Income, Consumption Chicago PMI, Trade, GDP forecasts, France, Canada, India

Continues to decelerate from the tariffs, and this is before the virus:

Also decelerating before the virus:

Before the virus, the downtrend is obvious as it remains below 50:

Exports and imports both slowing as global trade continues to wind down:


GDP forecast to decelerate, before the virus:


Unsold inventory piling up:


Gone negative well before the virus:

France, Inventory cycle, Unemployment benefits, Architectural billings

Never seen so many charts that look pretty much like this:

Much harder to get this cycle means that unemployment and benefits as defined are lower than otherwise, and that the counter cyclical stabilizing effect has been disabled:

Most Unemployed People In 2018 Did Not Apply For Unemployment Insurance Benefits

from the Bureau of Labor Statistics

In 2018, 77 percent of the unemployed people who had worked in the previous 12 months had not applied for unemployment insurance benefits since their last job. Of the unemployed who had not applied, 3 out of 5 did not apply because they did not believe they were eligible to receive benefits.

Still below 50 which means contraction, and still trending lower:

ECB trade comments, US rates, UK, Germany, France, Japan

Someone else agrees with me about the tariffs and the global trade collapse:

CNBC: The trade war is weighing ‘like a big, dark cloud’ on the global economy, says Christine Lagarde.

And this would function like a tax increase:

Bloomberg: President Trump Doubles Down on Call for Negative Interest Rates.

Today’s tariff induced bad news:

Small business indicators, China business survey, Car sales, FDI, Euro retail sales


Light vehicle sales peaked a while back:


Been helping to support the $US:

Eurozone Retail Sales Fall Unexpectedly

Retail trade in the Euro Area fell 0.3% in May, following a 0.1% drop in April and missing expectations of a 0.3% growth, as sales declined for all main categories. Among the bloc’s largest economies, Germany’s retail trade decreased for the second month, while gains were recorded in France and Spain. Year-on-year, retail sales rose 1.3%, also missing forecasts of 1.6%.

Euro area PMI, Architecture billings index, Philly Fed, Retail sales, Inventories, Fed report, Equity prices and earnings forecasts

Not looking good:

German Factory Activity Continues to Contract in April

The IHS Markit Germany Manufacturing PMI rose to 44.5 in April 2019 from the previous month’s near seven-year low of 44.1, but below market expectations of 45, a preliminary estimate showed. Still, the latest reading pointed to a sharp contraction in the manufacturing sector, as inflows of new business fell for a fourth straight month led by a further steep decline in new export orders, which dropped at the second-fastest rate in the past ten years. Firms highlighted weak demand across the automotive sector in particular, whilst also suggesting some hesitancy among UK based clients. In addition, work-in-hand at manufacturers declined the most for almost a decade while employment levels were unchanged. Looking ahead, business confidence towards the year-ahead outlook was the weakest since November 2012.

French Factory Activity Contracts the Most in 2-1/2 Years

The IHS Markit France Manufacturing PMI edged down to 49.6 in April 2019 from 49.7 in the previous month, missing market expectations of 50, a preliminary estimate showed. The latest reading pointed to the steepest contraction in the manufacturing sector since August 2016, as output fell the most in four years. On the other hand, new orders and export sales both declined at a softer pace while employment growth accelerated.

Back in negative territory:

In contrast, this is an upbeat report (subject to revision) for March, though the chart doesn’t look so good:

Highlights

The optimists weren’t quite optimistic enough as March retail sales, across all major readings, came in just above Econoday’s high estimates. Still, the trend is uneven and not pointing with certainty to acceleration ahead for consumer spending.

Total retail sales jumped 1.6 percent in March which exactly matches the decline in the much more important month of December. February sales are unrevised at the headline level at minus 0.2 percent with January sales revised 1 tenth higher to a gain of 0.8 percent.

Ex-auto sales show a bit less strength over this period, rising 1.2 percent in March but falling 2.1 percent in December with February revised to a 0.2 percent decline and January holding at an increase of 1.4 percent. Other core readings are similar, showing strength in March following bumpy results previously with ex-autos ex-gas rising 0.9 percent in the latest month and control group sales, which are inputs into GPD, up a helpful 1.0 percent.

