Category Archives: GDP

Holiday sales, Atlanta Fed, Freight transport index

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Not long ago they blamed cold weather, now it was the warm weather.

And this time not a word about the consumer not spending his gas savings…
;)

Holiday sales fall short of forecasts: NRF

Jan 15 (CNBC) — The National Retail Federation said Friday that holiday sales increased 3 percent to $626.1 billion in November and December, falling short of the trade group’s forecast for 3.7 percent growth, as unseasonably warm weather and low prices weighed on results.

The news came shortly after the Commerce Department said retail sales posted an unexpected drop in December, falling 0.1 percent from the previous month. Compared with the prior year, December sales rose 2.2 percent, to $448.1 billion, according to the government data.

During the October to December period, total sales rose 1.8 versus the prior year, according to the department. Total sales for all of 2015 increased 2.1 percent, representing their weakest result since 2009, Reuters said.

“Make no mistake about it, this was a tough holiday season for the industry,” said NRF President Matthew Shay. “Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds.”

“Despite these factors, the industry rallied, consumers responded and sales still grew at a healthy rate.”

How the industry generated this growth, however, remained a top concern among analysts. They cautioned that profitability will likely take a hit when retailers start rolling out their fourth-quarter earnings results in coming weeks, thanks to aggressive discounts.

“Knowing that the topline growth was fueled by promotions tells us that the real number for us to focus on is … the individual bottom-line results for retailers, because that’s where we’re going to see the real profitability numbers,” said Steve Barr, PwC’s U.S. retail and consumer leader.

Industry forecasts had called for modest sales growth this holiday season, as low gas prices and a stronger economy battled against muted wage gains and higher rent and health-care costs. Retailers that cater to middle-income shoppers faced even more headwinds, including price deflation and a shift in consumer spending toward dining out or travel.

As a result, the National Retail Federation predicted retail sales excluding autos, gas and restaurants would increase 3.7 percent in November and December, compared with the prior year’s 4.1 percent growth.

In the same vein, consulting firm AlixPartners forecast holiday sales (excluding motor vehicles, food services and dining, and gas stations) would rise 2.8 to 3.4 percent during the final two months of the year, compared with 4.4 percent growth in 2014.

And Deloitte, whose prediction covers the November through January period (but excludes motor vehicles and gasoline) predicted a 3.5 to 4 percent increase. That would mark a slowdown from its recorded 5.2 percent gain the prior year.

As the season progressed, however, analysts grew more pessimistic that sales would meet these forecasts. Despite retailers’ best efforts to get shoppers into their stores earlier, November got off to a slow start. Then, over the critical Black Friday weekend, ShopperTrak data indicated that sales fell an estimated 10.4 percent.

What’s more, unseasonably warm weather through December took a huge bite out of retailers’ traffic and sales, with Planalytics calculating a $572 million sales loss for specialty apparel stores during the final two months. That figure does not even take into account department stores, which also rely heavily on apparel. In its holiday sales release,Macy’s blamed 80 percent of its 4.7 percent same-store sales decline on cold-weather goods.

Down again, now forecasting only .6% GDP growth for Q4:
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Fed comment, Retail sales, Empire State Manufacturing, Industrial production, Business inventories, Consumer sentiment

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Looks like the Fed hiked during a recession.

Should make for interesting Congressional testimony…

Maybe the hundreds of $ millions they spend on economic research isn’t enough???
;)

Sales remain at recession levels:

Retail Sales
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Highlights
Retail sales proved disappointing in December, down 0.1 percent in a headline that is not skewed by vehicles or even that much by gasoline. Ex-auto sales also fell 0.1 percent while the core ex-auto ex-gas reading came in unchanged which is well below both expectations as well as low-end expectations. The Beige Book yesterday warned us about weak apparel sales which in this report fell a very steep 0.9 percent, in a decline that likely reflects more than just import-price contraction. The general merchandise category, which is very large, fell 1.0 percent in the month. Electronics & appliances also show contraction.

