Category Archives: Economic Releases

Existing home sales, PMI services, Coal mining jobs

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Less than expected and last month’s number revised a bit lower, so still no contribution to growth for the year:

Highlights

Lack of supply pulled down existing home sales in December and may very well pull down sales in January as well. Existing home sales fell 3.6 percent in December to an annualized rate of 5.570 million which is near the low end of Econoday’s consensus. But November, despite a small downward revision to a 5.780 million rate, remains by far the best month of the expansion, with the 5.700 million rate in March last year the next strongest.

Supply in December’s market fell a very steep 11.4 percent in the month to 1.480 million homes. On a sales basis, supply fell from 3.5 months in November to 3.2 months which is a record low in 19 years of available data. Lack of choice is an increasing problem for the resale market.

Prices softened slightly which won’t be drawing new homes onto the market. The median slipped 0.2 percent in the month to $246,800 for a year-on-year increase of 5.8 percent.

This year-on-year price rate is well above the 1.1 percent gain in overall sales which points perhaps to future price concessions and even less supply. On the year, supply is down a very sizable 10.3 percent.

The split between single-family and condo sales shows weakness for the latter, with sales down 11.6 percent on the month to a 610,000 annualized rate. Single-family sales fell a monthly 2.6 percent to 4.960 million.

Housing data are usually volatile which should take the surprise out of December’s weakness. Still, resales remain solid though the lack of supply is a serious obstacle for future sales.


Trumped up expectations pretty much fully reversed for the service sector purchasing managers index?

https://www.cnbc.com/2018/01/22/trump-pledged-to-revive-coal-industry-little-has-changed-in-a-year.html

Up a few jobs but you can see it’s about very small numbers:

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Housing starts, Apple repatriation

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Starts were quite a bit lower than expected while permits held steady:

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,192,000. This is 8.2 percent below the revised November estimate of 1,299,000 and is 6.0 percent below the December 2016 rate of 1,268,000. Single-family housing starts in December were at a rate of 836,000; this is 11.8 percent below the revised November figure of 948,000. The December rate for units in buildings with five units or more was 352,000.

An estimated 1,202,100 housing units were started in 2017. This is 2.4 percent above the 2016 figure of 1,173,800.

Building Permits:
Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,302,000. This is 0.1 percent below the revised November rate of 1,303,000, but is 2.8 percent above the December 2016 rate of 1,266,000. Single-family authorizations in December were at a rate of 881,000; this is 1.8 percent above the revised November figure of 865,000. Authorizations of units in buildings with five units or more were at a rate of 382,000 in December.
emphasis added

Read more at http://www.calculatedriskblog.com/#k7tq4Il3CRYpwRsC.99

Looks to me like starts have been hovering around the 1.2 million level for almost 3 years, which is still well below peak starts of the last cycle, and even well below 2001 recession levels as well. And permits looking pretty much the same, for all practical purposes:

It’s a purely political move, of course, as they could have just as easily done all they wanted to do in any case and not get hit with a $38 billion tax bill:

Apple to pay $38B in repatriation tax, pledges to open new campus

That’s less than the 21% tax rate on corporate profits from the new law, itself a drop from the 35% prior rate. In a news release, Apple didn’t mention moving production of iPhones to the U.S. They are currently designed at Apple’s headquarters in Cupertino, California, but built at the Foxconn plants in China.

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Housing index, Industrial production, Redbook same store sales, Healthcare comments

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Up more than expected this month, but last month revised down, inline with a recent pattern of reporting a better than expected number that subsequently gets revised down to where it no longer looks so good:


The year end blip up, funded by out sized credit card advances, may have reversed:

Highlights

Same store sales were up 2.6 percent year-on-year in the January 13 week, continuing the deceleration seen in the prior two weeks to fall to the smallest year-on-year weekly gain since November 11. Month-to-date sales versus the prior month were down 0.3 percent, the first negative reading in four weeks, while the full month year-on-year gain dropped 0.4 percentage points to 3.0 percent, matching the weakest pace since November 11. The second week of the year extends the weakening in sales metrics seen in the first week by retailers in Redbook’s same-store sample, suggesting a cooling in ex-auto ex-gas retail sales in January following December’s strength.

So you have a Fed policy of maintaining some minimum unemployment rate to meet their price stability mandate, which now means that many people won’t qualify for Medicaid?

Political risk looms over Republicans’ welfare tinkering (Reuters) Republicans are seeking tougher work and job training requirements for those helped by assistance programs. Kentucky on Friday became the first U.S. state to get approval from Washington to impose work requirements on recipients of Medicaid. The approval came a day after the Trump administration said states could move toward putting work or job training conditions on Medicaid.