Vehicle sales stand out sharply in March, up 3.3 percent following declines in the two prior months. Sales at gasoline stations also stand out, up 3.5 percent for a second straight month but boosted by price effects for fuel.

Convincing strength is evident once again for non-store retailers which, after falling 4.5 percent in December, have posted three straight strong gains including 1.2 percent in both March and February. Restaurants are also convincing, up 0.8 percent in the latest month for a third straight gain in what speaks directly to discretionary strength. Furniture & home furnishing stores are also doing well with three straight gains including a 1.7 percent March jump.

Lagging are department stores, unchanged following three straight declines which may reflect a shift underway in consumer habits away from traditional malls than weakness in consumer demand. General merchandise, which is the broader category that includes department stores, rose 0.7 percent in March but failed to make up for recent weakness.

Yet this report is not about weakness but about strength, and the results are certain, like yesterday’s trade data for February, to give a lift to first-quarter GDP estimates. The economy’s soft patch so far this year isn’t as soft as it once looked, but questions remain.

Elevated inventories are not a good sign:

U.S. labor market remains tight, economy continues to grow

(Reuters) The U.S. central bank’s “Beige Book” report found economic activity grew at a slight-to-moderate pace in March and early April. Prices have risen modestly since the last Beige Book, with tariffs, freight costs and rising wages often cited as key factors, the Fed said. It added that consumer spending was mixed but suggested sluggish sales for both general retailers and auto dealers. Wages grew moderately in most districts for both skilled and unskilled workers. In terms of the manufacturing sector, the Fed said contacts in many districts reported that trade-related uncertainty was weighing on activity.

Housing, Freight, Infrastructure, Trump advice, MMT hysteria, Cooling real estate markets

Tax Reform Exacerbates Sales Cooldown in the U.S.

(WSJ) U.S. tax reform has exacerbated a gradual cooldown in U.S. home sales over the past year in certain parts of the country, according to research from realtor.com. The Tax Cuts and Jobs Act, which went into effect on Jan. 1, 2018, allows homeowners to deduct mortgage interest on a loan up to $750,000—down from $1 million—and caps state and local tax deductions to only $10,000. Home sales fell 6% across a sample of 30 counties where a large proportion of households took the mortgage interest deduction, while home sales rose by a modest 0.3% in a sample of 30 counties where taxpayers didn’t use the deduction.

Sliding Freight Rates Send More Big Bulk Ships to Scrapyards

(WSJ) Ship-broker BTIG said in a report that 107,000 deadweight metric tons of ship steel were recycled in the first three months of this year, up 35% from 78,000 metric tons in the same period a year ago. Of 23 vessels scrapped, 16 were capesize vessels, the biggest cargo ships. Capes now command daily freight rates of around $9,000, well below the average $25,000 needed to break even. The Baltic Dry index was at 726 points on Friday, down 27% in the past 12 months. The ship-breaking industry has annual revenue up to $5 billion and 2018 was one of the busiest years ever.

U.S. Democrats seek up to $2 trillion to invest in aging infrastructure

(Reuters) House of Representatives Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer said they would try to revive an effort for major investments in public works. The White House said President Trump had spoken recently with Pelosi and “agreed to meet soon to discuss working together on infrastructure,” spokesman Judd Deere said. “I’m all for taking it (infrastructure legislation) up once the president and Democrats, everybody says: ‘OK, here’s how we’re going to pay for it.’ As soon as that magically appears, I think we have a way forward,” Senate Majority Leader Mitch McConnell said.

In case there was any doubt he’s still doing his own tweets:

President Donald Trump encourages France to use “flying water tankers” to put out a raging fire at the Notre Dame Cathedral in Paris as firefighters rushed to save one of the country’s most visited landmarks.

“So horrible to watch the massive fire at Notre Dame Cathedral in Paris,” the president tweets. “Perhaps flying water tankers could be used to put it out. Must act quickly!”
“If you hit that with tons of water from above, that’s going to collapse the entire structure and make the situation worse,” said Wayne McPartland, a retired New York City Fire Department battalion chief. “If you miss, you might hit civilians in the street.”

