Category Archives: China

ADP, Euro inflation, Mtg purchase apps, Loan officer survey, Saudi output, jobs

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Highlights

ADP sees the private payroll reading in Friday’s employment report coming in at 178,000. But ADP has been wild lately, evident in its sharp 33,000 upward revision to June which is now at 191,000. Econoday expectations are calling for 175,000 in private payroll growth in Friday’s report and 178,000 in total nonfarm payroll growth.

ADP private falling off since year end:

The now strong euro seems to be keeping a lid on prices via a drop in import prices. Looks to me like this time around the falling dollar is more likely to result in deflation abroad rather than inflation here at home. Also, with China keeping its currency relatively stable vs the dollar and weaker vs the euro, seem like China is targeting the euro area for exports:

Euro zone producer price inflation slows in June to lowest this year

By Lucia Mutikani

Aug 1 (Reuters) — Euro zone prices at factory gates grew in June at their slowest pace this year. Eurostat said industrial producer prices in the 19-country currency bloc increased 2.5 percent on the year in June, slowing from an upwardly revised 3.4 percent rise in May and a 4.3 percent surge in April. Headline inflation was stable at 1.3 percent in July, far from its 2.0 percent peak reached in February, according to preliminary estimates released by Eurostat this week. On the month, prices eased in June by 0.1 percent, in line with market expectations. In May industrial prices went down by 0.3 percent on the month, slightly less than the 0.4 percent fall previously estimated by Eurostat.

No rebound in mortgage purchase apps this week:

The seasonally adjusted Purchase Index decreased 2 percent from one week earlier to its lowest level since March 2017. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 9 percent higher than the same week one year ago. …
Read more at http://www.calculatedriskblog.com/#AA1sVKDFp3qYGrIX.99

Confirmation of weakening loan demand by domestic US banks, though some of the deceleration was due to foreign bank competition:

July 2017 Senior Loan Officer Opinion Survey Indicates Demand For Commercial And Industrial Loans Weakened

from the Federal Reserve

The July 2017 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. This summary discusses the responses from 76 domestic banks and 22 U.S. branches and agencies of foreign banks.

Regarding the demand for C&I loans, a moderate net share of domestic banks reported that demand from large and middle-market firms weakened, while a modest net share of banks reported that demand from small firms did so. The reported reasons for weakening loan demand were less concentrated than the reasons for having eased standards. Each of the following reasons for weaker demand was cited by at least half of the banks that reported weaker demand: shifts in customer borrowing to other bank or nonbank sources and decreases in customers’ needs to finance inventory, accounts receivable, investment in plant or equipment, and mergers or acquisitions.

Questions on commercial real estate lending. On net, domestic survey respondents indicated that their lending standards for all major categories of CRE loans tightened during the second quarter. In particular, a moderate net fraction of banks reported tightening standards for construction and land development loans and loans secured by multifamily residential properties, while a modest net share of banks reported tighter standards for loans secured by nonfarm nonresidential properties.

Banks also reported that demand for CRE loans weakened during the second quarter. A modest net fraction of banks reported weaker demand for construction and land development loans and loans secured by multifamily residential properties, while demand for nonfarm nonresidential loans remained basically unchanged on net.

Meanwhile, a modest net share of foreign banks reported tightening standards for CRE loans. Also, in contrast to the domestic respondents, a significant net share of foreign banks indicated that demand for CRE loans strengthened in the second quarter of 2017.

Not much happening here as Saudis continue to set price via their discounts to benchmarks, and let their output be demand determined:

Race to the bottom to see which party can make the stupidest proposals:

Democrats call for harsh new punishments on companies that outsource jobs

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Employment, Trade

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The chart says it all- deceleration that started when oil capex collapsed not abetting, and the decelerating credit charts indicate much more of same coming:

Highlights

An unexpectedly weak employment report has put a rate hike at this month’s FOMC in doubt. Nonfarm payrolls rose only 138,000 in May which is nearly 50,000 below expectations. Importantly, April and March have been downwardly revised by a net 66,000.

