Author Archives: WARREN MOSLER

Factory orders, Construction, Vehicles, Trump comments

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This was before the new round of tariffs took effect, which will only make things worse:

US Factory Activity Contracts for 1st Time since 2016

The ISM Manufacturing PMI in the US fell to 49.1 in August from 51.2 in the previous month, missing market expectations of 51.1. The reading pointed to the first contraction in the manufacturing sector since January 2016 as new orders and employment declined amid US-China trade dispute.


Serious contraction here:

Congress has some work to do tightening up the institutional structure:

Trump reportedly promised pardons to aides who break the law to build border wall by 2020 election

And the President is now lashing out at criticism that exists only in his imagination:

Trump lashes out at former intel officials for criticism of Iran tweet

“Being scolded by failed former “Intelligence” officials, like James Clapper, on my condolences to Iran on their failed Rocket launch. Sadly for the United States, guys like him, Comey, and the even dumber John Brennan, don’t have a clue. They really set our Country back,” Trump tweeted, adding: “but now we are moving forward like never before. We are winning again, and we are respected again!”

It wasn’t immediately clear what criticism the president was referring to, as the officials had not issued public statements on Trump’s tweet or his decision to release an image taken by U.S. forces of a damaged Iranian rocket facility.

More evidence of same:

National Weather Service corrects Trump on Hurricane Dorian: ‘Alabama will not see any impacts’

Trump Stumped by Category 5 Storm Bearing Down on East Coast

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Personal income and expenditures, Consumer sentiment, Chicago PMI, Trump comments

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With personal income decelerating shouldn’t surprise anyone if personal consumption does same, not to forget benchmark revisions just took employment down by 500,000 dampening that source of personal income:

US Personal Income Grows the Least in Nearly a Year

Personal income in the United States increased 0.1 percent month-over-month in July of 2019, following an upwardly revised 0.5 percent gain in June and below market expectations


Seems tariffs have reversed trumped up expectations:

Somehow he keeps getting more absurd, displaying delusional notions of cause and effect:

President Donald Trump on Friday argued “badly run and weak companies” have blamed his trade war with China for flagging business in order to mask “bad management.”His tweet comes as more companies from a range of industries have started to slam his tariffs on about $550 billion in Chinese goods. Earlier this week, more than 160 industry groups criticized Trump’s latest move to slap duties on Chinese products.Trump, who has tried to pin blame on the Federal Reserve rather than his trade conflict with the world’s second-largest economy as concerns about a looming recession grow, said companies “are smartly blaming these small Tariffs” for their difficulties.“And who can really blame them for doing that? Excuses!” the president tweeted.

“General Motors, which was once the Giant of Detroit, is now one of the smallest auto manufacturers there,” Trump tweeted Friday, a day after Bloomberg News reported GM employed fewer United Auto Workers-represented employees than Ford Motor Co. or Fiat Chrysler Automobiles NV. The president called for GM to “start moving back to America again.”

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Pending home sales, Trade, Trump comments

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Back down:

Highlights

After jumping sharply in June, pending home sales sank sharply in July, falling 2.5 percent which is well below expectations. Yet the 105.6 showing for the index is nevertheless among the best showings of the last year. Today’s results will hold down August forecasts for existing home sales which had been mostly flat before jumping sharply in July.


Tariffs not having the intended result yet:

Trump reportedly promised pardons to aides who break the law to build border wall by 2020 election

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US oil exports

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The US is about to send a lot more oil into an already oversupplied world market

  • The U.S. is about to boost its status as a major oil exporter.
  • New pipelines are coming online to transport oil from a bottleneck in the Permian Basin to the Gulf Coast where it can be shipped to the world.
  • The U.S. is turning the Gulf Coast into a major export hub, and that could one day make U.S. crude an international benchmark, according to Citigroup’s Ed Morse.
  • Citigroup says U.S. oil exports of 3 million barrels a day could grow by a million barrels a day this year and another million next year.

    • Initially, all else equal, this will result in a drop in Saudi sales as they set price and let quantity float with demand. The Saudis can do this to sustain their price targets if they wish to do that, until their exports fall to maybe 3-5 million barrels per day, after which it becomes economically problematic to cut back further (based on prior history), and oil prices collapse from the excess supply.