They are talking about me!
:(

US factory growth, China car sales, Euro Area, Germany, Fisher comment, State revenues, Las Vegas housing

The tariff thing keeps taking its toll:

China Nov car sales fall 14%, biggest drop since 2012

(Reuters) China’s automobile sales fell 13.9 percent in November from a year earlier. The drop in sales to 2.55 million vehicles, a fifth straight decline in monthly numbers. The last time sales fell by more than this was in January 2012, when business was hurt by the timing of the Lunar New Year holiday. The November drop comes on the heels of almost 12 percent declines in each of the past two months, putting China on track for an annual sales contraction not seen since at least 1990. Sales in the country totalled 25.4 million vehicles in the first eleven months of the year, down 1.7 percent from the same period a year earlier.

Euro Area Private Sector Activity at 49-Month Low: Markit

The IHS Markit Eurozone Composite fell to 51.3 from 52.7 in the previous month and below market expectations of 52.8, a preliminary estimate showed. The reading pointed to the weakest expansion in the private sector activity since November 2014, as both manufacturing (51.4 from 51.8) and services (51.4 from 53.4) slowed. The job creation rate dropped to a two-year low; new export orders fell for the third straight month, recording the steepest decrease since series began while new business almost stalled. The slowdown was centered in France, as disruptions to business and travel were registered from the ‘gilets jaunes’ protest. On the price front, input price inflation eased to an eight month low due to lower oil and other commodity prices and fewer supply constraints regarding demand in the region. Finally, optimism deteriorated drivn by growing concerns over global trade and economic growth, rising political uncertainty, Brexit and tighter financial conditions.

German Private Sector Growth at 4-Year Low

The IHS Markit Germany Composite PMI declined to 52.2 in December 2018 from 52.3 in the previous month and below market forecasts of 52.5. The latest reading pointed to the weakest pace of expansion in the private sector since December 2014 as service sector expansion was the second-weakest seen in over two years (PMI at 52.5 vs 53.3 in November) and manufacturing growth slowed to a near three-year low (PMI at 51.5 vs 51.8 in November). Inflows of new orders edged closer to stagnation as new export business fell for the fourth month running, with a number of manufacturers highlighting a drop in sales to China. Meanwhile, employment growth picked up from November’s six-month low and remained solid overall while backlogs of work decreased for a second straight month. On the price front, input price inflation was the lowest since September 2017. Looking ahead, business confidence regarding the year-ahead outlook for activity dropped to a four-year low.

Seems a particularly silly statement, but not uncommon:

Ex-Fed’s Richard Fisher: Rates need to go higher to create enough room to cut should the economy tank

State and local tax receipts now growing faster than expenditures is a source of drag on the economy:

Many States See Strong Revenue

(WSJ) With most states nearing the midpoint of their fiscal years, which end June 30, at least 19 of them are seeing higher-than-expected general-fund revenue, according to a report from the National Association of State Budget Officers. “Clearly, from what I’ve observed, a continued, much-improved personal-income tax situation” is feeding the states’ revenues, said John Hicks, Nasbo’s executive director. “But also, we’re seeing an improved sales tax.” The states’ personal income-tax collections grew by a median 7.9% in fiscal 2018, Mr. Hicks noted. And general-fund collections from personal-income taxes outperformed forecasts by 3.6%.

Producer prices, Retail sales, Business inventories, Consumer sentiment, Saudi output, German, Euro area GDP

Nothing here to get the Fed concerned about inflation:

8-12-1
Not good, less then expected and excluding autos, a ‘core reading’ even worse. Seems to me that perhaps the higher gas prices that caused the increases over the last couple of month’s have taken their toll on other spending. And at the macro level, without an increase in either private or public deficit spending top line growth won’t be there:

8-12-2

Highlights
Consumers spent their money on vehicles in July but not on much else as retail sales came in unchanged. When excluding autos, retail sales slipped 0.3 percent for the first decline in this reading since March. When excluding both autos and gasoline, the latter falling on lower prices, retail sales improve slightly but are still down 0.1 percent for the first decline since January. This core reading is telling and will likely define total consumer spending (which includes services) for the month of July.

The big plus that saves the report is the 1.1 percent monthly surge in motor vehicle sales, one that follows a 0.5 percent gain in June. Spending elsewhere may be weak, but spending on vehicles is a signal of consumer confidence and strength. Elsewhere, positives are hard to find.