Average hourly earnings are also not favorable, up only 02 percent in May with April revised down 1 tenth and now also at 0.2 percent. Wages are going nowhere with the year-on-year rate sitting at 2.5 percent.

A fall in the participation is yet another negative, down 2 tenths to 62.7 percent and pulling the unemployment rate down 1 tenth to only 4.3 percent. Unemployment is very low and contrasts with the lack of wage pressure.

Manufacturing jobs fell 1,000 in May, retail trade down 6,000, and government down 9,000. There were gainers including construction at 11,000, financial also at 11,000, and professional services at a healthy 38,000.

And these gains tell the other side of this report, that payroll growth, though moving lower, is still healthy. That is what the hawks are going to have argue at the June 13 & 14 meeting, that and the theoretical inevitability that wage pressures will soon build.

Higher than expected trade deficit means GDP was that much lower than expected. And all highly $US unfriendly:

Highlights

The bad news is accelerating for the second quarter. The trade deficit widened in April to $47.6 billion from a revised $45.3 billion in March. This opens the quarter on yet another defensive front.

Exports fell 0.3 percent in April to $191.0 billion as a fractional rise in service exports to $64.0 billion could not outmatch a 0.4 percent decline in goods exports to $126.9 billion.

Imports meanwhile jumped 0.8 percent to $238.6 billion with increasing pressure centered in goods but also including services.

The best positive in the details is a rise in aircraft exports and the worst negative is yet another jump in consumer goods imports, up $2.0 billion in the month to $51.0 billion. Country data show a sharp widening with China, to a $27.6 billion total gap in the month, with the EU gap also up sharply to $14.6 billion.

The conclusion? U.S. demand for foreign products is strong and foreign demand for U.S. products is not.

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Factory orders, Trade, Chain store sales

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Highlights

Factory orders, like much of the economy, fizzled in March, up only 0.2 percent and skewed higher for a third month in a row by aircraft. The split between the report’s two main components shows a 0.5 percent dip for nondurable goods — the new data in today’s report where weakness is tied to petroleum and coal — and a 0.9 percent rise for durable orders which is 2 tenths higher than last week’s advance report for this component.

The gain for durables looks impressive but when excluding transportation equipment (which is where aircraft is tracked) orders fell 0.3 percent. But core capital goods orders are a plus in the report, rising 0.5 percent (nondefense ex-aircraft) though the gain follows marginal increases of 0.1 and 0.2 percent in the prior two months.

Unfilled factory orders, which had been in long contraction, are a clear plus, up 0.3 percent following February’s 0.1 percent gain for the best back-to-back showing in 2-1/2 years. A negative however is a 0.1 percent decline in total shipments that came despite a constructive 0.5 percent rise in shipments of core capital goods. Inventories were unchanged in the month though the dip in shipments drove the inventory-to-shipments ratio 1 tenth higher to a less lean 1.32.

Aircraft had a weak year last year and have been making up lost ground so far this year. But how long Boeing can give total orders a lift is uncertain, and the performance of the wider factory sector, despite sky high strength in many anecdotal reports, has been no better than mixed.

Both imports and exports down which isn’t a good sign for GDP, as the trade deficit seems to be slowly working its way higher. Also, there was more evidence that the reported positive spike in nonresidential investment for Q1 is suspect:

Highlights

A decline in imports held down March’s international trade gap to $43.7 billion which is moderately under Econoday’s consensus for $44.5 billion. But the breakdown doesn’t point to cross-border strength as exports fell 0.9 percent to $191.0 billion in the month against a 0.7 percent decline for imports at $234.7 billion.

The petroleum gap widened sharply in the month to a nearly 2-year high of $7.9 billion and reflects higher prices for imports and a decline in exports. Exports showing the most weakness are industrial supplies, autos, and consumer goods. Foods rose slightly in March as did the key category of capital goods which otherwise has been flat.

