Category Archives: UK

Bankruptcy cuts, Wholesale trade, Turkey

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Bankruptcy-related job losses invoke grim reminders of Great Recession

In the first seven months of the year, U.S.-based companies announced 42,937 job cuts due to bankruptcy, up 40% from the same period last year and nearly 20% higher than all bankruptcy-related job losses last year, a report released Tuesday concluded. Despite record-low unemployment, bankruptcy filings have not claimed this many jobs since the Great Recession.
“It is the highest seven-month total since 2009 when 50,258 cuts due to bankruptcy were announced,” according to the report by outplacement and business coaching firm Challenger, Gray & Christmas. “In fact, it is higher than the annual totals for bankruptcy cuts every year since 2009.”

Not good, sales in contraction:

Highlights

Inventories in the wholesale sector were unchanged in the second estimate, down from a 0.2 percent build in the first estimate (which will be a small negative for second-quarter GDP revisions) and compared to a 0.4 percent build in May. Inventories may be steady but not sales which fell 0.3 percent in the wholesale sector during June after a 0.6 percent decline in May. Year-on-year, sales in June were down 0.2 percent versus a 7.6 percent rise in inventories which hints at a slowing inventory build ahead. Inventories of autos did fall 0.2 percent in June but were still up 17.4 percent on the year. This will likely be a negative for near-term auto production.


Inventories excessive and rising as sales slow:

Now that the ‘counter-intuitive’ rate cut worked in Erdogan’s favor, good chance more to come?

Turkish Lira

The Turkish lira rose to 5.484 against the US dollar on Thursday, the highest since early April

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GDI, Productivity, China pmi, Dallas Fed

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Gross domestic income was just revised higher. The blue bars are the previously reported levels and the red bars are the revised levels. This further meant that the savings rate unspent income) was higher as previously discussed. And an increasing savings rate generally reflects a deceleration in borrowing:


Lack of aggregate demand- desires to not spend income not being sufficiently ‘offset’ by’ private or public sector net (deficit) spending:


I see deceleration in both, just less so in services:

Highlights

Texas manufacturing activity bounced back but not as much expected in July, with the general business activity index rebounding by 5.8 points from June’s three-year low though remaining in contraction at minus 6.3. The production index also improved slightly, rising 0.4 points to 9.3, indicating factory output growth at roughly the same pace as in June.

The survey’s demand indicators were mixed but mostly stronger, however. Showing acceleration were new orders, which rose 1.8 points to 5.5 in an extension of June’s improvement, and moving out of contraction the growth rate of orders rose 8 points to 2.7. Shipments rebounded strongly by 8.5 points to 10.2, and capacity utilization rose to 1.6 points to 11.2. But unfilled orders did fall 6.2 points to minus 2.8 and delivery times fell 4.3 points to minus 4.8. Inventories of finished goods fell another 4.5 points to minus 10.6.

employment measures bounced back strongly after slipping previously, with the employment index rising 7.2 points to 16.0, well above the long-term average. Hours worked rose 1.9 points to 6.6, while wages slightly dipped by 1.6 points to a still strong 20.1.

Also pointing to strength ahead, capital expenditures rose sharply after falling to two-year lows previously, rising 8.3 points to 15.2.

On the inflation front, manufacturers saw upward pressures remaining about the same for raw materials input costs, with the index edging up 0.6 points 17.0, much stronger than for prices received, where price growth was down 2.9 points to minus 1.7.

Expectations for future business conditions improved, though remaining well below average, with expected general activity returning into positive territory by rising 8.7 points to 6.0 and the company outlook rising 5.5 points to 9.1.

Today’s report shows Texas manufacturing recovering in July from June’s slide more strongly than the headline suggests, and will probably not strengthen the case for more accommodation by the Fed.

Dallas Fed: “Texas Manufacturing Continues Moderate Expansion”

The general business activity index rose six points but remained in negative territory for a third month in a row, coming in at -6.3. The company outlook index rose five points to -0.9, with the near-zero reading indicating that the share of firms noting a worsened outlook roughly equaled the share noting an improved outlook. The index measuring uncertainty regarding companies’ outlooks retreated 12 points from its June peak, coming in at 9.7.

This is what the Fed is looking at- a steep deceleration after tariffs were announced:

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Existing home sales, Richmond Fed, UK factory orders, Chemical Activity Barometer

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Worse than expected and in contraction year over year:

Highlights

The housing market firmed in the early Spring but has since flattened out. Existing home sales came in softer-than-expected at a 5.270 million annual rate in June which, however, is right in line with the 3-month average of 5.280 million. This average started the year at roughly 5.1 million.