December winds up what was a not-so-great year for the nation’s retailers. Total sales rose only 2.1 percent in the year, the smallest gain since 2009 and well down from 3.9 percent in 2014. Excluding motor vehicles, sales rose 0.9 percent, far lower than 2014’s 3.1 percent.

There are, however, some positives in the report including another strong gain for restaurants, up 0.8 percent, and also another gain for furniture & home furnishings, up 0.9 percent in strength that confirms ongoing improvement in the housing sector. But sales at non-store retailers rose only 0.3 percent for a second straight month which are moderate gains that do not confirm anecdotal reports of unusual holiday strength for online shopping.

Upward revisions do take some of the sting out of the December report but not much. November total sales are revised 2 tenths higher to plus 0.4 percent and reflects a sharp upward revision to vehicle sales to plus 0.5 percent. But vehicle sales couldn’t muster any strength in December, coming in unchanged. And sales at gasoline stations extended their long run of contraction that reflects falling oil prices, down 1.1 percent in December.

There’s plenty of jobs for consumers and gas prices are low — but so are wages. The consumer started to slow down at year end and that was before the new trouble in China. Today’s data will pull down expectations for fourth-quarter growth.
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Retail Sales ‘control group’ (retail sales excluding food, auto dealers, building materials, and gas stations)
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More recession evidence, and maybe worse…

Empire State Mfg Survey
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Highlights
The contraction in factory activity in the New York manufacturing region, which began way back in August, unfortunately is picking up a lot of steam this month, at minus 19.37 for the January headline which is the lowest reading since April 2009. New orders, at minus 23.54, are contracting for an eighth straight month and at the sharpest pace since March 2009. Unfilled orders, at minus 11.00, are in an even deeper string of contraction. Employment, at minus 13.00, is down for a sixth straight month as is the workweek, at minus 6.00. And there’s a crumbling going on in the 6-month outlook which, at 9.51 is still in the positive column but shows the least optimism since way back in March 2009. This report is grim and offers an initial look at January’s factory activity which, based on these results, appears to be getting hit by global concerns.
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More recession evidence, or worse…

Industrial Production
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Highlights
December was not a good month for the industrial economy as industrial production fell a sharper-than-expected 0.4 percent. Utility output, down 2.0 percent, declined for a third straight month reflecting unseasonably warm temperatures. Mining, reflecting low commodity prices and contraction in energy extraction, has also been week, down 0.8 percent for a fourth straight decline. Turning to manufacturing, which is the most important component in this report, production fell 0.1 percent for a second straight month (November revised downward from an initial no-change reading).

Details on manufacturing include a second straight contraction for vehicles, down 1.7 percent following November’s 1.5 percent decline. Weakness here, along with weakness in the motor vehicle component of this morning’s retail sales report, will raise talk that the auto sector, which had been one of the highlights of the 2015 economy, may slow down in 2016, at least the early part of the year. Construction supplies are a positive, up 0.6 percent for the second strong showing in three months and confirming strength underway in data for construction spending.

Capacity utilization fell 4 tenths from a downwardly revised November to 76.5 percent. A low utilization rate, which is running roughly 4 percentage points below its long-term average, holds down the cost of goods.

Year-on-year rates confirm weakness, down 1.8 percent overall with utilities down 6.9 percent and mining down 11.2 percent. Manufacturing is in the plus column but it’s nothing spectacular, at plus 0.8 percent.

Making matters worse is a downward revision to November, now at minus 0.9 percent vs an initial decline of 0.6 percent. Looking at the annualized rate for the fourth quarter, industrial production fell 3.4 percent though manufacturing did increase but not much, up 0.5 percent. Weather factors are skewing utility output but otherwise, readings are fundamentally soft and reflect the downturn in global demand made more severe for U.S. producers by strength in the dollar.
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Inventories down some but sales down same so relative to sales inventories remain way high, another recession indication:

Business Inventories
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Highlights
Inventories are contracting, the result of defensive draws in the wholesale and manufacturing sectors. Business inventories fell 0.2 percent in November following a decline in October of 0.1 percent. Wholesale inventories fell 0.3 percent for a second straight month with manufacturing down 0.3 percent following October’s 0.2 percent draw. Retail, up 0.2 and 0.1 percent in November and October, was the only sector adding inventories and today’s weak results for December retail sales may point to an unwanted build for December.