On the import side most components are lower especially capital goods in what, along with capital goods shipments and nonresidential construction spending, is another contrast with the first-quarter GDP surge in nonresidential investment. Contrasting with the weakness in imports is a rise in imports of autos, up a sharp $1.2 billion in the month to $30.3 billion.

Country data are in line with trend: the nation’s trade gap with China totaled $24.6 billion in the month followed by the EU at $11.2 billion with Japan at $7.2 billion and Mexico at $7.0 billion. Canada is next at a distant gap of $1.4 billion.

Breaking down the data between goods and services shows a small widening in the goods deficit to $65.5 billion offset in part by a modest looking but still constructive $0.4 billion dollar rise in the surplus on services. The overall decline in exports and imports is a concern, but today’s report has several positives, not only the surplus on services but also the rise in capital goods exports. Today’s report should give a modest and badly needed lift to revision estimates for first-quarter GDP.

Highlights

Chain stores are reporting mostly stronger rates of year-on-year sales growth for April, a month however that got a big boost from this year’s Easter shift out of March. Sales reports from chains are in year-on-year terms only and are not adjusted for calendar effects such as the shift in Easter which is a major holiday for the retail sector. The best way to look at chain-store sales during Easter shifts is to take both March and April together and with this comparison, stores are mostly downbeat. Weakness in consumer spending has been the dominant feature so far of the 2017 economy.

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Trade, Manufacturing new orders, Redbook retail sales, GDP forecasts

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The trade deficit was a bit less than expected, all due to lower imports. The question is whether this means there were more domestic purchases, whether this is an indicator of lower aggregate demand:

Highlights
In favorable news for first-quarter GDP, the nation’s trade gap hit Econoday’s low estimate in February at $43.6 billion and reflects a 1.8 percent drop in imports but only a 0.2 percent gain for exports. The goods deficit came in at $65.0 billion vs $64.8 billion in last week’s advance report for February with the services surplus at $21.4 billion which is unchanged from January (there’s no advance report for services).

It has been strong demand for foreign consumer goods and foreign autos that has been a central factor behind the nation’s trade deficits, and the news in February, at least in terms of the deficit, is positive. Imports of consumer goods fell to $49.0 billion which is down a very sizable $3.1 billion from January. Imports of autos fell to $29.1 billion for a $2.7 billion decline. Offsets include a $1.3 billion rise in crude oil imports to $13.0 billion reflecting a sharp monthly increase of $1.31 per barrel to $45.25 along with a slight rise in volumes per day.

The export side, despite the fractional gain, is less constructive. Exports of capital goods extended their flat-to-lower trend, down $0.6 billion in the month to $42.9 billion and due entirely to civilian aircraft. Exports of foods fell $0.7 billion with nonmonetary gold down $0.4 billion. A positive is a $0.7 billion upturn in exports of consumer goods to $17.1 billion. Less positive, however, is a flat month for services where exports were unchanged at $64.4 billion with the surplus relative to $43.0 billion in service imports once again flat at $21.4 billion. Services have been the strength of the U.S. trade picture.

Country data show the trade deficit with China at $23 billion in the month followed by the EU at $9.4 billion, Mexico at $5.8 billion, Japan at $4.7 billion and Canada at $2.1 billion. Note that country data are unadjusted which makes monthly comparisons difficult especially given February’s 28 days vs January’s 31 days.

For GDP these data are very positive and help offset not only January’s large trade deficit but also what’s evolving as a weak quarter for domestic consumer spending. For cross-border trade, this report is not upbeat, showing less demand for goods and services both here and abroad.

Manufacturing continues to drift sideways, as per the chart. And note that vehicle sales have softened considerably since this report and aircraft orders are likely to revert:

Highlights

Factory orders may not be showing the same kind of strength that the ISM and Philly Fed are pointing to but they are solid, hitting Econoday’s February consensus at a 1.0 percent gain. Adding to the strength is a 3-tenth upward revision to January which is now at a 1.5 percent gain that follows December’s unrevised 1.3 percent rise.

