Category Archives: Economic Releases

Trade

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Downward revisions for q4 GDP. And not how both imports and exports are down for the last 6 months or so as global trade decelerates:

Highlights

Revision estimates for fourth-quarter GDP will be coming down following an unexpectedly deep $59.8 billion trade deficit in December. Not helping the quarterly deficit are downward revisions to November and October that deepened the net deficit in those two months by $1.6 billion.

The trouble is equally severe on both sides of the report as exports in December fell 2.8 percent to $205.1 billion and imports rose 2.4 percent to $264.9 billion.

Food is the standout negative with imports at a record $12.6 billion in the month and exports, at $9.6 billion, the lowest monthly total since August 2010. This looks like a smoking gun over tariff tensions with China which may well have cut back its U.S. purchases.

The bilateral trade deficit with China for full year 2018 came in at just over $419 billion, which is much deeper than deficits of $375 and $347 billion in the prior two years.

Exports of services failed to help out December, unchanged at a still very strong $69.5 billion with imports of services, however, rising 1.0 percent in the month to $47.7 billion. Turning back to goods trade, vehicles are another major weakness with monthly exports at $12.3 billion for a second month and the lowest since September 2017 with imports of $32.1 billion at a record high.

Today’s headline $59.8 billion deficit is the deepest of the expansion, since October 2008. It is also $1.4 billion beneath Econoday’s consensus range and $2.2 billion deeper than the consensus. Net exports had only been a small drag in last week’s initial estimate for fourth-quarter GDP but today’s report is pointing to a more significant one. One final detail, the nation’s total trade gap in 2018 came to $621.0 billion, 12.4 percent deeper than $552.3 in 2017 and the deepest since 2008.

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Construction spending, Auto sales, Personal income and spending, Trump on the $

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Bad. All sectors decelerating and residential looking down year over year:

U.S. auto sales tumbled 2.8 percent in February

(Detroit News) Overall sales for the month tumbled 2.8 percent from the same month a year ago, according to Edmunds.com. Sales came in at 1.26 million for an annualized industry sales rate slowed to 16.6 million. The estimated average transaction price for a new vehicle in February climbed to $36,590, according to Kelley Blue Book. That was $993 higher (2.8 percent) from the previous February. The average interest rate on a new-car loan was 6.26 percent in February, compared to 5.19 percent last year and 4.56 percent five years ago. The average monthly payment was $556, up from $527 a year ago.

U.S. personal income falls; spending weakest since 2009

(Reuters) Personal income slipped 0.1 percent in January after jumping 1.0 percent in December. Wages increased by a moderate 0.3 percent in January after rising 0.5 percent in December. Consumer spending dropped 0.5 percent in December after a 0.6 percent increase in November. When adjusted for inflation, consumer spending fell 0.6 percent in December. The saving rate jumped to a three-year high of 7.6 percent. The PCE price index excluding the volatile food and energy components rose 0.2 percent after a similar gain in November. That left the year-on-year increase at 1.9 percent.

When the understanding of trade dynamics is backwards and confused, you get one counterproductive policy after another:

Trump Says Dollar Too Strong in Renewed Criticism of Powell

(Bloomberg) President Donald Trump said Saturday that the U.S. dollar is too strong and took a swipe at Federal Reserve Chairman Jerome Powell as someone who “likes raising interest rates.” The dollar was quoted lower against the euro and the yen in early Asia-Pacific trading hours on Monday after Trump’s comments. The U.S. economy is doing well despite the actions of the central bank, Trump said during a wide-ranging speech at the Conservative Political Action Conference in National Harbor, Maryland. “I want a strong dollar but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” Trump said Saturday. He didn’t mention Powell by name, but referenced “a gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, we have a gentleman that likes a very strong dollar in the Fed.” “Essentially there’s no inflation,” Trump said. “Can you imagine if we left interest rates where they were, if we didn’t do quantitative tightening. Taking money out of the market if we didn’t do quantitative talk, and this would lead to a little bit lower dollar,” he said. Trump said the U.S. “is booming like never before,” while other countries are “doing very poorly, and that makes it even harder for us to be successful.”

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MMT on CNBC, Oil sale, Growth forecast

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Well done Professor Kelton!

Stephanie Kelton explains Modern Monetary Theory

This is particularly ridiculous:

U.S. offers up to 6 million barrels of oil from emergency reserve

(Reuters) The U.S. Energy Department said on Thursday it is offering up to six million barrels of sweet crude oil from the national emergency reserve in a sale mandated by a previous law to raise funds to modernize the facility. A law U.S. President Donald Trump signed last year requires the department to hold sales to fund $300 million improvements including work on shipping terminals to the Strategic Petroleum Reserve, or SPR, which is held in caverns on the coast of Texas and Louisiana. Previous laws have also mandated sales from the reserve, which currently holds more than 649 million barrels.