Relative to sales, which also fell 0.2 percent and were down 0.3 percent in October, total inventories are stable, at a ratio of 1.38. This report is indicative of economic weakness and will not be building expectations for fourth-quarter growth let alone the outlook for first-quarter growth.
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This was up a tad so they have something to report on the news. But even here the current conditions took a dive. And, as previously discussed, this is one man one vote, not one dollar one vote, and total spending has been decelerating:

Consumer Sentiment
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Highlights
The first indication of the China effect on U.S. consumers looks positive but ultimately is mixed. January’s flash consumer sentiment index did rise 7 tenths from final December to 93.3 but current conditions, the component that picks up the immediate impact of special factors, fell 3.0 points to 105.1. Should volatility in markets begin to ease and confidence in China improve, this reading could pop back as quickly as month end.

Lifting the mid-month index is a rise in the expectations component, up 3.0 points 85.7. Behind this gain is strength in the jobs market and perhaps even falling oil prices as 1-year inflation expectations are down a sizable 2 tenths to 2.4 percent. This is offset in part by a 1 tenth rise in 5-year expectations to 2.7 percent.

The resilience in long-term optimism is a plus for the U.S. economy though the eroding in short-term inflation expectations will not be encouraging to Federal Reserve policy makers who have launched a rate-hike sequence for an economy still struggling against deflation. The Dow is moving off opening lows in early reaction to this report.
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ECB comment, Retail Sales, Fed Atlanta, Oil comment

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Seems there’s no wisdom on the topic of ‘money’ anywhere of consequence:

No ‘plan B’ for ECB despite still low inflation: Praet

Jan 6 (Reuters) — Executive Board member Peter Praet said various factors, notably low oil prices and less buoyant emerging economies, meant it was taking longer to reach the goal of inflation of close to but below 2 percent. “We need to be attentive that this shifting horizon does not damage the credibility of the ECB,” he added. “There is no plan B, there is just one plan. The ECB is ready to take all measures necessary to bring inflation up to 2 percent. If you print enough money, you get inflation. Always. If, as is happening now, the prices of oil and commodities are tumbling, then it’s more difficult to drive up inflation,” he said.

From Morgan Stanley:

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Up to 1% for Q4 on the trade number, which is subject to revision.

And DB is forecasting +.5%.
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The still don’t seem to understand it’s only about pricing, not quantity:

Brent Crude Oil Drops Below $35

World’s benchmark oil fell by more than 4.8% to below $35 a barrel around 9:30 AM NY time, extending a third consecutive day of losses. It is the lowest price since 2004 as oversupply worries increased as tensions between Saudi Arabia and Iran diminish chances of major producers cooperating to cut production.

Not to forget their models use the oil futures prices, which express storage charges, as indications of future spot prices, and that this ‘rookie error’ tends to inflate their inflation forecasts:

A number of members commented that it was appropriate to begin policy normalization in response to the substantial progress in the labor market toward achieving the Committee’s objective of maximum employment and their reasonable confidence that inflation would move to 2 percent over the medium term.

However, some members said that their decision to raise the target range was a close call, particularly given the uncertainty about inflation dynamics, and emphasized the need to monitor the progress of inflation closely.

