Durables charts, new home sales,FHFA House Price Index, Japan PMI, GDP, Atlanta Fed, Mtg. purch apps, oil comment

Posted on June 24, 2015 @ 3:39 pm (Wednesday) by WARREN MOSLER

Longer term year over year view not looking so good:

The cheer leading continues, and sales in the Northeast up 87% looks a bit unsustainable?

New Home Sales

Highlights
The lift off for housing is appearing more and more like it’s straight up. New home sales rose 2.2 percent in May to an annual rate of 546,000 which is 6,000 above the high end Econoday forecast. Add to this is a 27,000 upward revision to the two prior months with April now standing at 534,000 for a big 8.1 percent monthly gain.

The surge in sales is making for a strong seller’s market with supply relative to sales down to a very thin 4.5 months vs 4.6 months in April. Total new homes on the market stand unchanged at 206,000. The lack of supply risks becoming acute and will doubtlessly speed up construction activity led by permits which, in data posted last week, have been jumping.

Lack of supply will prove to be a positive for sales prices, which however, are down in the latest report, 2.9 percent lower to a median $282,800. Year-on-year, the median price is down 1.0 percent vs the year-on-year sales gain of 19.5 percent in a mismatch that points to price acceleration ahead.

Regional sales data show a strong 13.1 percent rise in the West where year-on-year sales are up 25.5 percent. The South, which is larger than all the other regions combined in this report, has the strongest year-on-year rate at 33.3 percent though monthly sales in May dipped 4.3 percent. Sales have been soft in both the Northeast and Midwest where year-on-year rates are in the negative column though the Northeast is showing monthly strength in this report.

Yesterday’s existing home sales report was very positive as is today’s report, both of which add to other data that put housing at the top economy right now for a sector that can offset stubborn weakness in the manufacturing economy.

Seems like a stretch to call this ‘lift off’???

And price gains have at least moderated?

Another PMI goes negative. And note that exports are up, in contrast to the US:

Japan : PMI Manufacturing Index Flash

Highlights
The flash manufacturing PMI for June indicated a slight deterioration in operating conditions at Japanese manufacturers. Production growth slowed to a fractional pace, while new orders contracted for the third time this year so far. Subsequently, employment growth was subdued, while buying activity declined. The flash manufacturing reading was 49.9, down from the May final of 50.9. Output increased, though at a slower rate. Employment increased but at a slower rate. Both output and input prices increased at a faster rate.

While new orders changed direction and decreased, export orders increased at a faster rate. Reports of a favorable exchange rate and an increase in foreign demand led to a further rise in new export orders in June. Moreover, the latest expansion was the second-fastest since January and quicker than the series average.

As expected, still negative, still only a minor weather bounce to Q2 so far:

GDP

Highlights
The second revision to first-quarter GDP came in as expected, at minus 0.2 percent. Exports were near the top of the negative side, reflecting the strong dollar’s negative effect on foreign demand. A rise in imports was the quarter’s biggest negative.

The heavy weather of the quarter contributed to an outright contraction in business spending (nonresidential fixed investment) and an abrupt slowing in consumer spending (personal consumption expenditures).

Despite PCE slowing, spending on services, that included an upward revision for restaurants, was the strongest component in the first quarter. Also adding to GDP was an inventory build, one however that was largely unwanted and tied to the quarter’s severe weather and port slowdown. Residential investment was also a positive. The GDP price index was unchanged in the quarter.

First-quarter 2015 wasn’t as badly hit as first-quarter 2014 when GDP sank 2.1 percent, a dip that was then reversed by a 4.6 percent bounce back in second-quarter 2014. Estimates for this second quarter’s GDP growth are settling into the 2 to 3 percent range. We’ll get yet another look at the first quarter with annual revisions on July 30.

I’m sure the Fed sees this:

Marginally better:

Now 18% over last year. Better, but bank credit numbers don’t show an increase and all cash purchases are down as a % of purchases:

MBA Mortgage Applications

Highlights
After swinging up-and-down the past few weeks, mortgage applications inched higher in the June 19 week. Purchase applications rose 1.0 percent with refinancing applications up 2.0 percent. Year-on-year, purchase applications are up a very strong 18.0 percent. Mortgage rates dipped in the week with the average for conforming loan balances ($417,000 or less) down 3 basis points to 4.19 percent.

More signs that US production has peaked and maybe starting to decline, which will mean increased petroleum imports and a higher trade deficit:

Existing home sales, Chicago Fed, Greece

Posted on June 22, 2015 @ 6:12 pm (Monday) by WARREN MOSLER

Up some but still at depressed levels, and not enough to indicate a general bounce in spending. Personally I sold come small condos in Chicago I’d owned since working there in the early 1980’s. I got tired of fooling with them, net rental income was low, and prices weren’t going anywhere, And I still have 2 nice houses for sale, one in Jupiter Farms, another outside of Orlando, that haven’t sold yet and are priced well below 2007 levels. They are reconditioned foreclosures from the portfolio of the bank I sold 2 years ago.

