Redbook Retail Sales, NY Housing Spike

Posted on July 21, 2015 @ 2:28 pm (Tuesday) by WARREN MOSLER

More of same- looking very weak

Highlights

Redbook’s sample has been reporting depressed sales rates since all the way back in March, including the latest week when same-store year-on-year sales rose only 1.2 percent. The report blames a seasonal lull for the latest disappointment, citing lack of shopper interest ahead of the back-to-school season.

From Nomura:
Looks like an expiring property tax break in NY State caused the burst of activity. Excluding the northeast, looks like starts in Q2 were about the same as Q1:

Euro Area CA, Macro Chart Update

Posted on July 20, 2015 @ 4:34 pm (Monday) by WARREN MOSLER

Still positive but lower and less than expected:

A few charts not looking so good:

Housing doing a bit better but remains well below levels associated with prior recessions and remains a much smaller % of GDP:

Beware spikes in permits!

Housing Starts, Consumer Sentiment

Posted on July 17, 2015 @ 10:50 am (Friday) by WARREN MOSLER

The increase is entirely a multi family story, and multi family dwellings are cheaper/smaller than single family:

Highlights

Strong demand for apartment units drove housing starts & permits data far beyond expectations, overshadowing less strength for the key single-family home category. Starts came in near the top of expectations, up 9.8 percent in June at a 1.174 million annual rate, but reflect a 29.4 percent surge in the multi-family component. The single-family component actually fell 0.9 percent. The same pattern appears for permits which jumped 7.4 percent overall to a much higher-than-expected 1.343 million rate but here too multi-family units rose 15.3 percent with single-family up far less but at a still very strong 0.9 percent.

Regional data, where the separation between single-family homes and multi-family units is not broken out, show special strength for the South which is by far the largest region for housing. Starts in the South rose 13.5 percent in June with permits up 10.4 percent. Permits in the West are also strong, up 9.5 percent, though starts in the region fell 6.0 percent. Also of note is an outsized 35.5 percent surge in Northeast starts.

The unusual rise for multi-family units reflects high levels of rent, evident in today’s CPI report. The single-family component is less strong though the 0.9 percent rise in permits does point to strong second-half activity for the new home sector. This report is very solid but just not as spectacular as the headlines suggest.

Negative surprise here:

Highlights

Consumer sentiment is softening this month, to 93.3 in the mid-month July reading which is below Econoday’s low estimate for 94.5. The current conditions component is down nearly 3 points to 106.0 in an early reading for July that points to another month of weakness for consumer activity. The expectations component fell a bit less to 85.2 which is still very respectable for this reading and points to confidence in the jobs outlook.

Inflation data, as Federal Reserve policy makers have been predicting, are inching higher with 1-year expectations at 2.8 percent and 5-year expectations at 2.7 percent, both up 1 tenth in the month.

Consumer sentiment has been running very strong most of this year and often well ahead of consumer spending readings which have been flat. But today’s report suggests that the best for confidence may already have passed.

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Atlanta Fed, 2004 vs 2015 US data, EU trade

Posted on July 16, 2015 @ 12:38 pm (Thursday) by WARREN MOSLER

The Atlanta Fed forecast as of July 14 is was +2.3% annualized for Q2, which is far below initial estimates of most professional forecasters, and below their current forecasts as well, and likely to be lowered further due to recent data.

The first government estimate for Q2 GDP will be released on July 30th. June trade numbers will not be released until August, and it looks to me like May was a zig that could zag in June and could cause a downward revision to Q2 GDP.

Inventories also look high to me which means a correction would further reduce Q2 GDP, and the low productivity numbers and decelerating employment reports tell me business is overstaffed for the current pace of sales and likely to adjust accordingly as well.

The economy before the 2004 rate hikes vs now:

Another strong surplus:

Highlights

The seasonally adjusted trade balance returned another healthy surplus in May. At E21.2 billion the black ink was short of April’s slightly downwardly revised E23.9 billion but still above the E20 billion mark for the fourth time so far this year.

The deterioration in the headline reflected a 1.5 percent monthly fall in exports, their first drop since January. Imports were flat. Annual growth of the former was 3.0 percent and of the latter 0.0 percent.

At E2.6 billion the average surplus in April/May was 6.4 percent above its first quarter mean which points to a probable small positive contribution from total net exports to second quarter real GDP growth. Quite apart from the weakness of the oil market, the current soft level of the euro should help to ensure continued strong trade data over the rest of 2015.

This is just the euro area, also in surplus:

Italy in surplus as well:

Highlights

The seasonally adjusted trade balance was in a E4.3 billion surplus in May following a marginally larger revised E3.6 billion excess in April.