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Trade, Factory Orders, Pending home sales

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Can’t be making Tariff Man happy:

Highlights

The effects of cross-border trade actions have been difficult to pinpoint in the national economic data but outlines may be appearing in goods trade. The nation’s goods deficit swelled to a much larger-than-expected $79.5 billion in December as exports fell 2.8 percent in the month to $135.7 billion following 0.9 percent contraction in November. Agricultural exports, a focused area with China, fell 1.9 percent in the month and are down 5.5 percent year-on-year. The yearly rate for total exports is now in the negative column at minus 0.3 percent.

Adding to the downward trade pull from exports is a 2.4 percent rise in imports to $215.2 billion which are up 3.2 percent on the year. Here consumer goods are a sensitive area and are up 4.4 percent in the month to $55.5 billion though the year-on-year increase is modest at 0.9 percent. Imports of capital goods have also been climbing, up 4.9 percent on the year, but in contrast to consumer goods these goods represent business investment and will help future productivity.

For the quarterly GDP contribution, the goods deficit ran a monthly average of $75.7 billion in the fourth quarter vs $74.7 billion in the third quarter. Though this does point to another quarterly drag from trade, services for December have yet to be reported and based on U.S. strength here may yet pull the quarter even. Next Wednesday’s international trade report for December will post the services numbers as well as bilateral country data that are not published with this report.

Bad:

Highlights

Factory orders have significantly missed Econoday’s consensus for a second straight month, inching only 0.1 percent higher in December vs expectations for a 0.6 percent climb. In November when expectations were looking for a small gain, orders fell an initial 0.6 percent which is now revised to a 0.5 percent decline. October orders narrowly missed expectations, falling 2.1 percent against expectations for 2.0 percent.

The split between the report’s two main components shows a 1.0 percent dip for nondurable goods — the new data in today’s report where weakness is tied to both petroleum and coal as well as beverages — and a 1.2 percent rise for durable orders which is unchanged from last week’s advance report for this component.

But the gain for durable goods was skewed, as it often is, by a clump of aircraft orders in the month. Vehicles were also strong and when excluding these and aircraft as well as all other transportation equipment, orders fell 0.6 percent in December following a 1.3 percent drop in November.

A glaring weakness in December and November orders are sharp 1.0 percent and 1.1 percent declines for core capital goods orders (nondefense ex-aircraft). This is telling evidence that business investment is down which in turn may well betray a downturn in business confidence. And there’s an important revision in today’s report that will be trimming back estimates for nonresidential investment in tomorrow’s fourth-quarter GDP report as December shipments for this series, initially at a 0.5 percent gain in last week’s advance report, are now revised to no change. November stands at a 0.2 percent decrease for core shipments.

The third quarter was not strong for the factory sector notwithstanding, however, the 0.8 percent auto-related surge in December manufacturing production (previously released as part of the industrial production report). Manufacturing is disproportionately exposed to global demand and sector’s slump is a convincing reflection of general slowing in foreign economies, something that the Federal Reserve underscored as a key reason for its January downshift to neutral monetary policy.


Still trending down and down vs last year:

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Car sales, HK, China default, capex, EU business lending, EU sentiment, Credit card data

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Chinese state company defaults offshore, first time in 20 years

(FT) A Chinese state-owned enterprise from the country’s remote north-west has failed to repay a US dollar bond in Hong Kong, the first offshore default in 20 years and the latest sign investors can no longer rely on Chinese authorities to bail out state groups. Qinghai Provincial Investment Group defaulted on a $10.9m interest payment due on the Hong Kong note on Friday, then missed a separate principal and interest payment on a Rmb20m ($3m) onshore renminbi bond that matured on Monday, according to Caixin.

Tariff Fears Led U.S. Manufacturers to Trim Spending

(WSJ) Private-sector companies said increased tariffs and trade tensions have led them to reduce capital expenditures by an average of 1.2%, according to the Survey of Business Uncertainty. For manufacturers, the impact was larger, with a 4.2% impact on capital expenditures, according to the survey. The Atlanta Fed study finds that a rising proportion of businesses are trimming spending in response to tariff concerns, with 52% either postponing or dropping spending plans in the January survey, compared with 31% in a July questionnaire.