The durables side of the report, up 1.8 percent in the month (revised from 1.7 percent in last week’s advance data), reflects a second month of outsized strength for aircraft, at a 56 percent monthly gain vs January’s 188 percent surge. But durables also include a respectable 0.3 percent gain for vehicles. Nondurable goods inched 0.2 percent higher on strength in chemicals (there is no advance report for nondurables).

But there are cracks that perhaps betray the strength and one is a second weak month for core capital goods (nondefense ex-aircraft) where orders fell 0.1 percent after managing only a 0.2 percent gain in January. Yet given strength of prior orders, shipments of core capital goods — which are an input into first-quarter GDP — rose a very solid 1.0 percent to help offset January’s disappointing 0.4 percent decline. This is an important positive for first-quarter GDP which had been slipping.

Turning back to weaknesses, total unfilled orders were unchanged in February to extend a nearly yearlong streak of disappointment. Lack of unfilled orders will not spark demand for factory hiring. Inventories rose 0.2 percent in line with a 0.3 percent rise in total shipments to keep the inventory-to-shipments ratio unchanged at 1.31.

Another question in this report is the two months of reliance on aircraft orders where strength cannot be expected to extend indefinitely, to say the least for this volatile component. And this morning’s trade report poses further questions especially for capital goods exports which have been stubbornly flat. Still, on a total basis, factory orders are showing the directional lift that advance anecdotal reports have been signaling with rare strength.

Note how the charts show we’ve yet to recover to 2008 levels, and these numbers are not adjusted for inflation:


This measure of retail sales growth collapsed when oil capex collapsed and remains depressed:


Note how the other forecasts have been working their way down towards the Atlanta Fed’s forecast:

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Trade, Consumer credit

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As previously discussed, trade looks to be more negative in q1 than it was in q4:

Highlights

January’s trade deficit came in very deep but at least right on expectations, at $48.5 billion and reflecting a surge in foreign consumer and vehicle imports and higher prices for imported oil.

January imports rose 2.3 percent from December to $197.6 billion with imports of consumer goods jumping 2.4 percent to $52.1 billion and with vehicle imports up 1.3 percent to $13.6 billion. Petroleum imports totaled $15.3 billion in the month, up 19 percent and reflecting both higher prices, at $43.94 per barrel vs December’s $41.45, and a rise in volumes, at 8.4 million barrels per day vs 7.7 million.

Though dwarfed by imports, exports did rise 0.6 percent to $128.0 billion led by industrial supplies (where higher oil prices are at play) and also a 1.3 percent gain for vehicle exports to $13.6 billion as well as a $0.6 billion gain for foods. Exports of capital goods fell a sharp 1.9 percent to $43.5 billion in a decline that only partially reflected aircraft. Exports of services, usually the strength for the U.S., were unchanged in the month at $64.1 billion.

Unadjusted country data show a monthly widening with China, to a monthly deficit of $31.3 billion, and a widening with Canada, at $3.6 billion. Deficits narrowed with the EU, to $11.5 billion, with Japan, to $5.5 billion, and with Mexico, to $4.0 billion.

Strong demand for foreign goods and light demand for U.S. services and capital goods is not a favorable mix for GDP. This report puts first-quarter GDP on the defensive.

Higher oil prices and the end of the one time surge in soybean exports, etc:


A lot worse than expected:

Highlights

Consumers held back on credit-card borrowing in January as nonrevolving credit fell $3.8 billion for the first monthly decline since February last year and the largest since December 2012. But nonrevolving credit, where vehicle financing and student loans are tracked, rose a respectable $12.6 billion and offers a reminder that overall credit growth, including revolving credit, has been steady. Yet, at least for January, nonrevolving credit couldn’t offset the weakness in revolving credit as total credit increased only $8.8 billion for the smallest rise since July 2012.