Supermarket sales fell in the month as did building materials. Sporting goods were especially weak as were restaurant sales, the latter a discretionary category that speaks to the month’s lack of non-vehicle punch. On the plus side once again are sales at nonstore retailers which, driven by ecommerce, jumped a sizable 1.3 percent for a second straight month and follows even larger gains in prior months. Sales at gasoline stations, reflecting lower prices, swung 2.7 percent lower following a 2.2 percent gain in the prior month.

The consumer is the driver of the economy and July’s weakness for retail sales makes for a slow start to the third quarter and will ease talk for now of a September FOMC rate hike. Upward revisions are footnotes in the report with June now at plus 0.8 percent, up 2 tenths from the initial reading which will pull GDP revision estimates for the second quarter higher.

You can see how retail sales growth peaked when oil capex collapsed at the end of 2014,
and that spending has yet to be ‘replaced’:

8-12-3
Business inventories corrected some due to what I think was a one time jump in auto sales (which remain down year over year). However inventories still look way too high to me and so the liquidation is likely to continue into q3. And note that the inventory growth began when oil capex collapsed:

8-12-4
This was also below expectations and doesn’t look to be recovering to prior levels:

8-12-5

Highlights
Consumer sentiment is flat, at 90.4 for the August flash for only a 4 tenths gain. Components are mixed with expectations higher, at 80.3 for a 3.5 point gain, but current conditions lower, down 2.9 points to 106.1. The gain in expectations points to rising confidence in the jobs outlook but the decline in current conditions hints at a second month of slowing for consumer spending.

This too peaked when oil capex collapsed:

8-12-6
Saudi oil sales have moved up a bit but are still far below their presumed output availability of 12 million bpd. So it’s still a matter of setting price, in this case via their posted discounts to benchmarks:

8-12-8

German GDP grows much faster than expected

By Todd Buell

Aug 12 (MarketWatch) — Germany’s economy grew at a much faster pace than expected in the second quarter. In quarterly adjusted terms, Europe’s largest economy and economic powerhouse grew by 0.4%. The statistics office said that growth came primarily from foreign trade. Quarterly growth in the first quarter was 0.7%.

Euro Area GDP Growth Rate
The Eurozone’s economy expanded 0.3 percent on quarter in the three months to June 2016 slowing from a 0.6 percent growth in the previous period and matching preliminary reading, second estimate showed. Among the largest economies of the Euro Area, GDP growth slowed in Germany and Spain; while growth in France and Italy was flat.

Chicago PMI, Pending home sales, EU inflation, G20 statement, Virginia jobless claims

As previously suspected, last month’s higher print was just a bit of volatility on the way down, as per the chart:

Chicago PMI
er-2-29-1
Highlights
Another month and another month of wild volatility for the Chicago PMI which lurched from solid expansion in January to noticeable contraction in February. At a headline 47.6, Chicago’s PMI has fallen outside Econoday’s consensus range for a third month in a row! Still, this report is closely watched and confirms other early indications of February softness, not only for manufacturing but for services as well since this report tracks both sectors. The good news in the report is that new orders have held over breakeven 50 which hints at better readings in next month’s report. Now the bad news. Production is down sharply, backlogs are in a 13th month of straight contraction, employment is down and in a fifth month of contraction, and prices paid are contracting at the fastest pace since 2009. The resilience in new orders limits the signal of damage from this report, but production and other activity look to have slowed in February following respectable strength in January.

er-2-29-2
Another bad one, as the weakness that began with oil capex continues to dampen the rest:

Pending Home Sales Index
er-2-29-3
Highlights
Pending sales of existing homes slowed in January, down an unexpected 2.5 percent to an index level of 106.0 in a decline offset but only in part by an 8-tenths upward revision to December to plus 0.9 percent. Econoday forecasters were expecting a much better reading, at a consensus plus 0.5 percent for January sales. Sales in the month fell in three of the four regions with only the South in the plus column. Year-on-year, pending sales are up only 1.4 percent. Today’s report is yet another disappointment for a sector that, despite high employment and low mortgage rates, is getting off to a flat start for 2016.