Single-family resales fell 1.5 percent in the month to a 4.690 million pace while condo sales, the second and much smaller component in the report, fell 3.3 percent to 580,000. By region, the Northeast and Midwest posted mid-single digit monthly gains with the South and West posting mid-single digit declines.

For home sellers, the good news is centered in prices which rose a sharp 2.7 percent to a median $285,700. For buyers, the good news includes a 1.0 percent rise in supply on the market, at 1.930 million which nevertheless is dead flat on the year at zero.

Sales year-on-year are in negative ground at minus 2.2 percent in what should be an easy comparison against a weak 2018. Resales have only a limited impact on residential investment in contrast to new home sales which will be posted tomorrow. But if trends hold, even flat results for new home sales, given firmness early in the quarter, could still make for the first positive residential contribution, however modest, to GDP since 2017.

Lack of momentum in housing, which is unexpected this year given the strength of the jobs market and the fall in mortgage rates, will be one factor that doves can cite at next week’s FOMC meeting in favor a rate cut. Watch Friday for the first estimate of second-quarter GDP.


Bad:

Highlights

Fifth District manufacturing activity unexpectedly fell into contraction in July, according to the latest survey from the Richmond Fed, whose composite index fell 14 points from June’s revised reading of 2 to minus 12, its lowest level since January 2013. Coming in sharply below the range of analysts’ forecasts calling for a modest uptick in growth, the slowdown was driven by declines in in all three major components of the index, with shipments down 18 points to minus 13, new orders down 16 to minus 18, and the number of employees down 7 points to minus 3, the lowest level in more than three years.

Weakness was registered in nearly all components, with some posting double digit declines. Backlog of orders fell 29 points to minus 26, the lowest level since April 2009, while capacity utilization fell 20 points to minus 24. Companies reported worsening local business conditions, with the index plunging 25 points to minus 18, the largest monthly drop on record.

The one bright spot in an otherwise gloomy report were expectations over the next six months, as companies on balance saw improvement in most major components. Here, expected shipments were up 9 points 32 and expected new orders were up 9 points to 36, while expected local business conditions were up 14 points to 25.

On the inflation front, companies said both prices paid and prices received grew at a significantly faster pace in July, though input price growth continued to outpace growth of output prices. Survey participants expected growth of both prices paid and prices received to slow in the near future.

The surprising weakness of today’s report contrasts with the Philly Fed and Empire State regional reports last week showing manufacturing rebounding in these regions. Despite the reported increase in input and output prices, the marked deterioration in the region’s manufacturing survey to the lowest level in six years is likely to bolster the dovish case for cutting the Fed funds rate at the FOMC meeting next week.


Not at all good- 3mo average now negative year over year:

Chemical Activity Barometer Fell in July

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Employment, China, Trump speech

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The annual rate of change continues to take a dive:

Highlights

There’s still time to cancel your rate-cut party. Nonfarm payrolls shot 224,000 higher in June and well beyond Econoday’s consensus range where the high forecast was 205,000. There are no flukes in this report underscored by a 17,000 jump for what has been an uneven manufacturing sector that Federal Reserve policy makers are watching with concern. Payrolls at professional & business services jumped 51,000 as employers scramble to meet demand with contractors. Government payrolls, up 33,000, were also a large contributor to June’s growth.

China says there will be no trade deal unless existing tariffs are stripped

Continuing evidence that dementia is setting in:

“In June of 1775, the Continental Congress created a unified Army out of the Revolutionary Forces encamped around Boston and New York, and named after the great George Washington, commander in chief. The Continental Army suffered a bitter winter of Valley Forge, found glory across the waters of the Delaware and seized victory from Cornwallis of Yorktown.

“Our Army manned the air, it rammed the ramparts, it took over the airports, it did everything it had to do, and at Fort McHenry, under the rocket’s red glare it had nothing but victory. And when dawn came, their star-spangled banner waved defiant.”

Why Trump and Judy Shelton want the US back on the gold standard

‘In 2016, before his election, Trump suggested it might be time to stage a return: “Bringing back the gold standard would be very hard to do—but boy, would it be wonderful. We’d have a standard on which to base our money.” This might be dismissed as a throwaway comment, if not for Trump’s desire to put the likes of Cain, Moore, and now Shelton on the Fed board, giving a goldbug a seat at the table to steer the most powerful country’s monetary policy.’