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Saudi pricing, Mtg purchase apps, ADP, Trade, Factory orders, ISM non manufacturing

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Saudi discounts for February. Some reduced, some increased, so probably more same- prices fall until Saudi output hits its capacity:
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Zig zagging a lot recently, now back down to where they’ve been for a while:

MBA Mortgage Applications
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Highlights
Mortgage application activity fell sharply in the two weeks ended January 1, down 15 percent for home purchases and down 37 percent for refinancing. Rates were steady in the period with the average 30-year mortgage for conforming balances ($417,000 or less) up 1 basis point to 4.20 percent. Weekly data can be volatile during the shortened holiday weeks, making the latest results difficult to read. This series will resume its weekly periods beginning next week.
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This is a forecast for Friday’s jobs report:

ADP Employment Report
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Highlights
ADP is calling for unusual strength in Friday’s employment report, at 257,000 for private payrolls which is far outside Econoday’s consensus at 190,000 and well outside the high estimate for 227,000. Strength of this degree would underscore the health of the labor market and would begin to seal expectations for a rate hike at the March FOMC. ADP isn’t always an accurate barometer for the employment report but today’s results could definitely affect the markets.

A bit smaller than expected, but again, both imports and exports are falling:

International Trade
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Highlights
The nation’s trade balance, reflecting weak cross-border activity, narrowed in November to $42.4 billion from a revised $44.6 billion in October. Exports fell 0.9 percent in the month to $182.2 billion with industrial supplies and consumer goods showing the most weakness. Imports fell 1.7 percent to $224.6 billion with both consumer goods and capital goods showing declines.

Despite low oil prices, the petroleum gap widened by $0.9 billion to $5.4 billion due to rising demand. The price of imported oil fell 88 cents to $39.24 for the lowest level since February 2009.

The trade gap with China narrowed by $1.7 billion in the month to $31.3 billion while the gap with Europe widened by $0.4 billion to $13.8 billion. The gap with Mexico narrowed by $1.2 billion to $5.2 billion.

The nation’s fourth-quarter trade balance adjusted for inflation is still trending slightly above the third-quarter which will pull down GDP. But the takeaway from today’s report is slowing global trade.
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Negative growth continues here:

Factory Orders
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Highlights
Flat is a good description of the nation’s factory sector as factory orders slipped 0.2 percent in November, making October’s revised 1.3 percent gain look like a rare outlier. Durable goods orders were unchanged in the month while orders for non-durable goods fell 0.4 percent on price weakness for petroleum and coal.

Capital goods data, unfortunately, are mostly weak including a 0.3 percent decline for core orders. Shipments of core capital goods fell 0.6 percent in November and follow October’s 1.0 percent decline in readings that will pull down the business investment component of the fourth-quarter GDP report.

Outside of orders, total shipments edged 0.2 percent higher to end a string of declines that go all the way back to July. Inventories also offer good news, falling 0.3 percent and bringing down the inventory-to-shipment ratio to a less heavy 1.35 vs October’s 1.36. Unfilled orders are another positive, rising 0.2 percent following a 0.3 percent gain in October.

The factory sector is not exactly robust, the result of weak demand for U.S. exports and also weakness in the domestic energy sector reflected in this report by a 13.6 percent monthly plunge in orders for mining & oil field machinery. But the nation’s economy is not narrowly focused on the factory sector, evidenced by healthy readings in today’s ISM non-manufacturing report.

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Yes, it’s above 50, but the chart indicates the non manufacturing growth rate is melting away:
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Fed Atlanta Q4 GDP forecast is +.7%

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Down to only .7% for Q4 GDP forecast. JPM went down to 1% today as well.

It’s a bit below the DC Fed’s 3%+ forecasts earlier in the year, when the lower price of oil was presumed to be an unambiguous positive for growth, further supported by the massive monetary stimulus of near 0 rates and trillions of QE.

And a bit below their latest, similar forecasts of a couple of weeks ago when they judged the economy ‘solid’ and raised rates.