The headline gain was mainly attributable to stronger exports which rose 1.5 percent from April, their third increase in the last four months. Much of this came courtesy of a 28.4 percent jump in the energy sector excluding which exports were up only 0.6 percent. Consumer goods (2.2 percent) had a good period but intermediates were only flat and capital goods were weak (minus 0.3 percent). Compared with May 2015 exports were 2.0 percent stronger.

Imports fell a monthly 0.3 percent, largely due to a 5.3 percent slump in energy although capital goods also struggled (minus 0.9 percent). Annual import growth was 0.5 percent.

Claims, Phili Fed, Housing index

Posted on July 16, 2015 @ 12:02 pm (Thursday) by WARREN MOSLER

Down a touch but the 4 week moving average still moving higher:

Highlights

Auto retooling is clouding initial jobless claims data which fell 15,000 in the July 11 week to 281,000. But the 4-week average, inflated by a 14,000 spike in the prior week, rose 3,250 to a 282,500 level that’s more than 5,000 above the month ago comparison. The rise in the average is not a positive indication for the July employment report.

But the latest on continuing claims, which are reported with a 1-week lag, are very favorable, down a very steep 112,000 to 2.215 million in the July 4 week which is a new recovery low. Nevertheless, the 4-week average, down 3,000 to 2.264 million, is trending slightly higher than the month-ago comparison. The unemployment rate for insured workers is down 1 tenth to a recovery low of 1.6 percent.

July, with its closings in the auto sector, is always a difficult month for claims data. Next week’s report will be especially important as initial claims will cover the sample week for the monthly employment report.

Not at all good:

Highlights

It turns out that the Philly Fed’s big jump in June was in fact a one-time wonder as the index slowed substantially in the July reading to 5.7 from 15.2. Growth in new orders is still respectable, at 7.1, but well down from June’s 15.2. Likewise, shipments slowed to 4.4 from 14.3 while backlog orders fell into contraction at minus 6.3 from plus 3.7. Employment also fell into contraction, at minus 0.4 from 3.8.

The June reading for this report stood alone as really the only strong indication this year on the manufacturing sector, but the give back now in July puts the Philly Fed in line with other readings. The nation’s manufacturing sector is being held down by weak exports and is a drag on economic growth.

Housing still a bit of a bright spot, relatively speaking, but still very low and depressed, and too small to move the GDP needle. And there are fewer builders:

Highlights

The housing market index, unchanged in July at 60, is signaling substantial strength for the new home market. This is the strongest reading since November 2005.

Future sales, at 71, lead the report with present sales right behind at 66. Still lagging is traffic, down 1 point in the month to 43 and reflecting a lack of first-time buyers in the market.

All regions are showing growth led by the West at a composite 63 followed by the South at 62. The Midwest is at 59 and the Northeast, which had been under 50 for a long run, is now at 52.

The new home market is accelerating and is in place to be the best surprise of the 2015 economy. Housing starts & permit data, which have been volatile but very strong, will be posted tomorrow.

Personal Income and outlays, ISM manufacturing, Construction spending, Atlanta Fed

Posted on June 1, 2015 @ 4:25 pm (Monday) by WARREN MOSLER

Personal Income and Outlays

Highlights
The consumer started off the second quarter slowly, putting income into savings and not spending. Consumer spending was unchanged in April with deep declines in spending on both durable and nondurable goods, down 0.7 percent and down 0.5 percent respectively, offset by another incremental increase in spending on services of plus 0.2 percent. Personal income, boosted by rents and dividends, rose a solid 0.4 percent though the gain for wages & salaries was less strong at 0.2 percent. The savings rate rose 4 tenths in the month to 5.6 percent.

Inflation readings are very tame with the price index unchanged in the month and the core up only 0.1 percent. The core rate, unlike April’s 1.8 percent core reading for the CPI where weightings on housing and medical costs are greater, is showing less pressure, down slightly to 1.2 percent. Overall prices are barely up at all year-on-year, at plus 0.1 percent.

The April retail sales report first signaled trouble for second-quarter spending that today’s report confirms. The consumer, the economy’s bread-and-butter right now given weakness in manufacturing, is sitting on their hands. This report pushes back the outlook for the Fed’s first rate hike.

Construction Spending +2.2% in April

Seasonally adjusted annual rate of $1,006.1 billion, 2.2% above the revised March estimate of $984.0 billion. The April figure is 4.8% above the April 2014 estimate of $960.3 billion. During the first 4 months of this year, construction spending amounted to $288.7 billion, 4.1% above the $277.3 billion for the same period in 2014.