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China, UK, US, Euro zone

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Global collapse continues, though you’d never know it watching the stock market:

China Inflation Rate Slows to 6-Month Low

The official Non-Manufacturing PMI in China unexpectedly inched lower to 54.2 in June, the lowest in six months, from 54.3 in the previous month and missing market consensus of

China Factory Activity Shrinks More than Estimated

The Official NBS Manufacturing PMI in China unexpectedly was unchanged at 49.4 in June 2019 and missing market expectations of 49.5. This marked the second straight month of contraction in manufacturing activity

UK Manufacturing PMI Slumps to 6-Year Low

The IHS Markit/CIPS UK Manufacturing PMI fell to 48 in June, the lowest since February 2013 and well below forecasts of 49.2. Production contracted at the fastest pace since October 2012 and new orders dropped the most for almost seven years, amid high stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition.

US Manufacturing Growth Drops to New 2-1/2-Year Low: ISM

The ISM Manufacturing PMI in the US fell to 51.7 in June 2019 from 52.1 in the previous month, beating market expectations of 51.0. Still, the latest reading pointed to weakest pace of

Markit:

US Construction Spending Unexpectedly Falls in May

US construction spending fell 0.8 percent from a month earlier at a seasonally adjusted annual rate of USD 1.29 trillion in May 2019, after an upwardly revised 0.4 percent increase in the previous…

Deeper into contraction:

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Rail traffic, Business confidence, UK imports, Trade news

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Deep in contraction:


Looks to be below 2008 levels:

So looks like the current tariffs remain. As previously suggested, the US President is narrowly focused on the money he’s collecting, as the tariffs remove $US net financial assets from the global economy and discourages transactions with the US. That is, it all functions as a transactions tax on the global $US economy:

Trump says he agreed with Xi to hold off on new tariffs and to let Huawei buy US products

Trump and Xi held their highly anticipated bilateral meeting at the G-20 summit in Japan.
The two leaders agreed to hold off on new tariffs and to proceed with trade negotiations after a series of escalations to their nations’ tariff battle threatened to disrupt the global economy.

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Euro area PMI, Architecture billings index, Philly Fed, Retail sales, Inventories, Fed report, Equity prices and earnings forecasts

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Not looking good:

German Factory Activity Continues to Contract in April

The IHS Markit Germany Manufacturing PMI rose to 44.5 in April 2019 from the previous month’s near seven-year low of 44.1, but below market expectations of 45, a preliminary estimate showed. Still, the latest reading pointed to a sharp contraction in the manufacturing sector, as inflows of new business fell for a fourth straight month led by a further steep decline in new export orders, which dropped at the second-fastest rate in the past ten years. Firms highlighted weak demand across the automotive sector in particular, whilst also suggesting some hesitancy among UK based clients. In addition, work-in-hand at manufacturers declined the most for almost a decade while employment levels were unchanged. Looking ahead, business confidence towards the year-ahead outlook was the weakest since November 2012.

French Factory Activity Contracts the Most in 2-1/2 Years

The IHS Markit France Manufacturing PMI edged down to 49.6 in April 2019 from 49.7 in the previous month, missing market expectations of 50, a preliminary estimate showed. The latest reading pointed to the steepest contraction in the manufacturing sector since August 2016, as output fell the most in four years. On the other hand, new orders and export sales both declined at a softer pace while employment growth accelerated.

Back in negative territory:

In contrast, this is an upbeat report (subject to revision) for March, though the chart doesn’t look so good:

Highlights

The optimists weren’t quite optimistic enough as March retail sales, across all major readings, came in just above Econoday’s high estimates. Still, the trend is uneven and not pointing with certainty to acceleration ahead for consumer spending.

Total retail sales jumped 1.6 percent in March which exactly matches the decline in the much more important month of December. February sales are unrevised at the headline level at minus 0.2 percent with January sales revised 1 tenth higher to a gain of 0.8 percent.

Ex-auto sales show a bit less strength over this period, rising 1.2 percent in March but falling 2.1 percent in December with February revised to a 0.2 percent decline and January holding at an increase of 1.4 percent. Other core readings are similar, showing strength in March following bumpy results previously with ex-autos ex-gas rising 0.9 percent in the latest month and control group sales, which are inputs into GPD, up a helpful 1.0 percent.

Vehicle sales stand out sharply in March, up 3.3 percent following declines in the two prior months. Sales at gasoline stations also stand out, up 3.5 percent for a second straight month but boosted by price effects for fuel.

Convincing strength is evident once again for non-store retailers which, after falling 4.5 percent in December, have posted three straight strong gains including 1.2 percent in both March and February. Restaurants are also convincing, up 0.8 percent in the latest month for a third straight gain in what speaks directly to discretionary strength. Furniture & home furnishing stores are also doing well with three straight gains including a 1.7 percent March jump.