So activity is up some, prices are up but not to replacement cost and also because to some extent the bid hitting from distressed selling has subsided. And there also could have been a few sales in front of the anticipated rise in rates, as often happens.

And watch for all the cheer leading on this report, as below:

Existing Home Sales

Highlights
The housing sector is lifting off, as existing home sales jumped 5.1 percent in May to a 5.35 million annual rate that hits the top end of the Econoday consensus. The year-on-year rate tells the story, at plus 9.2 percent which, outside of March’ s 11.9 percent, is the strongest rate in nearly two years. And prices are rising, up 7.9 percent year-on-year at a median $228,700.

In a special sign of strength, sales are strongest for single-family homes, up 5.6 percent in the month to 4.73 million. Year-on-year, single-family sales are up 9.7 percent. Condo sales have been flat in recent reports, up 1.6 percent in May to a 620,000 rate for a year-on-year gain of 5.1 percent. And in yet another special strength, first-time buyers are back in the market, making up 32 percent of all sales vs 27 percent this time last year.

Gains sweep the regional data with the Midwest up 4.1 percent and the West and South up 4.3 percent each. Year-on-year, the biggest gain is in the Midwest at 12.4 percent with the West at 9.0 percent and the South up 6.9 percent.

Holding down sales has been a lack of supply which, relative to sales, is at 5.1 month vs 5.2 in April. In another sign of tightness, the median sales time held steady at 40 days. But the rising sales rate together with the rise in prices are certain to bring new homes to the market. And homes are coming onto the market, to 2.29 million vs 2.20 and 2.01 in the prior two readings.

No bounce here:

Chicago Fed National Activity Index

Highlights
There was net improvement in May’s run of economic data but not much at least based on the national activity index which comes in at minus 0.17 vs a downward revised minus 0.19 in April. The 3-month average is telling the same story of weakness, at minus 0.16 vs a revised minus 0.20 in April.

Much stronger payroll growth, at 280,000, was May’s highlight but the gain was offset by a 1 tenth tick higher in the unemployment rate to 5.5 percent which leaves the month’s total employment contribution to the index unchanged at plus 0.10. Other readings were also little changed and all soft: production-related indicators at minus 0.17 vs April’s minus 0.19, sales/orders/inventories at zero vs minus 0.1, and personal consumption & housing at minus 0.09.

The big bounce, according to today’s report, that was expected following the transitory factors of a very soft first quarter has yet to appear.

Remember the cheer leading last year when the high prints were recorded, just before oil prices fell? And then how the drop in oil price would be fueling/accelerating GDP with forecasts in the 4% neighborhood?

It now looks like the Greek leaders have thrown in the towel and offered something likely to be accepted, all as previously discussed (though it was never even close to a ‘sure thing’), showing that deep down the leadership are ‘Europeans’ first who see nationalism as the greater risk, and will work for progressive change within the context of the EU, however slim their odds of success.

And not to say it’s a ‘done deal’ or that rough spots won’t continue. This is politics, with all the associated risks.

DB: Greece: Finally some positive news, much more to go

The details of the new Greek proposal have not been published, but press reports so far suggest they represent a material change in stance for the Greek government. Details reported include the following:

– A broad based increase in VAT rates, inclusive of some foodstuffs and restaurants by 10%;

– An elimination of early retirement benefits from 2016 to be phased in over three years;

– Most importantly, a broad-based increase in pension contributions, reported to be 2% for wage-earners and 2% for corporations;

– An increase in a special “healthcare” charge on pensions equivalent to an across the board cut of 1% in main and 5% cut in supplementary pensions;

– Cuts in defense spending;

– Increases in corporate tax rates to those firms earning more than 500mio EUR profits;

– Increases in income tax rates to those earning above 30k EUR.

Our assessment of the reported changes above is that they represent meaningful concessions from the Greek side, if they are to be confirmed, bringing them closer to the creditor proposals.

Atlanta Fed, Italy trade, mtg purchase apps, oil prices

Posted on June 17, 2015 @ 1:09 pm (Wednesday) by WARREN MOSLER

Up some then back down some, still at a very low rate off of a negative Q1:

Down a bit but still positive, as is most all of the euro zone now with the euro at current levels:

Italy : Merchandise Trade

Highlights
The seasonally adjusted trade balance was in a E3.5 billion surplus in April, short of a marginally downwardly revised E3.8 billion in March and the smallest excess since September 2014.