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Posted in GDP

PMI Manufacturing, ISM Manufacturing, Construction Spending, Canada PMI, China Manufacturing PMI

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Bad:

PMI Manufacturing Index
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Highlights
The manufacturing PMI has been consistently running warmer than other manufacturing surveys which helps put into context the disappointment of December’s slowing to 51.2, down from 52.8 in November. The final reading for December is 1 tenth lower than the mid-month flash. Near stagnation in new orders is a key negative in the report, one that points to further slowing for the headline index in coming readings. Orders are still growing but at their slowest pace of the recovery, since September 2009. Backlog orders are contracting sharply, the most since September 2009 as well. The report points to widespread weakness across orders including for export orders where manufacturers continue to site strength in the dollar as a negative.

Very bad, employment down, but export orders did manage a bounce:

ISM Mfg Index
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Highlights
ISM manufacturing sample is reporting the weakest conditions since July 2009. At 48.2, December is much lower than Econoday’s 49.2 consensus and is only the third sub-50 reading of the recovery. But the story is much the same as it was in November which came in at 48.6 with both months showing slight contraction underway for both new orders and production. Employment in the sample, however, is noticeably weaker than November, at 48.1 for a more than 2 point decline and the second sub-50 reading in the last three months. A sizable 4.5 point rise for new export orders to 51.0 is a positive in the report. Inventories are steady and low but the sample still say inventories are a little bit high which betrays caution in their outlook. Prices for raw materials continue to contract, a reminder that low oil and commodity prices are making it difficult for the Fed to reach its 2 percent inflation target. This report points to ever softer conditions for a sector that, held down by energy and weak foreign demand, showed very little life during 2015.
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And more bad. Note the ‘processing error’ which resulted in reductions to prior months. As suspected, things have been worse than reported ever since the collapse in oil capex a little over a year ago. And as the chart shows, the blip up as the NY tax credit expired in June continues to reverse:

Construction Spending
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Highlights
Construction spending had been a highlight of the U.S. economy but less so with November’s report where the headline fell 0.4 percent, far below the Econoday consensus for plus 0.7 percent. The year-on-year gain for spending, at 10.5 percent, is the lowest since April last year. Today’s report also includes sharp downward revisions to prior months, the result of a processing error going back to January last year. October’s initial 1.0 percent monthly gain is now cut 7 tenths to 0.3 percent while September is now at plus 0.2 percent vs an initial plus 0.6 percent.

The processing error, unfortunately for the housing outlook, is centered in the residential component where prior strength has been cut back. Still, residential spending rose 0.3 percent for a second month in a row that follows September’s very solid 1.2 percent gain. Spending on new single-family homes has been rising strongly with the year-on-year rate at a very solid plus 9.3 percent. Spending on multi-family homes did fall in November but has been in fact booming in prior months, up 24.5 percent year-on-year.

Spending on nonresidential construction has also been solid, down in November but with the year-on-year rate at plus 13.6 percent. Public spending has been led by the educational component, up 15.2 percent year-on-year, with highway spending behind at plus 5.6 percent.
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Canada Manufacturing PMI at Record Low

Jan 4 — The RBC Canadian Manufacturing PMI dropped to 47.5 in December of 2015 from 48.6 in the previous month. It is the fifth contraction and the lowest reading on record due to weak output, new orders and employment.

China Caixin Factory Activity Contracts for 10th Month

Jan 4 — The Caixin Manufacturing PMI in China dropped to 48.2 in December of 2015 from 48.6 in November and below market expectations. While the reading was the lowest in 3 months, factory activity has been in a contraction since March. Production declined for the seventh time in the past eight months, driven in part by a further fall in total new work. Client demand was weak both at home and abroad, with new export business falling for the first time in three months. Manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements. Meanwhile, deflationary pressures persisted, as highlighted by further marked declines in both input costs and selling prices.

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Mtg purchase apps, Durable goods orders, New home sales, Personal income and outlays, Chemicals Activity Barometer

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Up some this week. Been bouncing around a lot with looming Fed hike, regulation changes, etc. but mtg apps and home sales remain depressed:
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More bad here:

Durable Goods Orders
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Highlights
October was a rare good month for the factory sector, not November where manufacturing production in the industrial production report was no better than unchanged and now new orders were also unchanged. Excluding transportation, orders dipped into the minus column though just barely at minus 0.1 percent.