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Consumer sentiment, China policy, Iran

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Trumped up expectations fading:

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No telling why our new President changed his mind on this one. Might have something to do with a kosher house being a two china policy… ;)

White House confirms Trump’s agreement to honor ‘One China’ policy

By Everett Rosenfeld

Feb 10 (CNBC) — A White House statement confirmed a Thursday night report that President Donald Trump had agreed to honor China’s “One China” policy in his first call with the country’s president.
“President Donald J. Trump and President Xi Jinping of China had a lengthy telephone conversation on Thursday evening. The two leaders discussed numerous topics and President Trump agreed, at the request of President Xi, to honor our “one China” policy,” The White House said in a statement.

“Representatives of the United States and China will engage in discussions and negotiations on various issues of mutual interest. The phone call between President Trump and President Xi was extremely cordial, and both leaders extended best wishes to the people of each other’s countries. They also extended invitations to meet in their respective countries. President Trump and President Xi look forward to further talks with very successful outcomes.”

China state-run news agency Xinhua reported in Chinese that Trump told Xi he believed that the two nations could promote bilateral relationships to a “historical high level.”

Earlier, Trump had attracted criticism from China for saying that the U.S. did not necessarily have to stick to the “One China” policy.

China’s foreign ministry responded at the time that it was extremely concerned with Trump’s comments, with spokesman Geng Shuang telling reporters that the policy was the basis of relations between the world’s two largest economies.

The government’s official response came after the Communist Party-owned paper, Global Times, published an opinion piece with the headline: “Trump, please listen clearly, the One China policy cannot be traded” as it warned Trump that China cannot “be easily bullied.”

“If Trump abandons the one-China principle, why should China need to be U.S.’ partner in most international affairs?” said the paper, which is known for its extreme nationalistic views.

Most would think Trump is “ignorant like a child” in handling diplomacy, the paper added.

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Jolts, Consumer credit, Trade, Brexit poll

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Still looks to me like it’s already rolled over:

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Less than expected indicating spending likely to be less than expected as well:

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Highlights

Growth in consumer credit slowed in December, to $14.2 billion vs an upward revised $25.2 billion in November. Revolving credit showed less life in December than prior months, rising only $2.4 billion vs November’s $11.8 billion. Weakness here helps explain the general weakness in core shopping during December. Nonrevolving credit, reflecting demand for auto loans and especially student loans, rose an intrend $11.8 billion.

When losses start to increase, banks tend to tighten credit:

Credit conditions for most business lending unchanged in fourth quarter: Fed (Reuters) Loan officers at U.S. banks reported largely unchanged lending standards and slightly looser terms for business loans in the last three months of 2016, the Federal Reserve reported on Monday in a quarterly survey. About a third of the 69 institutions surveyed, however, said they had “tightened somewhat” the standards for commercial real estate construction and land development loans, and close to a fifth had tightened standards on loans secured by multifamily properties.

This was released Nov 29:

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The higher crude oil prices look to be showing up in the next report:

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Highlights

Strong exports of capital goods helped limit the nation’s trade deficit in December to a lower-than-expected $44.3 billion vs a revised $45.7 billion in November. Exports, also boosted by strong demand for U.S. services, rose a very solid 2.7 percent to $190.7 billion in the month, strength offset however by a 1.5 percent rise in imports to $235.0 billion that was swollen by heavy imports of vehicles.

Petroleum was not a factor in the December report with the related deficit unchanged from November at $6.1 billion. Details here show a 0.3 percent dip in imports to $14.3 billion in December and a 0.6 percent dip in exports to $8.2 billion. Month-to-month import volumes slipped slightly but were offset by a rise in the average barrel of crude to $41.45 which is the highest since September 2015.