The modest deterioration reflected a 0.8 percent monthly fall in exports, their first decline since December, as imports were flat after three successive months of growth. Compared with April 2014 exports rose 9.0 percent, little different from their end of quarter rate (9.1 percent) while imports increased 9.3 percent, also much in line with the previous month’s rate (9.7 percent).

The monthly change in exports was hit by falls in capital goods (3.9 percent) and intermediates (0.4 percent) but boosted by consumer goods (1.3 percent) and, in particular, energy (9.9 percent). Excluding energy exports fell a sharper 1.1 percent. Imports saw broad-based declines amongst the major categories and would have dropped versus March but for an 8.8 percent bounce in energy.

The latest data leave the trade gap at the start of the second quarter some 13.1 percent below its average in the first quarter. In part this will reflect higher oil costs but it also increases the risk of another negative contribution from net exports to real GDP growth.

Back down, not good, but now looking like it was a modest blip up in front of a feared increase in mtg rates that accelerated a few purchases. Still about 15% over last year which just about makes up for the loss of all cash purchases, indicating similar sales but with a shift towards more financing:

United States : MBA Mortgage Applications

Highlights
Volatility in interest rates is making for volatility in mortgage applications which fell sharply in the June 12 week, down 4.0 percent for the purchase index and down 7.0 percent for the refinancing index. Mortgage rates moved sharply higher in the week, up 5 basis points for the average 30-year conforming loan ($417,000 or less) to 4.22 percent. But rates have since been coming down this week, following the 10-year Treasury note which, after spiking near 2.50 percent last week, is back near 2.30 percent.

From the MBA:Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage applications decreased 5.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 12, 2015. …

The Refinance Index decreased 7 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 15 percent higher than the same week one year ago.

And here’s a chart of housing starts on a per capita basis. It’s not yet up to prior recession lows:

The Saudis continue to hold the price in $ constant, however the spread between West Texas and Brent has narrowed, indicating US production may have peaked and be in at least relative decline. This follows the narrative that the collapse in operating drilling rigs leads to production declines as existing wells see their output decline over time.

Housing Starts, Redbook retail sales, EU merchandise trade, Russia comment, California real estate licensees

Posted on June 16, 2015 @ 1:09 pm (Tuesday) by WARREN MOSLER

The good news here is that last month was up more than expected, and permits were up as well. Lots of cheer leading on this one, and the upward revision of last month’s report ups Q2 GDP estimates a tad, but a quick look at the charts tells me that so far it was a blip up last month from a prior dip, and now back to where it’s been, and longer term it’s still extremely depressed and no longer the large % of GDP it used to be, and growing only very slowly at best. Also, the latest move up in mortgage rates was caused by market anticipation of Fed hikes, and was not demand driven, so if anything it’s likely to slow sales once the pre hike mini surge in borrowing abates, as the credit numbers show has already happened.

Housing Starts

Highlights
Don’t let the headline fool you, the housing starts & permits report points to solid strength for the housing sector. Starts came in at a 1.036 million rate in May which is down 11.1 percent from the April rate but the April rate, which was already one for the record books, is now revised higher to 1.165 million for, and this is no misprint, a 22.1 percent gain from March. Sealing matters is another gigantic surge in permits, up 11.8 percent to 1.275 million following a 9.8 percent gain in April. Forecasters will be revising their second-quarter GDP estimates higher following today’s report, not to mention their estimates for Thursday’s index of leading economic indicators where permits are one of the components.

Permits are the leading indicator in the report and the latest rate is the best since way back in August 2007. The gain is centered in the Northeast followed by the Midwest. Turning to starts, the monthly step back is split between all regions with the Northeast, in contrast to permits, showing the largest percentage decrease.

The housing sector is moving to the top of the economy, just as many suspected following a first quarter that was depressed by heavy weather. Watch tomorrow for descriptions of the housing sector in the FOMC statement and also Janet Yellen’s comments at her press conference.

Permits spiked up, but spikes like this have always been followed by spikes down, and sometimes worse:

Still stone cold dead for all practical purposes:

This is very strong euro stuff that will put upward pressure on the euro until this surplus goes away as it weakens the economy and brings on the next major euro crisis:

European Union : Merchandise Trade

Highlights
The seasonally adjusted trade balance returned a record E24.3 billion surplus in April following a marginally larger revised E19.9 billion excess in March. Unadjusted the surplus was E24.9 billion, up some E10.0 billion from a year ago.

The monthly jump in the adjusted black ink reflected a combination of stronger exports and weaker imports. The former posted a 1.1 percent monthly rise, their third consecutive increase, to stand 9.0 percent above their level a year ago. Imports on the other hand were down 1.6 percent versus March and reversed much of that period’s advance. Even so, annual import growth accelerated to 3.0 percent.