These surveys are ‘one company one vote’ and the drop in oil capex hurts a small number of the total initially even as GDP growth fades before it spreads to the rest, which could take a while as slowing employment gains reduce demand in general, etc. And note the continued reference to export softness, which is partly dollar related, but also a function of the drop in gobal oil capex.

ISM Mfg Index

Highlights
May was a modestly positive month for ISM’s manufacturing sample with the headline index rising 1.0 point to a better-than-expected 52.8 which is near Econoday’s high-end forecast. New orders are the highlight of the report, up 2.3 points to 55.8 which is the best reading of the year. Contraction in export orders has been pulling down total orders in many reports but exports were unchanged at 50.0 in this report.

Employment moved back over 50 to 51.7 for a 3.4 point gain while production looks solid at 54.5. Backlog orders, at 53.5, are back over 50 for the first time since February. Supplier deliveries show very little change, at 50.7 vs 50.1 in the prior report to suggest that snags tied to the first-quarter port slowdown have unwound. Price data show slightly lower costs for raw materials.

The 52.8 headline for this report may be better-than-expected but it’s still very soft. The manufacturing sector appears to be stumbling through the second quarter.

Up nicely, though mainly due to state and local govt increases. And more importantly, year over year growth a bit better but still very low.

Construction Spending

Highlights
Construction spending is showing life, up 2.2 percent in April which is well above Econoday’s consensus for plus 0.7 percent and Econoday’s high-end forecast of 1.6 percent. Spending on residential construction rose 0.6 percent with strong gains posted for both single-family and multi-family homes. The gain here is no surprise and follows April’s big surge in housing starts & permits.

Private non-residential spending looks very strong in this report, up 3.1 percent and led by gains out of the power and office sectors. Pubic spending is also strong led by an outsized gain for highways & streets and including a large gain for educational building. The gain in public spending came entirely from the state and local governments as federal construction spending declined for a second straight month.

Adding to the positive news are big upward revisions, to plus 0.5 percent from an initial reading of minus 0.6 percent for March and no change from minus 0.6 percent in February. This will help boost the next revision to first-quarter GDP. And construction should give a badly needed lift to second-quarter growth which isn’t getting much help from the consumer, evidenced by this morning’s personal income & outlays report, nor from manufacturing, underscored by mostly soft readings in both this morning’s PMI index and ISM index.

After factoring in today’s numbers the Atlanta Fed GDP forecast remains at .8% annualized for Q2:

Lumber prices, UK pmi, West Coast Port Traffic, trade, PMI and ISM services index

Posted on May 5, 2015 @ 11:03 am (Tuesday) by WARREN MOSLER

From Calculated Risk:
Right now Random Lengths prices are down about 11% from a year ago, and CME futures are down around 25% year-over-year.

Stll positive but more recent numbers coming in worse than expected:

Great Britain : PMI Construction

Highlights
Business activity in UK construction slowed unexpectedly quickly last month. At 54.2 the sector PMI was 3.6 points short of its March outturn and at its weakest level since June 2013. However, the April print was still well above the 50 growth mark and its decline was probably at least in part due to supply shortages.

Note: West Coast port traffic increased sharply in March following the resolution of the labor issue in February. The workers were catching up with all the ships anchored in the harbor (now gone).

Both imports and exports rebounded in March, but imports rebounded more – and were up 36% year-over-year – whereas exports were down 20% year-over-year.

This suggests more imports from Asia in March, and also suggests the trade deficit was significantly higher in March than in February.

Well below expectations, hearing Q1 being revised down .5%, as Americans spend their gas savings on other imports from China and Japan. ;) And the growing US trade deficit/EU current account surplus fundamentally supports the euro vs the dollar.

United States : International Trade

Highlights
First-quarter GDP, barely above zero at plus 0.2 percent, may move into the negative column on revision following a much higher-than-expected March trade deficit of $51.4 billion, the largest since October 2008. The unwinding of the port strike on the West Coast, which was resolved mid-month March, played a major role in the data especially evident in imports which surged $17.1 billion in the month as backlogs at the ports were cleared. Imports of consumer goods, especially cell phones, were especially heavy. Exports, led by aircraft, also rose but only $1.6 billion. The total goods gap in the month was $70.6 billion which is the highest since August 2008.

The gap in petroleum trade, at $7.7 billion vs February’s $8.2 billion, wasn’t a major factor in the March data as the drop in prices was offset by a rise in volumes. By country, the gap with China widened to $31.2 vs $22.5 billion in February and to $7.1 billion vs $4.2 billion for Japan. The OPEC gap widened slightly to $1.2 billion vs $0.7 billion.