They are inching their way towards single payer, as once you’ve decided not to let people die in the streets the “process” will get you there, one way or another:

Ryan suggests room for bipartisanship on ObamaCare (The Hill) House Speaker Paul Ryan said Friday there might be an opportunity for a bipartisan deal to shore up ObamaCare’s insurance markets. Ryan expressed optimism that Congress could pass a bill similar to one sponsored by Sens. Susan Collins and Bill Nelson. The bill would provide billions of dollars to states to help establish high-risk pools or reinsurance programs. “I’ve talked to Susan Collins and Democrats about this … It’s basically different ways of saying, let’s all agree a person with a catastrophic illness shouldn’t go bankrupt if they get sick,” Ryan said.

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Bank lending review, $US, Dementia signs

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I’m using monthly totals this week to take some of the ‘noise’ out of the weekly numbers surrounding year end:

Pretty clear here there’s been almost no loan growth over the last year or so:


The growth rate of real estate lending also shifted around election time:


Consumer credit, however, expanded into year and as consumers borrowed to sustain spending as income growth fell short:


Large trade deficit:


Large trade surplus:

clinical dementia:

“Problems these experts say they have observed include rambling speech; episodes of slurred speech; failure to recognize old friends; frequent repetition of the same concepts; decreased fine motor coordination; difficulties reading, listening and comprehending; suspect judgment, planning, problem solving and impulse control; and markedly declining vocabulary in recent years, with over reliance on superlatives, according to the letter.”

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Retail sales, $US

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Highlights

It was a very good holiday shopping season but perhaps not a great one. Retail sales rose a solid 0.4 percent in December which is just shy of Econoday’s consensus though November is revised 1 tenth higher to what is a standout gain of 0.9 percent. Core readings show similar strength with all pointing to a solid consumer contribution to fourth-quarter GDP.

Nonstore retailers, a component which e-commerce dominates, did in fact have a great season. Sales here rose 1.2 percent in December on top of November’s 4.2 percent surge. These gains no doubt came at the expense of brick-and-mortar boxes as general merchandise inched only 0.1 percent and 0.3 percent higher in the two months with the sub-component for department stores down a very noticeable 1.1 percent in December. Clothing stores are another December disappointment, falling 0.3 percent and reflecting price discounting as evidenced in the apparel reading of this morning’s consumer price report.

But furniture stores had a very good season with December and November gains of 0.6 percent and 0.5 percent. And in further evidence of housing strength, building material sales jumped 1.2 percent in December following November’s 0.5 percent gain. Restaurants are also positive with December and November gains of 0.7 and 0.5 percent. Vehicle sales rose 0.2 percent in December with gasoline sales unchanged.

The consumer was alive during the holidays but not unrestrained. Likely gains underway in wages along with the enormous strength in confidence and in the labor market are positives going into the 2018 economy.

The year end binge buying financed by consumers adding to credit cards as income fell short doesn’t seem at all sustainable:


The $US is down maybe 10% since the election, and looks to be going lower as:

1. The relatively large US trade and current account deficits have been getting larger, exacerbated by higher oil prices
2. The President’s trade initiatives are often ‘weak dollar’ stories
3. Fed rate hikes fundamentally weaken the $US via interest income channels
4. US trade policy is reducing non-resident desires to accumulate $US financial assets

So yes, equity prices are higher, but in terms of foreign currencies, such as the euro, not so much. And a lower $US could translate into higher US inflation should import prices increase. Along those lines, the Saudis could be targeting a non-dollar price for their oil, such as the price in euro, for example, which could mean a higher $US oil price. And higher gasoline price can slow the US consumer should income growth continue to lag:

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Jobless claims, Producer prices, Savings rate chart

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Yes, they have been made very hard to get, and now economists are getting concerned that they are moving higher:

Highlights

In what might be an early sign of loosening in the labor market, initial jobless claims rose 11,000 in the January 6 week to a higher-than-expected 261,000. The gain is widespread and not centered in Puerto Rico where claims, at 1,778, are down about 500 in the latest week and back to pre-hurricane levels. Only one state, Maine, was estimated in the week. The 4-week average, at 250,750, is up a steep 9,000 in the week and is roughly 15,000 above the month-ago trend which offers an early hint of trouble for the January employment report.

In data for the last week of December, continuing claims showed improvement, down 35,000 to 1.867 million which is a new 44-year low. The unemployment rate for insured workers is down 1 tenth to 1.3 percent.

Initial claims, aside from hurricane distortions in September and October, were remarkably steady and favorable throughout last year which makes the gain in the first week of this year stand out. Next week’s initial claims data will be very closely watched and will track the sample week of the January employment report.