The April data put the trade surplus more than 13 percent above its first quarter mean when total net exports subtracted 0.2 percentage points from the quarterly change in total output. Although volatile energy prices mask underlying volume trends the omens are good for a positive contribution from the external sector this quarter.

Russia: President Vladimir Putin said his country would be bulking up its nuclear arsenal in the coming year. Speaking at a military and arms fair, Putin announced that, “More than 40 new intercontinental ballistic missiles able to overcome even the most technically advanced anti-missile defense systems will be added to the make-up of the nuclear arsenal this year.”

The announcement comes a day after Russia denounced a U.S. plan to move tanks and heavy weapons to the Russian border in support of its NATO allies. “The feeling is that our colleagues from NATO countries are pushing us into an arms race,” Anatoly Antonov, Russia’s deputy defense minister, reportedly told RIA news agency.

NY manufacturing, Industrial Production, Housing index, Bundesbank comment

Posted on June 15, 2015 @ 4:23 pm (Monday) by WARREN MOSLER

Nothing good here:

Empire State Mfg Survey

Highlights
There’s no bounce at all in the Empire State manufacturing survey where the headline index sank to minus 1.98 in June, well below Econoday’s low-end forecast for 4.00 and the second negative reading in three months that pulls its second quarter average into the negative column at minus 0.03. This report was actually doing much better during the heavy weather and special factors of the first quarter when it averaged 8.21.

And new orders point to greater weakness ahead, at minus 2.12 in June for the third negative reading in four months. Shipments have been strong in this report, at 12.01 in June, but won’t stay strong very long given the weakness in orders. The six-month outlook reflects this concern, down nearly 4 points to 25.84 which is the lowest for this reading since February and the second lowest in 2-1/2 years.

Unfilled orders are always weak in this report, at minus 4.81 in today’s report which is actually the least negative reading since October last year. And employment does remain in the plus column at 8.65, up from 5.21 in May but well down from their recent peak in March at 18.56. Price readings show little change with output prices showing fractional upward pressure at 0.96 and input prices showing steady and mild pressure at 9.62 vs 9.38 in May which was the lowest reading in nearly 3 years.

The manufacturing sector is supposed to be building up steam, not losing steam. There are no special factors in the second quarter that can be blamed for the loss of momentum. Later this morning the industrial production report will offer definitive indications on national shipments during May. On Thursday, the Philly Fed, which has also been weak, will offer a second early look at conditions in June.

And another bit of bad news here:

Industrial Production

Highlights
The hawks may have some good arguments at this week’s FOMC meeting but they won’t have anything convincing to say on the manufacturing sector which, instead of rebounding from a weak first quarter, appears to be slowing further. All the main numbers in today’s industrial production report are below low-end forecasts with the headline at minus 0.2 in May and April revised 2 tenths lower to minus 0.5. May is the fourth negative reading in the last six months with the other readings at no change. Capacity utilization fell 2 tenths to 78.1 percent which is the lowest rate since January 2014.

The manufacturing component fell 0.2 percent in May for the third negative reading in five months. Weakness in May was concentrated in consumer goods and construction supplies, the latter a disappointing indication for the housing sector. The mining component, at minus 0.3 percent, has really been hit hard by weakness in the energy sector but, in a plus, contraction here seems to be easing. The utilities component is positive but just barely at plus 0.2 percent.

Turning back to manufacturing, vehicles are actually a very big positive with a third outsized gain in a row, at plus 1.7 percent in May vs 2.0 percent and 4.0 percent in the two prior months. This reflects very strong consumer demand for cars and trucks underscoring unit vehicle sales which, in previously released data, are the strongest in 10 years. Excluding vehicles, however, the decline in May manufacturing slips another tenth to minus 0.3 percent. Another area of strength is capital goods which is showing life in the durable goods report and which here, tracked in the business equipment subcomponent, shows a 0.2 percent gain for May.

Otherwise, however, this report is surprisingly weak and echoes this morning’s equally surprisingly weak Empire State report for June. Though there are no separate readings on exports in either of this morning’s reports, weakness here appears to be pulling down the manufacturing sector.

On a brighter note the remaining home builders are reporting that things are looking up some. But a few % pts gain in this sector which is now less than half of what it used to be isn’t going to drive overall growth:

And yes, this is the euro zone’s vulnerability and inevitable with an export surplus:

11:00:00 RTRS – GERMANY’S BUNDESBANK SAYS IF THE EURO APPRECIATES STRONGLY, DOWNSIDE RISKS FOR THE ECONOMY WOULD RESULT

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mtg purchase apps, China comment

Posted on June 10, 2015 @ 11:02 am (Wednesday) by WARREN MOSLER

Mortgage purchase apps were up 10% for the week, leaving them about 15% higher than last year, which is where they’ve been for a while. However, cash sales are down sharply, so it seems that buyers have shifted from all cash to borrowing, leaving the total purchases about the same:

Weekly mortgage applications jump as rates surge

By Diana Olick

June 10 (CNBC) — Interest rates’ sharp jump to their highest level this year caused a sudden surge in mortgage applications. While that may seem counter-intuitive, there’s a reason: Fear that rates will move even higher.