Country data show a narrowing in the monthly gap with China to $27.8 billion from November’s $30.5 billion and a narrowing with Mexico to $4.4 billion from $5.8 billion. For full year 2016, the gap with China totaled $347.0 billion, down from $367.2 billion in 2015, and with Mexico at $63.2 billion vs $60.7 billion in 2015. Gaps in Canada narrowed in December to $2.2 billion for $11.2 billion in 2016 and narrowed to $12.2 billion with the EU for a 2016 total of $146.3 billion.

December exports were the highest since April 2015 though imports were the heaviest since March 2015. Still, the active two-way traffic points to strong cross-border trade and improved global demand.

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Seems to be a shift in progress?

Most British voters now approve of May’s approach to Brexit (Reuters) A majority of Britons approve of the government’s approach to leaving the European Union. Prime Minister Theresa May set out her vision for Brexit in a speech in mid-January, outlining plans to leave the EU single market in a clean break with the bloc. The proportion of the public that approve of the government’s preparations for Brexit stood at 53 percent, ORB found, up 15 points from a poll last month when only 38 percent approved, with 62 percent disapproving. The poll also found that 47 percent agreed that May would get the right deal for Britain, with just 29 percent disagreeing.

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Auto sales, Deficit news, Budget news, Germany news, Japan news

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Looks like a weak start for 2017:

From WardsAuto: Forecast: January Forecast Calls for Low Sales, High Inventory

The U.S. automotive industry is expected to a have a slow start in the new year, with January light-vehicle sales down 4.4% from like-2016. … The resulting seasonally adjusted annual rate is 17.0 million units, well below the 18.3 million in the previous month and 17.4 million year-ago.
…
December inventory was 9.2% above same-month 2015, the biggest year-over-year gap since the summer of 2014. Weak sales in January will keep inventory levels high, 16.0% greater than year-ago. A 93-day supply is expected to be available at the end of the month, a major jump from 62 days in December and 77 in January 2016.
emphasis added

Read more at http://www.calculatedriskblog.com/2017/01/vehicle-sales-forecast-sales-around-17.html#tsmvSK1MApIVDcKE.99

The positive, surprise zig up last month is now forecast to zag back down into negative territory, as previously discussed:

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The federal deficit remains far to small meaning the deceleration of the growth of output and employment we’ve seen over the last two years is likely to continue. That said, looks to me like tax revenues will continue to decline over the course of the next year due to earnings and employment weakness and therefore the federal deficit will be larger than this forecast indicates:

U.S. deficit forecast to shrink in 2017 but climb over next decade (Reuters) The CBO projected the deficit to fall slightly to $559 billion in fiscal year 2017, which ends on Sept. 30, compared to $587 billion a year earlier, and it was seen lower still in 2018 at $487 billion. After that, according to the CBO, deficits are expected to grow steadily over the next decade to $1.4 trillion by fiscal 2027. The CBO forecast that $8.6 trillion will be added to the federal debt over the next 10 years. The CBO also forecast U.S. real gross domestic product growth in calendar year 2017 at 2.3 percent, slowing to 2 percent in 2018.

As previously discussed, spending cuts are contractionary/deflationary, and far more potent than the proposed tax cuts:

Conservatives Try to Shape Donald Trump’s Budget Priorities (WSJ) President Donald Trump is expected to release next month the outlines of his first budget that will then be fleshed out later in March or April. Budget experts tasked to oversee the transition at OMB have been using pieces of a budget blueprint advanced by the Heritage Foundation. Altogether, the Heritage plan offers about $97 billion in discretionary spending cuts for the current year, equal to about 8% of discretionary spending and 2% of total spending. It proposed even larger cuts to automatic spending programs, including entitlements, for a combined $10.5 trillion in savings over a decade, or around 20% of all government spending.

More euro friendly news here:

Germany raises growth forecast for 2017 exports, imports (Reuters) Germany expects both exports and imports to grow faster this year than previously forecast, a government source told Reuters on Tuesday, providing an optimistic outlook despite fears of protectionism under U.S. President Donald Trump. The source in the right-left ruling coalition said the government expected exports to grow 2.8 percent in 2017, up from a previous forecast of 2.1 percent. Imports are forecast to grow by 3.8 percent, up from a previous estimate of 3 percent.