    At the same time, global demand is likely peaking this year, and likely to begin falling next year, a process likely to be accelerated by a global economic slow down and the shift to electric vehicles, etc., all of which will further cut into Saudi sales and reduce the time it takes for their sales to fall to minimum levels that trigger a price collapse.

    A price collapse can be avoided by cutbacks from other oil producers, particularly Russia, but that’s rarely happened, and would only be temporary unless demand increased.

    Saudi sales:

    Saudi price settings:

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    Durable goods, Fed surveys, House prices, Chicago Fed, Dudley comments, Trump comments

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    This is before the latest round of tariffs which will only make things worse:

    Up a bit for the month, but still working it’s way lower. Also, the chart is not inflation adjusted, so in real terms it’s far below prior ‘peaks’:


    Growth of home prices is slowing:


    Speaks for itself:

    Highlights

    Deep contraction in production pulled down the national activity index in July to minus 0.36 versus an upward revised 0.03 in June in what now is a rare gain for this index. The 3-month average, at minus 0.14 in July, has fallen for six straight months in a row and offers a counterpoint to GDP data which have been very solid this year.

    Production-related indicators, reflecting 0.2 and 0.4 percent declines in industrial production and manufacturing production, pulled the index down by 0.25 points in July. These declines speak to the effects of slowing global demand and the slowdown in export demand. Personal consumption & housing was the next greatest negative at minus 0.06 points with sales, orders & inventories close behind at minus 0.05 points. Employment is another major component and it failed to provide positive support, down 0.01 in the month and reflecting a still solid but slower rate of payroll growth in the month.

    This is pretty bad on Dudley’s part:

    Dudley encourages the Fed to help sway the 2020 election against Trump

    Former New York Fed President Bill Dudley encouraged his one-time colleagues not to help Trump’s “disastrous path of trade war escalation.”
    He even suggested, in a Bloomberg editorial, that the Fed try to influence the 2020 election by not cutting rates further.
    “After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives,” Dudley wrote.

    Use presumed leverage like a 6 year old and you treated like a 6 year old…

    Trump says Europe will give him anything he wants: ‘All we have to do is tax their cars’

    “Dealing with the European Union is very difficult; they drive a high bargain,” Trump told reporters at the White House on Tuesday. “We have all the cards in this country because all we have to do is tax their cars and they’d give us anything we wanted because they send millions of Mercedes over. They send millions of BMWs over.”

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    Freight

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    It’s all in contraction:

    A slump in freight shipping flashes warning signs for economy as US-China trade war rages

    Air freight volumes fell nearly 5% in June, the eighth consecutive month of declines.
    Freight airlines say demand has dropped amid the worsening trade war between the U.S. and China.
    Economists and executives are trying to assess the health of the economy amid conflicting signals.

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    Trump comments, Mexico, Fox News polls

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    Powell’s getting the perfect opening to resign:

    Trump tweets: ‘Who is our bigger enemy,’ Fed Chairman Powell or Chinese President Xi?

    Serious dementia- hopefully enough for Pence to pull the plug:

    Stocks fell to their lows of the day on Friday after President Donald Trump ordered in a series tweets that U.S. companies find alternatives to their operations in China.

    Trumps tariffs and related policy taking it’s toll globally:

    Mexico Economy Contracts for 1st Time since 2009

    The Mexican economy shrank 0.8 percent year-on-year in the second quarter of 2019, compared to a preliminary reading of a 0.7 percent contraction and a 1.2 percent

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    Employment revision, US pmi, KC Fed, Archetecture index, German PMI, Australia PMI, Trump comments

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    Employment growth has been revised substantially lower. Note that one of the inputs used for estimating monthly employment is data from the weekly jobless claims report, which I had suggested would be misleading due to claims being made substantially harder to get over the last several years.

    Employment: Preliminary annual benchmark revision shows downward adjustment of 501,000 jobs

    The BLS released the preliminary annual benchmark revision showing 501,000 fewer payroll jobs as of March 2019. The final revision will be published when the January 2019 employment report is released in February 2020. Usually the preliminary estimate is pretty close to the final benchmark estimate.

    Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2019 total nonfarm employment of -501,000 (-0.3 percent).

    US Factory Activity Contracts for 1st Time in a Decade

    The IHS Markit US Manufacturing PMI dropped to 49.9 in August from 50.4 in July and below market expectations of 50.5, a preliminary estimate showed. The latest reading pointed to the first month of contraction in manufacturing since September 2009, as new orders fell the most in 10 years led by the largest decline in exports since August 2009.


    Services decelerating and near contraction:


    In contraction:


    Continued weakness:

    German Manufacturing Contracts for 8th Month

    The IHS Markit Germany Manufacturing PMI rose to 43.6 in August 2019 from a seven-year low of 43.2 in the previous month and above market expectations of 43, a preliminary estimate showed. Still, the latest reading pointed to the eight month of contraction in the manufacturing sector, as new orders fell the most since April on the back of weak external demand. In addition, employment contracted the most since July 2012 and outstanding business continued to decline. On the price front, goods producers recorded a further sharp drop in input costs and a subsequent reduction in factory gate charges. Looking ahead, business confidence was the weakest since that series began in mid-2012.


    Services in contraction:

    Continuous flip flopping as dementia sets in:

    President Donald Trump says he’s not currently looking at a payroll tax cut or indexing capital gains to inflation.
    The comments follow several days of mixed messaging from his administration about whether or how it will respond to growing recession fears.
    Trump says the U.S. does not “need” tax cuts, because of a “strong economy.”

    ?????

    Trump attacks Ford Motor for not backing fuel economy rollback

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    Mtg apps, Existing home sales, Freight, Germany, Greenland

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    Highlights

    The surge in refinancing is easing as the related index, after spiking 37.0 and 12.0 percent in the two prior weeks, rose only 0.4 percent in the August 16 week. Yet rates did move lower in the week, down another 3 basis points to 3.90 percent for conventional 30-year loans and down nearly 20 basis points over the past month. Mortgage-related gains for the purchase index have been much more subdued with this index up 0.4 percent in the latest week and the year-on-year increase slowing sharply to 5.0 percent. The slowing in the purchase index will not be lifting expectations for home sales which have been struggling to move higher this year.

    Maybe try to buy Denmark?

    U.S. President Donald Trump said he was postponing a scheduled meeting with Denmark’s Prime Minister Mette Frederiksen because of her lack of interest in discussing a possible purchase of Greenland.

    Powell’s best move is to resign:

    Trump says the Fed is the ‘only problem’ with the economy, calls Powell ‘a golfer who can’t putt’

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    Japan exports, RV sales, Tariff delays

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    Japan Exports Fall for 8th Month

    Exports from Japan dropped 1.6 percent from a year earlier to JPY 6.64 trillion in July 2019, the eighth straight month of decrease and compared to market expectations of 2.2 percent fall, amid weakening global demand and the US-China trade dispute.

    An Economic Warning Sign: RV Sales Are Slipping

    Elkhart, Ind., is flashing a warning sign that a recession could be just ahead.

    Capital of the country’s recreational-vehicle industry, the northern Indiana city and the surrounding area are watched by economists and investors for early indications of waning consumer demand for luxury items, often the first sign of economic anxiety.

    Shipments of recreational vehicles to dealers have fallen about 20% so far this year, after a 4.1% drop last year, according to data from the RV Industry Association. Multiyear drops in shipments have preceded the last three recessions.

    Aides got Trump to delay tariffs by telling President it could ‘ruin Christmas’

    (CNN)- President Donald Trump’s trade advisers were searching last week for a strategy to forestall his threatened tariffs on China, they struck upon a novel approach: appeal to his Christmas cheer.

    Under pressure from retailers to prevent a move that would likely have caused prices of popular consumer goods to spike, the President’s team came to him during a meeting last week with a warning. Applying new tariffs on all Chinese imports, they cautioned, could effectively “ruin Christmas,” according to people familiar with the matter.
    It was a tactic that worked: Trump announced the tariffs would be delayed until December 15.

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