Total mortgage application volume jumped 8.4 percent on a seasonally adjusted basis for the week ending June 5th from the previous week, according to the Mortgage Bankers Association (MBA). The previous week included an adjustment for the Memorial Day holiday.

“Mortgage application volume rebounded strongly…indicating that the holiday had a larger impact on business activity than originally assumed,” said Mike Fratantoni, MBA’s Chief Economist.

Refinance volume increased 7 percent week-to-week, and applications to purchase a home jumped 10 percent, both seasonally adjusted. Purchase volume is now 15 percent higher than the same week one year ago, but refinance volume is off nearly 5 percent. The weekly move higher in refinances was likely due to the holiday skewing the trend. Refinances are still lower than they were two weeks ago. This all comes as rates continue to climb.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.17 percent, its highest level since November 2014, from 4.02 percent, with points increasing to 0.38 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans, according to the MBA

While higher rates make home buying more expensive, sharp moves higher often have the immediate effect of getting potential buyers off the fence, before chilling the overall market in the longer term. That is especially true now, as the Federal Reserve is widely expected to increase interest rates in addition to what is happening in the U.S. bond market already.

China:

Confirms that their western educated economists’ believe ‘monetary policy’/rate cuts etc. work to increase output and employment, even though I think they are entirely wrong and backwards:

China’s economy to pick up in H2: Central bank economists

June 10 (CNBC) — Economists at China’s central bank have sharply lowered their 2015 inflation forecast even as they predicted that stabilising Chinese home prices and firmer foreign demand will drive a pick-up in the world’s second-biggest economy in the next six months.

In a report posted on the central bank’s website on Tuesday, economists at the People’s Bank of China (PBOC) said they had cut their 2015 inflation forecast for China to 1.4 percent, from an initial 2.2 percent.

The report, which said the estimates represented the view of the analysts and not that of the PBOC, contained other downward revisions to forecasts that underscored headwinds being faced by the slowing Chinese economy.

Yet, the economists were cautiously optimistic on the outlook.

The property market is “starting to stabilise” and the world economy should show further signs of a recovery in coming months, said the economists who were led by Ma Jun, the chief economist at the central bank.

Looser monetary policy conditions as a result of China cutting interest rates thrice since November were also expected to help shore up growth in coming months, the economists said.

“We estimate that our country’s gross domestic product growth in the second-half of the year will be higher than in the first-half,” they said, noting that it takes six to nine months for China’s economy to feel the effects of monetary policy easing.

The report showed the economists had shaved their forecast for China’s economic growth to 7.0 percent for 2015, from 7.1 percent previously.

The forecast for producer prices was also sharply revised to indicate deepening deflationary pressure. The producer price index is now expected to fall 4.2 percent for 2015, from an estimated decline of 0.4 percent previously.

Comments on transport weakness, Draghi comments, Japan exports to US, new home sales,PMI and Fed indexes chart, Dallas Fed, Richmond Fed, Consumer confidence

Posted on May 27, 2015 @ 9:36 am (Wednesday) by WARREN MOSLER

Transport Is Saying Consumer Spending Should Slow Further

By Steven Hansen

When one analyzes the economy, there are always some sections which do better than others. When the economic growth is weak (like currently), several segments can be in contraction while others are expanding.

Everything but the needed fiscal relaxation:

ECB’s Draghi urges euro zone to unite for economic reform

May 23 (Reuters) — “The current situation in the euro area demonstrates that this delay could be dangerous,” ECB President Mario Draghi said while acknowledging progress had been made, for example with banking union. But private risks need to be shared within the euro zone, with financial integration improving access to credit for companies and leading to a complete capital markets union, Draghi said. Countries should observe common standards when implementing structural reforms but also take a country-specific approach, as part of a process of “convergence in the capacity of our economies to resist shocks and grow together”.

Looks like our trade deficit is still on the rise:

“Exports to the United States rose 21.4 percent in the year to April, keeping the pace of gains in the previous month with brisk shipments of cars and vehicle engines.”

