is not about weakness but about strength, at least strength for consumer spending.


Not that the deficit matters the way they think it does- It’s just the $ spent by govt. that haven’t yet been used to pay taxes and sit as cash, $ in reserve accounts at the Fed and $ in securities accounts at the Fed (aka tsy secs) until used to pay taxes.

But after all this time they’re just now addressing this?

Tax cut-driven economic growth alone won’t wipe out the deficit, top House tax writer Brady admits

  • “Growth alone, I acknowledge, won’t get us back” to a balanced budget, says the House Ways and Means Committee chairman.
  • Critics say the GOP tax package would add to the deficit.
  • Kevin Brady’s committee is set to begin revising its tax reform plan on Monday to court holdout lawmakers.
  • GOP tax cuts will not pay for themselves, add ‘significantly’ to US debt: Fitch report

    This chart is getting attention again. It isn’t interest rate adjusted, so we’ll see if that matters:


    This may have leveled off as well:

    MMT conference closing remarks:

    https://www.youtube.com/watch?v=jfJAdxnGNL8

    Credit check with macro comments

    Bank credit growth continues to decelerate, to where historically, after revisions, the economy would already be in recession. Housing and vehicles look like they are already reporting negative growth, and personal income growth has decelerated to about 0% growth, with personal spending holding positive only because people are dipping into savings, which historically has always been followed by a reduction in spending:


    Less borrowing to spend translates into less personal income growth:


    Spending has been sustained only by dipping into savings, which is not sustainable and historically happens at he end of the cycle:


    With this many jobs taken every month by people not considered to be in the labor force I suspect it’s not so easy to be counted as being in the labor force as it once was? And so there is quite a bit more slack than generally presumed?


    Likewise, maybe if you leave your job it’s harder to be counted as in the labor force than it was historically?

    Maybe people over 65 do want to work?


    The participation rate for this segment didn’t drop in 2008 and continues to increase:

    Private payrolls, Construction spending, Vehicle sales, Saudi output and pricing, Trump news headlines

    2 month average is 167,500:

    Highlights

    ADP is calling for a limited snap back in the October employment report. ADP sees private payrolls rising 235,000 which is just on the high side of ADP’s usual estimates. Actual private payrolls fell 40,000 in September, pulled down by hurricane dislocations. Today’s results may, only on the margin, pull down expectations for Friday’s private payrolls where the consensus is currently 320,000.

    Service sector employment growth began it’s deceleration at the end of 2014 when oil capex collapsed:

    Highlights

    The non-residential sector gets a downgrade in today’s construction spending report where the headline increase, at 0.3 percent in September, nevertheless beats the consensus by 3 tenths. Private non-residential spending, however, fell a steep 0.8 percent following a sharply downward revised 0.7 percent decline in August. Year-on-year, this reading is down 3.8 percent with weakness most evident in manufacturing and office building that offsets gains for commercial building.

    The residential side, though unchanged in September, shows much more strength with a year-on-year rise of 9.6 percent. Spending on both new single-family and new multi-family homes actually increased in the month, up 0.2 and 0.6 percent respectively, but spending on home improvements fell back 0.6 percent.

    Public spending improved in the month led by a 5.2 percent gain for educational building. Highway & street spending rose 1.1 percent in the month but the yearly decline is still steep at 7.4 percent. Both Federal and state & local spending rose in the month but are down in the low single-digits on the year.

    This is a mixed report for what has proven to be an uneven year for the construction and housing sectors.


    All three look like they’re in decline to me:

    Down from last month but better than expected on post hurricane replacement buying:

    From : WardsAuto

    Another month ended well beyond expectations, as replacement sales and inventory clear-out boosted the daily sales rate to a 15-year high.

    U.S. automakers sold 1.35 million vehicles in October, resulting in a daily sales rate of 53,945, 2.6% above prior-year.

    A 18.00 million SAAR was ahead of year-ago’s 17.80 million and behind prior-month’s exceptionally high 18.48 million mark.
    That is up 1% from October 2016, and down 2.6% from last month.

    Saudis set price via their discounts and let quantity sold float. Note that their discounts seem to have turned south, indicating
    they are looking remove the upward pressure on prices since their prior discount adjustments:

    Trump’s politicised reaction to New York attack a far cry from Las Vegas shooting

    President Donald Trump said his Justice Department is a “joke” and blamed Democrats for Tuesday’s attack that killed eight people in Manhattan, saying they “do not want to do what is right for the country.”

    Sen. Jeff Flake, R-Ariz., said on Twitter that Trump was unfairly blaming Schumer for the diversity visa program. Flake, one of Trump’s chief Republican foes in Congress, said Schumer was among a group of eight Republican and Democratic senators who proposed eliminating the program three years ago as part of a broader bipartisan bill to overhaul U.S. immigration laws.
    Flake, who served on that “Gang of Eight” with Schumer, said: “I know. I was there.”

    The immigration bill ultimately failed in the GOP-led House after passing the Senate in June 2013, 68-32, with 14 Republicans joining Democrats.

    “I’m calling on President Trump to rescind his proposed cuts to this vital anti-terrorism funding immediately,” Schumer said.

    He said Trump actually had proposed cutting anti-terrorism funding in his most recent budget.

  • President Donald Trump is reportedly insistent that the Republican tax reform bill be called the “The Cut Cut Cut Act.”
  • Trump’s proposed title for the legislation is being met with resistance on Capitol Hill.
  • House Ways and Means Committee Chairman Kevin Brady, R-Texas, has final say over the bill’s name.