Yen friendly news here:

Japan exports up for first time in 15 months, U.S. protectionism poses risks (Reuters) Ministry of Finance data showed on Wednesday that exports rose 5.4 percent year-on-year in December. It followed an annual 0.4 percent decline in November. Shipments in terms of volume also rose 8.4 percent from a year earlier. In December, the value of exports to the United States rose 1.3 percent year-on-year. Exports to China rose 12.5 percent in December to 1.3 trillion yen ($11.44 billion). The data showed Imports fell 2.6 percent in the year to December, resulting in a trade surplus of 641.4 billion yen.

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Euro zone trade, Tax receipts, Trump comments

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Strong euro stuff!

Eurozone Trade Surplus Widens Ahead Of Expectations
The Eurozone trade surplus rose to €25.9 billion in November 2016 from €22.9 billion in the same month of the previous year, above market consensus of €22 billion. Exports increased 6 percent while imports went up at a slower 5 percent. Considering the first eleven months of the year, the trade surplus increased to €248.2 billion, compared with €214.3 billion in the same period of 2015.

Weak US economy stuff:
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As previously discussed, Trump has repeatedly stated that the value of the dollar vs our trading partners was contributing to our trade deficit, and that he’d take action to keep others from keeping their currencies weak to gain an advantage. While the entire notion is entirely misguided- imports are real benefits and exports real costs, and unemployment best addressed by fiscal adjustment- it looks like he’s beginning to follow through on his campaign rhetoric, which could include having the US accumulate fx reserves, etc. as previously discussed:

The greenback fell against most peers after Donald Trump told the Wall Street Journal its value is too high in part because China holds down its own currency.

Likewise, Trumps tax policy was at odds with the general Republican views, suggesting he’ll be moving for something very different than the Republican plan before Congress. He’s already questioned the border tax, saying he’s ‘not loving it’, and instead is asking about spending cuts. Also, note the following story where he articulates his position on taxing the rich. This doesn’t read like he’ll be supporting lowering the higher marginal rates?

Donald Trump thinks the rich should pay more in taxes than everyone else

By Max Ehrenfreund

Aug 24, 2015 (WP) — Helicopter aficionado and Park Avenue resident Donald Trump said Monday morning that the rich should pay more in taxes than the middle and working classes.

He criticized the idea of taxing all Americans at the same rate, an idea endorsed by some of his rivals for the GOP presidential nod. Sen. Rand Paul (R-Ky.) has proposed levying the same tax on all forms of income and on businesses, which would be able to write off their expenses under his plan. Mike Huckabee, the former governor of Arkansas, has called for taxing sales instead of income, but also at a single rate. Other Republican plans, such as the one put forward by Sen. Marco Rubio (R-Fla.), have more than one rate, but fewer than the seven brackets in the current system.

Simplifying the tax code is a goal that Trump said he shares, but he also believes that rich Americans should pay more on every dollar of additional income.

“The one problem I have with a flat tax is that rich people are paying the same as people that are making very little money,” Trump, who is worth an estimated $2.9 billion, said Monday morning on “Fox & Friends.” “I think there should be a graduation of some kind.”

[What Trump didn’t say about his four big business bankruptcies]

The Republican front-runner also advocated higher taxes on hedge-fund managers, a position shared by his Democratic opponent Hillary Rodham Clinton.

Managers at hedge funds are able to count their income as returns on investments, allowing them to pay less in taxes than they would if they reported their earnings as a salary or a wage. It’s known as the carried-interest loophole, and while it’s difficult to know how much it costs the government, one estimate puts the price tag at a whopping $180 billion over 10 years.

Clinton said she’d close the loophole, and while Trump didn’t mention carried interest specifically, he did say that hedge-fund managers should pay more in taxes.