Chart not looking so good:

United States : Durable Goods Orders

Up a bit after a dip in March but not much different from the Q1 average so hard to say Q2 is doing better than Q1 from this report:

United States : New Home Sales

Highlights
New home sales bounced back solidly in April, up 6.8 percent to a 517,000 annual rate that is on the high side of Econoday expectations. Strength is centered in the South which is the largest and important housing region and where sales rose 5.8 percent, this however fails to reverse the region’s 11.8 percent drop in the prior month.

Supply rose slightly in the month, to 205,000 new homes on the market, but supply relative to sales fell to 4.8 months from 5.1 month. Low supply should encourage builders to bring more homes on the market but at the same time low supply hurts current sales. Price readings are mostly favorable led by a 4.1 percent rise in the median price to $297,300 for a strong 8.3 percent year-on-year gain.

Readings in this report are always volatile month-to-month but the gains for April underscore the recent surge in housing starts & permits and help offset last week’s disappointing weakness in existing home sales. The housing sector is still trying to get off the ground but indications, taken together, are improving.

Again, doesn’t look like Q2 is doing any better than Q1 here either:

This is notable as my narrative is about the end of the energy capex that was chasing $100 oil that had been keeping total US GDP positive in 2014. This key indicator of that energy investment is showing the deep cuts have not stabilized but are continuing to take their toll, and the drop in total spending and income necessarily ripples out to the rest of the US and global economies. And note the continuing reports of weakness in exports, as the foreign sector drop in oil capex reduces their ability to import:

United States : Dallas Fed Mfg Survey

Highlights
Contraction in the energy sector continues to pull the Dallas Fed report into deeply negative ground, to a headline minus 20.8 vs minus 16.0 and minus 17.4 in the prior two months. Production shows a turn for the worse, at minus 13.5 vs April’s minus 4.7, as does employment, at minus 8.2 vs plus 1.8. New orders remain deeply negative, at minus 14.1 vs minus 14.0. Prices paid also fell further though the decline is easing, to minus 1.7 from minus 11.2.

The regional Fed reports all point to another slow month for the manufacturing sector which is struggling with energy contraction, especially evident in this report, as well as weakness in exports.

Dallas Fed: Texas Manufacturing Activity Contracts Further

Texas factory activity declined again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. … The general business activity index fell to -20.8 in May, its lowest reading since June 2009.

Labor market indicators reflected employment declines and shorter workweeks. The May employment index declined 10 points to -8.2, after rebounding slightly above zero last month. Twelve percent of firms reported net hiring, compared with 21 percent reporting net layoffs. The hours worked index fell from -5 to -11.6.

United States : Richmond Fed Manufacturing Index

Highlights
Regional Fed reports on the manufacturing sector continue to be soft with Richmond’s at only plus 1 for May following two prior months of declines. New orders, after three straight declines, did rise but only to plus 2. Backlog orders, however, remain deep in the negative column at minus 10.

Employment growth is down while shipments are in contraction for a 4th month. Price readings are flat except for wages which show a big 11-point gain to 20. Wage pressures are a trigger for an FOMC rate hike and this reading, though isolated, will get the attention of the hawks at the Fed.

First it was Empire State, then the Philly Fed, then Kansas City, all showing weakness this month and now including Richmond. Data from the Dallas Fed, also released this morning, is especially weak. The manufacturing sector is having a tough time gaining momentum, held down by weak exports and contraction in the energy sector.

This is one man one vote, not one dollar one vote, and is another indicator where Q2 isn’t doing as well as Q1:

seasonal adjustments, export reports, Atlanta Fed, Chicago Fed, PMI manufacturing, Philadelphia Fed Survey, Existing home sales, KC Fed

Posted on May 22, 2015 @ 12:38 pm (Friday) by WARREN MOSLER

Note that if/when the adjustments are changed it looks like they make Q4 and Q1 a bit higher and Q2 and Q3 a bit lower. The net adjustments are 0 for the year.

Nicole Mayerhauser, chief of BEA’s national income and wealth division, which oversees the GDP report, said in the statement that the agency has identified several sources of trouble in the data, including federal defense service spending. Mayerhauser said initial research has shown this category of spending to be generally lower in the first and the fourth quarters. The BEA will also be adjusting “certain inventory investment series” that have not previously been seasonally adjusted. In addition, the agency will provide more intensive seasonal adjustment quarterly service spending data.

My narrative goes something like this: The CB euro selling drives the price down to the point where the euro zone net exports increase sufficiently to absorb the cb selling, at which point the euro reverses as the trade flows overwhelm the selling from those portfolios and the euro then continues to rise until the current account surplus goes away:

Job creation at four-year high despite slower pace of economic growth

May 21 (Markit) — Eurozone PMI Composite Output Index at 53.4 (53.9 in April), Services PMI Activity Index at 53.3 (54.1 in April), Manufacturing PMI at 52.3 (52.0 in April), and Manufacturing PMI Output Index at 53.5 (53.4 in April). Faster growth in manufacturing was offset by a slowdown in services, though the pace in the latter merely eased slightly further from March’s eight-month high to suggest a broad-based upturn remains in place. Weaker order book growth was centred on the service sector, with manufacturing reporting the strongest inflows of new orders for just over a year, linked to improved export performance.