Still blaming the Easter Bunny for this:

United States : PMI Services Index

Uptick here so still showing growth, first glimmer of hope for a positive Q2:

United States : ISM Non-Mfg Index

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RT interview

Posted on April 24, 2015 @ 11:56 am (Friday) by WARREN MOSLER

My interview starts at 3:30

mtg purchase apps, NY manuf survey, industrial production, home builders index

Posted on April 15, 2015 @ 11:14 am (Wednesday) by WARREN MOSLER

Turned south again, unfortunately. Remains seriously depressed.

MBA Mortgage Applications

Highlights
After three straight weeks of impressive gains, the purchase index slipped back 3.0 percent in the April 10 week. Year-on-year, the index is still up a solid 7.0 percent in a reading that points to strength for the spring housing market.

More bad news:

Empire State Mfg Survey

Highlights
There’s no evidence yet that the manufacturing sector is building up steam early into the spring quarter. The Empire State index points to month-to-month contraction for April, at minus 1.19 for only the second negative reading in the last 23 months. The other negative reading was in December which was just about the beginning of this indicator’s slowdown.

New orders are contracting noticeably, at minus 6.00 for the second straight contraction. Weakness in exports, tied to the strong dollar and soft global demand, is a major factor behind the dip in orders. Unfilled orders, at minus 11.70, are in sharp contraction for a second straight month.

But the drop in orders has yet to pull down shipments which, at least for now, are still in the plus column and well into the plus column, at 15.23. Employment is also well into the plus column at 9.57 on top of March’s standout strength of 18.56.

Still, shipments and employment are certain to turn lower if orders don’t pick up. But, in an optimistic note, that’s exactly what the sample sees as a sizable 52 percent expect general conditions to improve in the next six months.

All in all, today’s report is soft reflecting weakness in global demand, weakness underscored by yesterday’s data out of China where GDP is at a 6-year low. Watch for the US industrial production and the latest hard data on manufacturing at 9:15 a.m. ET.

Another bad one:

Industrial Production

Highlights
The manufacturing sector remains sluggish. Industrial production for March fell 0.6 percent after a February rise of 0.1 percent. The March drop was largely due to utilities although manufacturing was soft. Market expectations were for a 0.3 percent fall for overall production in March.

Manufacturing edged up 0.1 percent in March after dipping 0.2 percent the month before. Analysts projected a 0.2 percent increase.

Mining dropped 0.7 percent in March after a 1.6 percent decrease the prior month. Utilities plunged 5.9 percent after surging 5.7 percent in February.

The production of durable goods moved up 0.2 percent, on the strength of a rebound in the production of motor vehicles and parts. The output of primary metals declined 3.2 percent to register the largest loss among durable goods industries. The production of nondurable goods moved up 0.1 percent; decreases in the indexes for paper, for chemicals, and for plastics and rubber products mostly offset gains by the other major nondurables industries. The production of other manufacturing industries (publishing and logging) fell 0.4 percent. The decrease of 0.7 percent for mining reflected a drop of 17 1/2 percent in the index for oil and gas well drilling and servicing that was partly offset by gains in crude oil and natural gas extraction and by a bounce back in coal mining.

Overall capacity utilization declined to 78.4 percent from 79.0 percent in February.

Not terrible but still low historically:

Atlanta Fed, Retail Sales, Redbook retail sales, small business optimism index, business inventories

Posted on April 15, 2015 @ 11:01 am (Wednesday) by WARREN MOSLER

Another string of lower than expected releases

And 2nd quarter nowcasts are showing about the same as Q1 no bounce yet.

Auto sales have a high import component. Note that reports of domestic wholesale auto output and sales have been lower than expected. And note year over year growth decline, though some of that is lower fuel prices. But of course the lower fuel prices were presumed to translate into higher sales elsewhere…

Retail Sales

Highlights
Weather effects may be fading with healthy sales numbers in March. Retail sales in March rebounded 0.9 percent after dropping 0.5 percent in February. The market consensus for March was for a 1.1 percent boost. Excluding autos, sales gained 0.4 percent, following no change in February. Expectations were for a 0.6 percent increase. Gasoline sales dipped 0.6 percent after 2.3 percent increase in February. Excluding both autos and gasoline sales rebounded 0.5 percent after declining 0.3 percent in February. Expectations were for a 0.4 percent increase.

By components, strength was seen in motor vehicles (up 2.7 percent), furniture, clothing, department stores, and miscellaneous store retailers.

On a year-ago basis, retail trade and food service were up 1.3 percent in March, compared to 1.9 percent in February.