“They should be taxed a fair amount of money,” he said, without offering details. “They’re not paying enough tax.”

He later criticized Clinton as being too close to Wall Street.

“The hedge-fund guys are the ones that are giving her the money,” he said. “When she was in the Hamptons, she was with the hedge-fund guys.”

Trump also contrasted managing a hedge fund with his own field, real estate. “It’s one thing if you’re building buildings,” he said. “If you build buildings, you put people to work. These hedge-fund guys, they move around papers.”

Recently, Trump has been involved in very little actual building, as The Washington Post has reported. Much of his income comes from simply signing his name on various deals around the world. Other investors pay him for the right to use his name in connection with their projects.

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Retail sales, Business inventories, Consumer sentiment, China exports, German GDP

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Less than expected and held up by vehicle sales which were about flat for the year and are unlikely to be any better than that in 2017, and therefore not contributing anything to growth:

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Highlights

Outside of cars, consumers weren’t in much of a spending mood this holiday season. Retail sales did post a very solid gain in December, up 0.6 percent, but without autos the gain falls to only 0.2 percent. And exclude gasoline as well, which isn’t really a common holiday gift, and sales come in dead flat at zero.

And gifts were on the light side this year based on department store sales which fell 0.6 percent in the month and also electronic & appliance stores where sales fell 0.5 percent. And in a clear sign of discretionary weakness, restaurant sales fell 0.8 percent for the largest monthly decline in a nearly year.

Vehicle sales, which jumped 2.4 percent in the month, pull the report to the upside as do gasoline sales which rose 2.0 percent. But retail sales excluding gasoline do show a very solid 0.5 percent vehicle-driven gain and underscore that this report, despite the softness in holiday categories, is still a solid plus for fourth-quarter GDP. And there are positives led once again by ecommerce as nonstore retailers saw a 1.3 percent monthly rise.

The bottom line is best characterized by apparel where sales were flat, posting no change for the second month in a row. Consumer spirits may be very high, and if this benefited retail sales in December it was mostly isolated to vehicles.

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More bad news on inventories which were already way too high:

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Highlights

Data on fourth-quarter inventories are looking heavy, up 0.7 percent in November in an offset to a revised 0.1 percent draw in October. Both retailers and wholesalers show large 1.0 percent builds in November with manufacturers at a 0.2 percent build. Given weakness in total sales, up only 0.1 percent, the stock-to-sales ratio rose 1 tenth in the month to 1.38.

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Still trumped up but moderating some:

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Post-election confidence readings have been very high but have not equated to the same proportional punch for consumer spending which, nevertheless, has been respectable. The report notes that partisanship is extreme right now with 44 percent of the sample citing the importance of government policies (whether positive or negative). The cycle average for this reference is 20 percent.

Exports from China declined by 6.1 percent from a year ago to USD 209.42 billion in December of 2016, following a revised 1.6 percent drop in the prior month while markets expected a 3.5 percent drop. Considering the full year of 2016, sales fell 7.7 percent, the second straight year of decline and the worst since the depths of the global crisis in 2009. In yuan-denominated terms, exports rose 0.6 percent from a year earlier, following a 5.9 percent rise in a month earlier. From January to December of the year, sales dropped by 2 percent.

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Improving global environment?

German GDP Grows at Fastest Rate in Five Years

By Nina Adams and Andrea Thomas

Jan 12 (WSJ) – Gross domestic product expanded 1.9% in 2016 in inflation-adjusted terms, the Destatis statistics body said on Thursday. This is the highest rate since 2011, beating the government’s own prediction of 1.8% growth. A statistician with Destatis said GDP probably expanded by around 0.5% in the fourth quarter from the third quarter. An official forecast is due Feb. 14. “The restraint seen in the third quarter has been overcome,” the economics ministry said in its monthly report on Thursday, pointing to solid industrial production and an improving global environment.

Interesting divergence?

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