Capital goods had turned higher in October but, once again, November is a different story with core orders down 0.4 percent and October’s gain shaved in half, and more so from plus 1.3 percent to a revised plus 0.6 percent. Year-on-year, core orders are down a very weak looking 1.8 percent. Core shipment data are also in the negative column, at monthly losses of minus 0.5 percent and minus 1.0 percent for the last two months which is a very poor opening for fourth-quarter business investment.

Outside of core capital goods, shipments in this report did show strength, up 0.9 percent vs, however, a 1.2 percent drop in October. Inventories fell 0.3 percent as manufacturers, facing soft demand, continue to work their stocks lower. The inventory-to-shipments ratio fell 2 notches to a less heavy 1.64. In another positive, unfilled orders rose for a second month, up 0.2 percent following October’s 0.3 percent gain.

Turning to industry data, vehicle orders bounced back, aircraft orders swung lower while electrical equipment, belying construction strength, fell for a second month. Machinery orders were down as were orders for primary metals.

The factory sector, held down by weak exports and weak energy-related demand, appears to be finishing up a soft 2015 on another soft note.

This is not adjusted for inflation. Note it’s only been hovering around the $240 billion level where it was back in 2007:
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Less than expected and last month revised down as well, as the trend remains lower since peaking when oil capex collapsed, though no one seems to notice…:

New Home Sales
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Highlights
Rising construction is bringing supply into the housing sector and helping to lift new home sales, which rose 4.3 percent in November to what is still however a lower-than-expected annualized rate of 490,000. The month-to-month gain follows a very strong 6.3 percent rise in October which, however, has been revised sharply lower to 470,000 from an initial 495,000. Houses for sale rose 5,000 in the month to 232,000 which is up from 210,000 in November last year. At the current sales rate, supply is at 5.7 months which, because of the rise in sales, is down slightly from October. Still, rising permit data point to more homes coming into the market.

Price data are also constructive, up 6.3 percent in the month to a median $305,000 with the year-on-year, which had been negative, up 0.8 percent. Still, this is a modest year-on-year rate and, relative to the very strong 9.1 percent year-on-year sales gain, points to discounting. Prices in this report appear to have room to move higher.

Regional sales data have the West up more than 20 percent in the month with the year-on-year rate at plus 4.7 percent. Sales in the South, which is by far the largest region, rose 4.5 percent in the month for an outstanding year-on-year gain of 19.4 percent. The Midwest and Northeast both show monthly and yearly declines.

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Personal Income and Outlays
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So the problem is, unlike prior recessions, personal income took a substantial hit after 2008 and then didn’t grow fast enough to make up for lost ground. Then it took another hit with the tax hikes and sequesters and again hasn’t grown fast enough to make up for the prior hit:
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And consumption continues to decelerate since the oil capex collapse about a year ago:
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Oil prices, Existing home sales chart

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This means ‘the swamp has been drained’ and falling production has eliminated the trapped oil in Cushing that caused WTI to be at a discount to Brent. In fact, Brent should trade at a discount to WTI when the shortage is fully eliminated, reflecting transportation costs to the US.

This, however, does not mean there’s any kind of national shortage or that prices will go up as unlimited imports are continuously available at then current prices, and last I saw the Saudis are still discounting their crudein an attempt to sell their full capacity output as previously discussed:
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This chart puts it in historical perspective. Housing was forecast to be the ‘driver’ of growth. Unfortunately all it’s done is turn south like most all the other stats, and nothing has stepped up to replace the lost oil capex which had stepped up to offset the tax hikes and sequesters. And remember the population grows at about 3 million per year, so it’s even worse on a per capita basis:

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GDP, existing home sales, Richmond Fed

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Not so good since oil capex collapsed about a year ago:

GDP
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Highlights
A downward revision to inventories pulled down the third revision to third-quarter GDP, coming in at an annualized and expected rate of 2.0 percent. Revised inventory growth, at $85.5 billion vs an initial $90.2 billion, was the most negative factor in the quarter, which is actually a plus of sorts as businesses held down inventories due to slowing sales, a move that should limit future disruptions in production and employment. Personal consumption expenditures include a downward revision to service spending, now at an annualized 2.1 percent for a 1 tenth decline. The drag from net exports was raised slightly to $11.5 billion. On the plus side, residential fixed investment was upgraded to a very strong 8.2 percent for a 9 tenths upward revision. Nonresidential fixed investment was also upgraded, up 2 tenths to an annualized plus 2.6 percent in the quarter. In sum, the third-quarter came in at a respectable rate, down from an outsized 3.9 percent bounce in the second quarter that followed a weather depressed 0.6 percent rise in the first quarter. Fourth-quarter GDP is tracking at roughly 2 percent and is likely to get a bounce from the current spree of mild weather.

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Serious miss here, and now down from last year. My guess is that there was some buying was accelerated prior to the rate hike:

Existing Home Sales
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“U.S. home resales posted their sharpest drop in five years in November, a potential warning sign for the health of the U.S. economy although new regulations on paperwork for home purchases may have driven the decline.

The National Association of Realtors said on Tuesday existing home sales plunged 10.5 percent to an annual rate of 4.76 million units. That was the sharpest decline since July 2010. October’s sales pace was revised slightly lower to 5.32 million units.

Housing has been providing a sizable boost to U.S. economic growth this year as a strengthening labor market and low interest rates have helped young adults to leave their parents’ homes.”

This went up some, so it will probably make all the headlines:

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Atlanta Fed, US current account, Philly Fed

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Blue chip consensus dropping quickly now, and today won’t help any:
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Remember a year ago when they said the oil price drop would be an unambiguous positive for the trade balance?
;)

Anyway, this is weak dollar stuff, vs the euro area current account surplus, which is strong euro stuff:

Current Account
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Highlights
The nation’s current account deficit widened sharply in the third quarter, to $124.1 billion from a revised $111.1 billion in the second quarter. This is the widest gap of the recovery, since the troubles of fourth-quarter 2008. A greater deficit in goods trade, at $0.8 billion in the quarter, is the smallest factor in the widening. A narrowing in the surplus for primary income, at $6.6 billion, and a widening in the gap for secondary income, at $5.8 billion, are the main factors behind the quarter’s deficit. The gap relative to GDP rose 1 tenth in the third quarter to a still manageable 2.7 percent.

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Bad. Fed rate hike already have an effect…
;)

Philadelphia Fed Business Outlook Survey
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Highlights
The negative headline, below Econoday’s low-end estimate, isn’t even half of story for the December Philly Fed report which is pointing to another rough month for the nation’s factory sector. The headline index came in at minus 5.9 for its third negative reading in four months. New orders have been in the negative column for the last three months, at a steep minus 9.5 in today’s report. Unfilled orders, which popped up slightly in November, are back in the minus column and deeply in the minus column at 17.7.

Manufacturers in the Philly Fed’s sample worked down their backlogs to keep up shipments which came in on the plus side at 3.7. But without new orders coming in, shipments are bound to fall. Employment, likewise, is bound to fall though it did hold in the plus column for a second month in a row at 4.1 in December. Ominously, price data are beginning to turn deeply negative, at minus 9.8 for inputs and minus 8.7 for final goods — the latter an indication of weakening demand.

Another ominous detail in the report is a breakdown in the 6-month outlook, down more than 20 points to 23.0 which is low for this reading. Expectations for future orders are especially weak. Today’s report falls in line with Tuesday’s Empire State report and are both reminders that weak global demand, together with the breakdown in the energy and commodity sectors, are pulling down the nation’s factory sector.

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