Euro zone business lending growth slows sharply: ECB

(Reuters) Corporate lending expanded by 3.3 percent in January, well below December’s 3.9 percent reading and its post-crisis peak of 4.3 percent hit in September. Credit growth to households meanwhile held steady at 3.2 percent, the ECB data showed. The ECB last month warned that the growth outlook is deteriorating quickly, suggesting that the bloc’s biggest slowdown in half a decade may be longer and deeper than feared. The annual growth rate of the M3 measure of money supply, which often foreshadows future activity, slowed to 3.8 percent from 4.1 percent in December.

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MMT in the headlines, Housing starts

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The notion behind what is called “Modern Monetary Theory,” or MMT, is that as long as the Fed can keep interest rates low without sparking inflation, the national debt and budget deficit won’t be an issue. MMT has been espoused by politicians including Rep. Alexandria Ocasio-Cortez, D-N.Y., and Democratic presidential candidate Sen. Bernie Sanders of Vermont.

Powell conceded that he has not read up on the theory but said he has heard some “pretty extreme claims” about how it might be implemented.

Highlights

Housing starts proved unexpectedly weak in December and will pull back residential investment in Thursday’s GDP report. A strong offset, however, is steady strength in permits which are less impacted by weather or similar one-time effects.

Starts fell 11.2 percent in the month to a 1.078 million rate that is far below Econoday’s consensus range. This compares with a long trend in the 1.200 to 1.300 million range and is the weakest showing since September 2016.

Wildfires in the West may be at play and are likely responsible at least in part for a 26.3 percent monthly drop in starts in the region to a 216,000 rate. But starts were also down 13.2 percent in the Midwest to a 125,000 rate with the South down 6.0 percent to 630,000. The Northeast was unchanged at 107,000.

Starts of single-family homes, down 6.7 percent, fell less severely than multi-units, down 20.4 percent. This should limit the pull lower for residential investment as single units have higher per unit construction costs than multi-units.

Now the good news in the report. Permits rose 0.3 percent in December to a 1.326 million rate that exceeds Econoday’s high estimate for 1.305 million. Here, however, the single-family reading is down 2.2 percent to 829,000 while multi units are up 4.9 percent to 497,000. And here the West shows strength, up 17.1 percent to 383,000.

Bad:

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Japan outlook, Rail traffic, Business inventories

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Japan downgrades industrial outlook for first time in 40 months

(Nikkei) The Japanese government on Thursday downgraded its monthly assessment of industrial output for the first time in more than three years. The Cabinet Office’s economic report for February says “weakness can be seen in some areas” of production, qualifying a view of moderate growth that had been kept unchanged since October 2015. February’s report also downgraded the assessment on corporate profits. It follows January’s downward revision on exports, which are now described as “almost flat,” and raises doubts about the durability is poised to become Japan’s longest postwar economic expansion.

Rail Week Ending 16 February 2019: Economically Intuitive Sectors In Contraction

Week 7 of 2019 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The economically intuitive sectors rolling averages are now in contraction.

Highlights

Volatility is increasingly the theme of recent economic data, including wholesale inventories which bloated by 1.1 percent in December against a 1.0 percent decline in wholesale sales. The inventory rise is not the result of price swings in nondurable goods as durables lead the build at a very heavy plus 1.5 percent including large builds for metals, furniture, electrical goods, and lumber.

The relationship between inventories and sales in the wholesale sector began to look unfavorable in November and really points to overhang in this report. Year-on-year, inventories are up 7.3 percent while sales are down 1.5 percent. The stocks-to-sales ratio spiked through the second of last year, to 1.33 in December from 1.30 and 1.28 the prior two months and from as lean as 1.26 in August.

The jump in wholesale inventories will provide a technical boost to fourth-quarter GDP but not a healthy one. Wholesalers may very well be looking to make their inventories more lean this year which would not be a plus for the sector’s employment. In an offset, comparable data on retail and manufacturing inventories, still not updated for December, showed less upward pressure in prior reports.

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*exports to China, Philly Fed, US home sales, durable goods orders

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Asia’s exports to China plunge as economy stumbles

(WSJ) Japan’s exports to China in January sank 17.4% on the year to 958.1 billion yen ($8.65 billion), accelerating from December’s 7% drop. South Korean exports to China in January slid 19% on the year, a steeper rate than in the previous two months of decline. Taiwan’s mainland-bound shipments, which make up 40% of its total, also fell for the third consecutive month in January by 7.5%. Singapore suffered a 25% plunge. Thailand saw a second straight monthly drop in December, declining 7.3% on weaker exports of IT components. Vietnam was the odd man out, with its first increase in three months in January.

The global slowdown includes the US:

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.2 percent from December to a seasonally adjusted annual rate of 4.94 million in January. Sales are now down 8.5 percent from a year ago (5.40 million in January 2018).