Interesting how 2017’s 10% or so drop in the dollar and increase in oil prices didn’t translate into higher prices in this series:

Highlights

Yesterday’s weakness in import and export prices did in fact point to wide weakness in today’s producer price report where the headline, at minus 0.1 percent in December, is 3 tenths below Econoday’s consensus for the first decline since August 2016. Ex-food and ex-energy is also at minus 0.1 percent and when also excluding trade services, which were very weak, prices came in at plus 0.1 percent. Year-on-year rates, which had been on the rebound, all fell back with total prices down 5 tenths to 2.6 percent.

Service prices are less sensitive to change than commodity prices and December shows wide weakness with the trade services component down a very steep 0.6 percent for the second straight decline and the third in the last four months. Goods prices were unchanged in December with key readings here showing a 0.7 percent decline for food, no change for energy and a 0.3 percent decline for finished goods with light trucks unchanged, cars up 0.2 percent and computers down 0.7 percent.

Down is definitely the theme of this report which points squarely at disappointment for tomorrow’s consumer price report where expectations are already soft, at an Econoday consensus gain of only 0.1 percent and 0.2 percent for the core (ex-food and ex-energy). The absence of inflation is a stubborn theme of the economy.

Others catching on:

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Consumer Credit, Small business index, JOLTS, Rig counts

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Things are starting to add up better with this jump in consumer borrowing. With real disposable personal income growth near 0, and spending growing at just over 2.5% through November, it’s now looking like consumers ‘dipped into savings’ by running up their credit card balances which tends to be followed by reductions in spending:

Highlights

Consumers were heating up their credit cards in November as revolving credit, up $11.2 billion in the month, made a sizable contribution to total credit outstanding which rose $28 billion for a 17-year high. The rise in revolving credit is the second largest of the ongoing expansion and perhaps indicates less reluctance among the nation’s consumers to run up their credit cards. And though it hints at momentum going into December’s shopping, it may also revive talk of slackening credit standards. Nonrevolving credit, where auto financing and student loans are tracked, rose $16.8 billion which is also a sharp rise.

Total consumer credit:


Revolving credit includes credit cards:


Non revolving credit includes auto loans:


And then there are analysts who don’t believe the number (though it is inline with income and spending reports):

Analyst Opinion of the Consumer Credit Situation:

You would have to be on drugs to believe consumer credit grew at 8.75% in November.

Not only does this data set suffer from backward revision (moderate to significant enough to change trends – such as this month), but the use of compounding (projecting monthly change as annual change) by the Federal Reserve to determine consumer credit growth rates exaggerates the volatility in this data. The total consumer credit unadjusted growth in 2017 has been hovering around 6% year-over-year.

Down more than expected but remains elevated since the election as per the chart, even as the reality of weak sales and earnings persists:

Highlights

Optimism among small business owners cooled in December after November’s surge to 13-year highs, with the NFIB Small Business Optimism Index falling 2.6 points to 104.9. Leading the monthly index below the range of analysts’ expectations and 3 points below the consensus forecast was an 11-point drop in expected business conditions to 37 and a loss of 8 points to minus 1 in plans to increase inventories. Only two of the ten components of the index posted gains, five declined, and three remained unchanged. Despite the monthly drop, however, NFIB said 2017 was the strongest year in the 45-year history of the index, as measured by the monthly average, which at 104.8 beat the previous record of 104.6 set in 2004.

Helping to dampen optimism in December were expectations of real sales, down 6 points to 28, plans to increase employment, down 4 points to 20, and earnings trends, which dropped 5 points deeper into negative territory to a minus 15, by far the worst performance among the components.

The two rising components, plans to make capital outlays and current job openings, both posted only feeble 1-point gains, albeit achieving high levels of 27 and 31, respectively.

While the December index level may be disappointing, the NFIB pointed out the reading remains one of the strongest in the history of the index, as November’s 107.5 was bested only by the 108.0 record posted in July 1983. Moreover, throughout the year much of the optimism reported by the survey hinged on expectations of the passage of business-friendly tax reform, and the likely positive reaction to the signing of the decidedly business-friendly Tax Cuts and Jobs Act on December 22 was probably not captured in the December survey.


Weaker than expected, and the details still tell me it’s been cooling down for a while:


Oil prices up and drilling down some:

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Bank loans and macro analysis

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Bank lending began to decelerate after oil related capital spending collapsed late in 2014, and then collapsed further about the time of the presidential election:

Note the consumer ‘dipping into savings’ some to sustain consumption via borrowing into year end as personal income flattened:

Real disposable personal income flattened and consumer spending slowed but not as much as income, and was instead supported by consumers ‘dipping into savings’:

This is now impossibly low, given the deceleration in credit:


Employment gains continue to decelerate:


Total vehicle sales were lower in 2017 vs 2016, with domestic autos particularly weak. This is through November:


Slowing growth here as well:

With income and employment decelerating I can’t see the upside?