PMI data signals further slowing of private sector output growth

May 21 (Markit) — PMI data signals further slowing of private sector output growth () Germany Composite Output Index at 52.8 (54.1 in April), Services Activity Index at 52.9 (54.0 in April), Manufacturing PMI at 51.4 (52.1 in April), and Manufacturing Output Index at 52.7 (54.3 in April). Mirroring the trend for output, German private sector companies also signalled a weaker rise in new business. While a pick-up in construction activity and rising domestic demand were reasons behind the overall increase, some survey participants linked the slowing in the rate of growth to economic uncertainties. Meanwhile, manufacturers reported a fourth successive monthly rise in new export orders.

Recent data leaves their forecast unchanged:

Negative and looking weak:

Weaker here too:

PMI Manufacturing Index Flash

Highlights
Markit’s US manufacturing sample had been far stronger than other readings on the sputtering sector but is a little less so with the May report where the index slipped slightly to a 16-month low of 53.8, 8 tenths below the Econoday consensus.

Slowing growth in new orders, including weakness in export orders tied directly to strength in the dollar, held down the May index. Another area of weakness remains the energy sector where business spending is down. Shipment growth slowed to its slowest rate so far this year.

Strength in the report is centered in employment, but this won’t last if orders continue to slow. Deliveries continue to be delayed in part by persistent bottlenecks tied to the long since resolved port strike. Costs are up but inflation remains marginal.

The manufacturing sector is having a tough spring following six prior months of slowing. Watch for the Philly Fed report coming up this morning at 10:00 a.m. ET.

Less than expected and weak:

Less than expected and weak:

Existing Home Sales

Highlights
Existing homes sales are not living up to springtime expectations, down 3.3 percent in April to a 5.04 million annual rate which is just below the low-end Econoday forecast. Three of 4 regions show contraction in April with the sharpest decline, minus 6.8 percent, in the South, which is by far the largest housing region. Year-on-year, total sales are still up a respectable 6.1 percent.

Another positive is a rise in supply with 2.21 million used homes on the market vs 2.01 million in March. This rise, together with the drop in sales, raises supply relative to sales to 5.3 months from 4.6 months. And another positive is a 4.1 percent rise in the median price to $219,400 which is up 8.9 percent year-on-year.

But this report in sum is a disappointment, failing to point to any building momentum. Strength in the housing sector may be switching, from existing home sales to new home sales at least based on this report compared to the historic surge earlier this week in housing starts & permits. But housing data month-to-month are always volatile and, on net, it’s too soon to decipher how strong the spring housing season is right now.

And one last negative for today:

Kansas City Fed Manufacturing Index

Highlights
The early indications on May’s manufacturing activity have been slightly positive, that is until the Kansas City Fed report where the composite index is in deeply negative ground at minus 13. This is the weakest of the recovery for this reading and follows an already weak minus 7 in April.

New orders this month are deeply negative, at minus 19, as are backlog orders at minus 21. These readings, reflecting contraction for export orders and trouble in the energy sector, point to significant trouble for the region’s manufacturing activity in the months ahead.

Shipments are already in contraction, at minus 9, as is employment, at a deeply negative minus 17 that contrasts with mostly positive employment indications in other reports.

Japan Q1 GDP, Sea Containers, home building charts

Posted on May 20, 2015 @ 10:32 am (Wednesday) by WARREN MOSLER

Looks like mainly inventory building:

Japan : GDP

Highlights
The Japanese economy appears to be recovering with its second consecutive quarter of growth. First quarter gross domestic product was up 0.6 percent on the quarter – consensus was for a 0.4 percent quarterly gain. On an annualized basis, GDP was up 2.4 percent. However, GDP was down 1.4 percent when compared with the same quarter a year ago. Fourth quarter GDP was revised down to a gain of 0.3 percent on the quarter or an annualized pace of 1.1 percent.

Among the components, domestic demand contributed 0.8 percentage point while net exports subtracted 0.2 percentage point. CAPEX contributed 0.1 percent while inventories added 0.5 percentage point. Private consumption was up 0.4 percent on the quarter as was CAPEX. Government consumption was up 0.1 percent.

From CNBC:

Economists have been watching Japan’s economic data closely for signs Abenomics, or Japanese Prime Minister Shinzo Abe’s plan to kick-start the long-moribund economy out of its decades-long struggle against deflation, has made any progress.