Lagging are department stores, unchanged following three straight declines which may reflect a shift underway in consumer habits away from traditional malls than weakness in consumer demand. General merchandise, which is the broader category that includes department stores, rose 0.7 percent in March but failed to make up for recent weakness.

Yet this report is not about weakness but about strength, and the results are certain, like yesterday’s trade data for February, to give a lift to first-quarter GDP estimates. The economy’s soft patch so far this year isn’t as soft as it once looked, but questions remain.

Elevated inventories are not a good sign:

U.S. labor market remains tight, economy continues to grow

(Reuters) The U.S. central bank’s “Beige Book” report found economic activity grew at a slight-to-moderate pace in March and early April. Prices have risen modestly since the last Beige Book, with tariffs, freight costs and rising wages often cited as key factors, the Fed said. It added that consumer spending was mixed but suggested sluggish sales for both general retailers and auto dealers. Wages grew moderately in most districts for both skilled and unskilled workers. In terms of the manufacturing sector, the Fed said contacts in many districts reported that trade-related uncertainty was weighing on activity.

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Earnings, New issuance, UK services, Germany, MMT comments

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Expect Pre-Earnings Frowns to Turn Upside Down

(WSJ) Analysts polled by Refinitiv think earnings per share for companies in the S&P 500 will be down 2% from a year earlier. The number of companies that have had negative first-quarter earnings warnings so far has outpaced those with positive preannouncements by a 2.8-to-1 ratio—well above the ratio of 1.2 to 1 registered at the same time ahead of first-quarter earnings season last year or the 1.9 to 1 ahead of the fourth-quarter earnings season. By this point in the calendar, the earnings bar tends to be low enough for companies to easily clear. Positive surprises typically outweigh negative ones by more than 3-to-1.

Sharp sell-off late last year takes its toll on equity deals

(FT) Proceeds from stock market listings in the region fell 99 per cent in the first quarter compared with the same period last year, with just $144m raised, Refinitiv data show. Including follow-on deals for companies already listed on stock markets in Europe, the number of transactions, at 81, was down by almost half. Proceeds from initial public offerings in the UK dropped a more modest 85 per cent, while US and Chinese companies’ IPO proceeds both halved compared with the first quarter of last year. In total, Refinitiv reported that 404 equity deals were launched around the world in March.

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NFIB survey, China, UK, California home sales, Rig count

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Trumped up expectations fading:

Highlights

Doubts about future economic growth diminished optimism among small business owners to the lowest level in 26 months, according to the NFIB’s Small Business Optimism Index, which fell 3.2 points in January to 101.2, below consensus expectations as well as the range of analysts’ forecasts. Though still above the long-term average of 98, the optimism reading has retreated sharply from the 45-year high set last August, and the fall in January mainly reflects a 10-point drop to a net 6 percent in expectations that the economy will improve, a 7-point decline to a net 16 percent in expectations that real sales will be higher, and a 7-point drop to a net 1 percent in plans to increase inventories.

The decline was broad-based, however, with 7 of the 10 components of the index retreating: plans to increase employment fell 5 points to a net 18, current job openings fell 4 points to a net 35 percent, the view that now is a good time to expand was down 4 points to a net 20 percent, and the view that current inventory is too low fell 2 points to a net minus 3 percent.

China’s Lunar New Year sales lose steam as economy slumps

(Nikkei) China’s Lunar New Year holidays through Sunday saw single-digit consumption growth for the first time on record, as an economic slump dampened one of the year’s biggest shopping seasons. Sales in the retail and food-and-drink industries grew 8.5% to 1.005 trillion yuan ($149 billion) over the weeklong holiday down 1.7 percentage points from 2018 and the lowest growth rate in data going back to 2005 when such data was first collected. The number of people traveling within China rose only around 7% year on year to 415 million, compared with growth of around 12% in 2018.

Slowing global trade more than Brexit?

Southern California Home Sales Were The Lowest For A December In 11 Years

New data released today by CoreLogic shows a total of 15,781 new and existing houses and condos were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in December 2018. This number is down 8.2 percent month over month from 17,192 sales in November 2018,* and down 20.3 percent year over year from 19,800 sales in December 2017. Total Southern California home sales in December were the lowest for that month since December 2007 when 13,240 homes were sold.

Sales have fallen on a year-over-year basis for the last five consecutive months and in seven of the last eight months.

Stabilizing at current levels, which means no growth in capital expenditures:

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