The oil patch is where the recession started and it keeps getting worse which means the rest of the economy will continue to deteriorate as well:

Dallas Fed Mfg Survey
er-2-29-4
Highlights
Dallas, together with Kansas City, are two Fed districts that are being hit hardest by the collapse in oil prices. The Dallas Fed’s general activity index came in at a deeply minus 31.8 in February vs minus 34.6 in January. New orders contracted a further 8.4 points in the month to minus 17.6 for their lowest reading since 2009 in what is a very ominous signal for the months ahead. Unfilled orders are also in contraction as are production and shipments. Price contraction deepened for both raw materials and selling prices. Inventories are down as is employment. In fact, in a rare sweep of weakness, all 17 current components are in contraction! The company outlook index is at minus 17.4 with a quarter of the sample saying their outlook has worsened during February. The latter is a telling reading and suggests very strongly, in line with all other anecdotal readings this month, that the factory sector, hit by weak exports and a weak energy sector, fell back in February.

er-2-29-5
Fundamentally high inflation = weaker currency as higher prices means the same amount of currency buys less,etc. and deflation = a fundamentally stronger currency. However, the euro has been falling on news of deflation, as portfolio mangers, traders, etc. sell what euro they still have (or get outright short), their logic/fears being that deflation will trigger more inflationary policy from the ECB, which has yet to ‘trigger’ inflation. Meanwhile, the lower euro, driven down by selling and not ‘fundamentals’, continues to support the large and growing trade surplus that removes net euro financial assets from global markets. This has been going on for maybe a couple of years now leaving the euro more and more ‘undervalued’ and in ever shorter supply:

Euro-Area Prices Decline Most in Year as ECB Mulls Easing

By Alessandro Speciale

Feb 29 (Bloomberg) — The inflation rate in the 19-nation bloc declined to minus 0.2 from a positive reading of 0.3 percent in January,. Core inflation, which strips out volatile elements such as food and energy, was at 0.7 percent, down from 1 percent in the prior month. In Germany, the European Union- harmonized inflation rate dropped to minus 0.2 percent from 0.4 percent. The rate in France fell to minus 0.1 percent, while Spanish prices slid 0.9 percent. The ECB has already cut its deposit rate to minus 0.3 percent and is pumping 60 billion euros ($66 billion) a month into the economy via asset purchases.

Nothing good here:

The world’s top economies are set to declare on Saturday that they need to look beyond ultra-low interest rates and printing money if the global economy is to shake off its torpor, while promising a new focus on structural reform to spark activity.

A draft of the communique to be issued by the Group of 20 (G-20) finance ministers and central bankers at the end of a two-day meeting in Shanghai reflected myriad concerns and policy frictions that have been exacerbated by economic uncertainty and market turbulence in recent months.

“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” the leaders said in a draft seen by Reuters.

“Monetary policies will continue to support economic activity and ensure price stability … but monetary policy alone cannot lead to balanced growth.”

Geopolitics figured prominently, with the draft noting risks and vulnerabilities had risen against a backdrop that includes the shock of a potential British exit from the European Union, which will be decided in a June 23 referendum, rising numbers of refugees and migrants, and downgraded global growth prospects.

But there was no sign of coordinated stimulus spending to spark activity, as some investors had been hoping after the market turmoil that began 2016.

Germany had made it clear it was not keen on new stimulus, with Finance Minister Wolfgang Schaeuble saying on Friday the debt-financed growth model had reached its limits.

“It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy,” he said.

This is from a story about Virginia’s claims for unemployment which are down even as the economy has weakened:

Colonna said the dip to 1974 levels in new unemployment claims is baffling since economic growth has been so sluggish in Virginia recently.

The state’s economy didn’t grow at all last year, U.S. Bureau of Economic Analysis data show.

And for the 12 months ended in July, the number of Virginians working rose by just 12,200, or 0.3 percent, the Virginia Employment Commission reports. The number who were unemployed declined by 33,000 – a figure that’s larger because it includes people who have stopped looking.

Part-time workers can’t always qualify for benefits when they are laid off, since to receive the minimum $60 a week unemployment benefit in Virginia, a person must have earned at least $3,000 during two of the previous five quarters.