Some are unconvinced that the GDP data will herald a sustained recovery.

“The acceleration in GDP growth last quarter was mostly due to a jump in inventories, and a range of indicators point to a slowdown in the second quarter,” Marcel Thieliant, a Japan economist at Capital Economics, said in a note Wednesday. He expects Japan’s GDP growth will be around zero for the year, adding that the data suggest that the near-term chances of further easing from the Bank of Japan have diminished.

And not everyone is convinced domestic demand is making a comeback. In a note, DBS says private consumption on an annualized basis, while up 1.4 percent, grew at a similar rate as in the third and fourth quarters of 2014

“The cumulative growth in consumption in the past three quarters has remained far from enough to offset the contraction in early-2014 caused by the sales tax hike. This means that consumer spending remained far weaker than the normal levels prior to the tax hike,” DBS said.

“Admittedly, the pace of consumption recovery has remained very slow so far and whether it could pick up and match expectations in the coming quarters will remain to be seen,” the note added.

April 2015 Sea Container Counts Continue to Demonstrate Weak Conditions in the USA and Globally

By Steven Hansen

The data for this series continues to be weak. Not only is year-to-date volumes contracting for both imports and exports – but both April exports and imports are contracting month-over-month and year-over-year. This continues to indicate weak economic conditions domestically and globally.

And note how depressed sales and starts remain:

United States : MBA Mortgage Applications

Highlights
The ongoing run up in mortgage rates may be easing demand for mortgage applications just at the time that demand for purchase applications had been gaining steam. Purchase applications fell 4.0 percent in the May 15 week though, year-on-year, applications are still up a very strong 11.0 percent. Refinancing applications slipped 0.3 percent in the week. The average 30-year mortgage for conforming loan balances ($417,000 or less) rose to its highest level of the year, up 5 basis points to 4.04 percent. Watch for existing home sales on tomorrow’s calendar.

Down big:

The Fed’s concerned about the employment cost index?

Not even up to the growth rate lows of the last cycle:

Just got through prior growth rate lows after years of being much lower:

Atlanta Fed, LA port traffic, EU trade surplus, German ZEW, housing starts, redbook retail sales

Posted on May 19, 2015 @ 11:51 am (Tuesday) by WARREN MOSLER

No positive change here yet:

This was supposed to rebound:

LA area Port Traffic Decreased in April

By Bill McBride

May 18 (Calculated Risk) — Note: LA area ports were impacted by labor negotiations that were settled on February 21st. Port traffic surged in March as the waiting ships were unloaded (the trade deficit increased in March too), and port traffic declined in April.

Container traffic gives us an idea about the volume of goods being exported and imported – and usually some hints about the trade report since LA area ports handle about 40% of the nation’s container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

On a rolling 12 month basis, inbound traffic was down 0.2% compared to the rolling 12 months ending in March. Outbound traffic was down 1.1% compared to 12 months ending in March.

Inbound traffic had been increasing, and outbound traffic had been moving down recently. The recent downturn in exports might be due to the strong dollar and weakness in China.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

LA Area Port TrafficUsually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

Imports were down 2% year-over-year in April; exports were down 11% year-over-year.

The labor issues are now resolved – the ships have disappeared from the outer harbor – and the distortions from the labor issues are behind us. This data suggests a smaller trade deficit in April.

Strong number.

Currencies with trade surplus don’t ordinarily go down…
;)

European Union : Merchandise Trade

A bit on the weak side, to say the least, and even with negative rates and QE…
;)

Germany : ZEW Survey

Solid improvement here. First good number in quite a while.
The 5 month average is almost back to where it was in November…

United States : Housing Starts

Highlights
There were hardly any indications before today, but the spring housing surge is here. Today’s housing starts & permits report is one of the very strongest on record with starts soaring 20.2 percent in April to a much higher-than-expected annual rate of 1.135 million with permits up 10.1 percent to a much higher-than-expected 1.143 million. Both readings easily top the Econoday high-end forecast of 1.120 million for each. The gain for starts is the best in 7-1/2 years with the gain in permits the best in 7 years. Today’s report is an eye-opener and will re-establish expectations for building strength in housing, a sector held down badly in the first quarter by severe weather.

Half way through May and this one isn’t bouncing back:

United States : Redbook

Mosler Economics / Modern Monetary Theory

The Site of Economist Warren Mosler

Category Archives: Housing

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PMI data signals further slowing of private sector output growth

Japan Q1 GDP, Sea Containers, home building charts

April 2015 Sea Container Counts Continue to Demonstrate Weak Conditions in the USA and Globally

Atlanta Fed, LA port traffic, EU trade surplus, German ZEW, housing starts, redbook retail sales

LA area Port Traffic Decreased in April