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Employment, International trade

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Weaker than expected, with the prior two months revised downward by a net 9,000 jobs. In any case employment growth continues its multi-year deceleration that began with the collapse of oil capex:

Highlights

Hiring cooled though employment levels are very high and there’s also a hint of wage inflation in December’s employment report. Nonfarm payrolls rose 148,000 which is lower than expected but still favorable and enough to absorb new entrants into the jobs market. Revisions are slightly negative with November now sharply higher, now at 252,000, but October sharply lower, to 211,000 for a net 9,000 decline.

The number of unemployed actively looking for work rose slightly to 5.308 million with the unemployment rate remaining at a 17-low of 4.1 percent. The pool of available workers, which includes those not actively working but nevertheless wanting a job, held little changed at 11.884 million. The labor participation rate is also unchanged, at 62.7 percent.

Wage data show a little pressure as average hourly earnings rose a noticeable 0.3 percent on the month though November gets a 1 tenth downgrade to only a 0.1 percent gain. Year-on-year, this reading is moving in the right direction though very slowly, up 1 tenth to 2.5 percent.

The payroll breakdown shows two more outstanding months for construction, up 30,000, and manufacturing, up 25,000, in confirmation that housing and the factory sector accelerated into year end. Other industries are more subdued with retail falling 20,000 in results that will raise talk of brick-and-mortar decline while professional and business services rose a subdued 19,000 with the temporary help subcomponent up only 7,000. Weekly hours are unchanged in this report at 34.5.

The fundamental strength of this report contrasts a bit with the more moderate level of headline payroll growth and does raise the question, one that the Federal Reserve has been repeatedly asking in its Beige Book, whether scarcity of available, particularly skilled labor, is holding back business expansion — that employers simply can’t find the people they need.

Nothing new here- annual employment growth has been decelerating in a straight line for a long time, coincident with the general deceleration of bank credit, auto sales, housing, etc. all evidence of decelerating aggregate demand:


Wages also continue to indicate this cycle’s chronic lack of aggregate demand:


The US trade balance continues to modestly widen, which given current conditions that include higher oil prices, likely works to keep the $US under pressure:

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ADP, Light vehicle sales, Wolf quote

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This is ADP’s forecast of tomorrow’s employment number. We’ll see tomorrow how well accurate they were:


A bit higher than expected but down for 2017 vs 2016 (negative growth):

Highlights

Unit vehicle sales proved solid in December, at a 17.9 million annualized rate vs 17.5 million in November. Outside of October and September, which were driven by hurricane-replacement demand, December’s results are among the very best of the last two years. The results, which easily top Econoday’s high estimate, point to strength for the motor vehicle component of the retail sales report and are a plus for fourth-quarter consumer spending. Domestic-made sales also topped the high estimate, coming in at a 14.0 million rate vs November’s revised 13.8 million.

Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.79 million SAAR in December.

That is down 1.5% from December 2016, and up 2.2% from last month.

This puts annual sales 17.14 million, down from 17.46 million in 2016.
Read more at http://www.calculatedriskblog.com/#VDdCh1WIl0m8GDhd.99


This is not population adjusted:


And in any case it’s turning into an all light truck story:

Annual U.S. Car Sales Drop for First Time Since Financial Crisis

Jan 3 (WSJ) — Though sales fell 1.8% last year as pent-up demand declined and interest faded in sedans and compact cars, auto makers still sold 17.2 million vehicles in 2017, the first time the industry has cleared the 17-million mark three consecutive years, according to IHS Markit. Vehicles now routinely sell for above $32,000, even with average incentives of $4,000 factored in, according to J.D. Power. That is 10% higher than what car buyers were dishing out when the industry’s rally began in 2010. The domestic car business is far healthier than the last time volumes slipped.

From Wolf’s book:

10. Wolff also writes at length about former Goldman Sachs executive Gary Cohn, who leads the president’s National Economic Council. Cohn has privately disagreed with Trump a number of times in the past year. But an April email that, Wolff writes, circulated around the White House “purporting to represent the views of Gary Cohn” takes this to a new level:

“It’s worse than you can imagine. An idiot surrounded by clowns. Trump won’t read anything – not one-page memos, not the brief policy papers; nothing. He gets up halfway through meetings with world leaders because he is bored. And his staff is no better. Kushner is an entitled baby who knows nothing. Bannon is an arrogant prick who thinks he’s smarter than he is. Trump is less a person than a collection of terrible traits. No one will survive the first year but his family. I hate the work, but feel I need to stay because I’m the only person there with a clue what he’s doing. The reason so few jobs have been filled is that they only accept people who pass ridiculous purity tests, even for midlevel policy-making jobs where the people will never see the light of day. I am in a constant state of shock and horror.”

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