And if income from any part-time job exceeds a laid-off person’s unemployment benefit, the state won’t pay the unemployment benefit. The maximum unemployment benefit in Virginia is $378, and the maximum time it is paid is 26 weeks. You can’t get the benefit if you are fired or quit your job.

CPI, Redbook Retail Sales, Industrial Production, Housing Index, Containers, FHA Capital, EU Car Registrations, Japan

Part of the Fed’s mandate is to hit it’s 2% inflation target:
er-11-17-6
Still at recession type levels:
er-11-17-7
This is also what recession looks like:
er-11-17-8
The anointed ‘driver of the economy’ continues to falter as previously discussed:

Housing Market Index
er-11-17-9
Highlights
The housing market index from the nation’s home builders shows weakness, at 62 for November and missing the Econoday consensus by 2 points. And compared to a revised October, the index is down 3 points. Yet readings in the report, though slowing, remain solid and one important detail is favorable.

Of the report’s three components, future sales are down a sizable 5 points but the level is still in the seventies, exactly at 70. Present sales, which is the most heavily weighted component, fell 3 points to 67, also still a strong level.

The positive in the report is a 1 point rise in traffic, a component which, at 48 in the latest report, has been lagging badly but is getting closer to the breakeven 50 mark. Weakness in this reading has been reflecting lack of first-time buyers in the market.

Turning to regional data, the highest composite score goes to the West, at an enormously strong 77, followed by the South, at 62. Two less watched regions for new homes, the Midwest and North, trail at 59 and 52.

There are positives in this report but the decline in both future and present sales is a reminder that both starts and permits for single-family homes have been slowing. Despite the rise in traffic, this report probably pulls back the housing outlook by a degree.

October 2015 Sea Container Counts Continue to Show Trade Recession Continues

By Steven Hansen

The data for this series continues to be in contraction. The year-to-date volumes are contracting for both exports and imports. The trade sector remains in a recession.

Federal agencies don’t need ‘capital’ to function.

This is simply unspent income that reduces aggregate demand:

FHA Meets Minimum Reserve Requirement for First Time Since 2009

(WSJ) — The Federal Housing Administration, which backs low-down-payment mortgages popular with first-time home buyers, said its insurance fund’s net worth at the end of September was $23.8 billion, up from a year-earlier level of $4.8 billion. Its capital reserve ratio, which by law is required to stay above 2%, rose to 2.07%, the first time it met the threshold since the start of the agency’s 2009 fiscal year. With the private subprime-mortgage market largely gone, the agency offers some of the easiest terms available, letting borrowers with a credit score as low as 580 make a down payment of as little as 3.5%.

Passenger car registrations: +8.2% over ten months; +2.9% in October

(ACEA) — In October 2015, the EU passenger car market continued its upward trend, despite a slower rate of increase (+2.9%), marking the 26th consecutive month of growth. Demand for new passenger cars saw momentum slowing down in all major markets. Registrations in Italy (+8.6%), Spain (+5.2%), Germany (+1.1%) and France (+1.0%) kept growing, even though less strong than in past months, while the UK market declined in October (-1.1%). Across the region, new passenger car registrations totalled 1,104,868 units, also supported by growth in the EU’s new member states (EU-12).

Can’t admit fiscal works and monetary doesn’t:

Abe to call for supplementary budget topping 3tn yen

(Nikkei) — Prime Minister Shinzo Abe will direct the Japanese government to put together a supplementary budget totaling more than 3 trillion yen ($24.2 billion) next week to help shore up a flagging economy. The government is set to compile measures to cope with the Trans-Pacific Partnership trade pact on Nov. 25 and steps for promoting active civic engagement on Nov. 26, with both to be incorporated into the extra budget for fiscal 2015. The prime minister declined to characterize the supplementary budget as a stimulus measure, since doing so could be seen as admitting defeat on Abenomics.

Capital spending delays took toll on July-September GDP

(Nikkei) —Weak capital investment led Japan’s economy to shrink by an annualized 0.8% in the three months ended September. A 1.3% drop in capital investment was the main cause of the decline. Corporations had planned to invest a good deal this fiscal year, though the follow-through has been lacking. Machinery orders, which typically lead capital investment by three to six months, slipped 10% for the July-September quarter. But if the outlook for economic growth overseas remains hazy, more companies could put investment on hold.