Not good:

Highlights

The 1.2 percent headline rise in December durable goods masks weakness for business investment. New orders for core capital goods sank an unexpected 0.7 percent that falls well below Econoday’s consensus range. Magnifying what may be an emerging pivot lower for capital goods is a sharp downward revision to November, now at minus 1.0 percent.

Significant declines for a second month in a row were posted by machinery, computers as well as communications equipment which are all central to the capital goods group. But these are orders. Shipments of core capital goods actually rose 0.5 percent which will help offset a 0.2 percent shipment decline in November and may actually give a small boost to nonresidential fixed investment in next week’s fourth-quarter GDP report.

Jumping more than 50 percent, aircraft orders, as they often do in the durable goods report, skewed December’s headline higher. Vehicle orders were also strong, rising 2.1 percent and, together with the previously released vehicle surge in the manufacturing component of the industrial production report, point to a burst of late-year activity in the auto sector. But when excluding aircraft and vehicles as well as all other transportation equipment, orders inched only 0.1 percent higher in December vs Econoday’s consensus for a 0.2 percent gain.

An underlying softness is also indicated by total unfilled orders which have posted small declines in each of the last three reports. Unwanted inventories, however, do not appear to be a threat, rising only 0.2 percent vs a 0.8 percent increase for total shipments that pulls the inventory-to-shipments ratio down to 1.60 from November’s 1.61.

The factory sector was the economy’s star performer in 2018 and, on the surface at least, ended the year in strength especially for autos. But the weakness in business investment, and its negative implications for future productivity, point to hesitance among businesses which is consistent perhaps with easing indications for business confidence.

Flattened out below 2008 levels, not adjusted for inflation:

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Euro area PMI, Japan pmi, Misc. global headlines

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Tariff man, aka Agent Orange, doing a number on global economies…

Just went negative:


Services moved up some but the trend still looks down:

Japan appearing to be collapsing as well:

And these recent headlines:

Argentina Leading Economic Index

The economy of Argentina shrank 0.1 percent month-over-month in January 2019, following a 0.3 percent contraction in the previous month. It is the eleventh consecutive decrease in economic activity but the softest since a mild 0.2 percent expansion seen in February last year.

Russia GDP YoY

Russia’s gross domestic product growth slowed to 0.7 percent year-on-year in January 2019, the weakest since a contraction seen in November 2017, from an upwardly revised 2.3 percent in the previous month. Output rose at a softer pace for construction (0.1 percent vs 2.6 percent in December), retail trade (1.6 percent vs 2.3 percent), freight turnover (2.4 percent vs 3.2 percent) and industrial production (1.1 percent vs 2 percent). On the other hand, agriculture activity expanded at a faster 0.7 percent, compared to a 0.1 percent decline in December.

Brazil Business Confidence

The Industrial Entrepreneur Confidence Index in Brazil fell to 64.5 in February 2019 from 64.7 in the previous month. Future expectations deteriorated (69 from 69.9 in January), namely regarding the company’s situation (69.2 from 69.9) and the country’s economic situation (68.5 from 69.8). Meanwhile, the assessment for current conditions improved (55.6 from 54.1), boosted by both the country’s economic situation (57.1 from 54.8) and the company’s situation (55 from 53.7). Among sectors, confidence weakened in construction (63.3 from 63.7) and manufacturing (64.7 from 64.9) while strengthened in mining (66.7 from 65.1).

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Japan exports, California home sales, Arizona home sales

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Japan exports hit by biggest fall in 2 years on weak China demand

(Reuters) Japan’s exports fell 8.4 percent in the year to January. It was the sharpest annual decline since October 2016, and followed a revised 3.9 percent year-on-year drop last December. Japanese exports to China, Japan’s biggest trading partner, fell 17.4 percent in the year to January. Slowing shipments ahead of Chinese New Year holidays likely helped slow China-bound exports, finance ministry officials said. Japan’s shipments to Asia, which account for more than half of overall exports, fell 13.1 percent in January. U.S.-bound exports rose 6.8 percent in the year to January, led by shipments of cars.

California Existing Homes in January: “Home sales fall to lowest level in more than 10 years”

The CAR reported: California home sales fall to lowest level in more than 10 years, C.A.R. reports

Housing demand in California remained subdued for the ninth consecutive month in January as economic and market uncertainties sent home sales to their lowest level since April 2008, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

The Arizona Regional Multiple Listing Service (ARMLS) reports (“Stats Report”):

1) Overall sales declined to 5,357 from 6,082 in January 2018. Sales were down 16.3% from December, and down 11.9% from January 2018.

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