Category Archives: Inflation

Industrial production, Empire state manufacturing, Retail sales, PMI, Port traffic

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Boring:

Highlights

A rise for mining offsets a dip for utilities making a modest 0.2 percent gain for manufacturing the story for November’s industrial economy. This report’s manufacturing component has been the only uneven indicator on the factory sector all year which limits the surprise of November’s results.

Forecasters weren’t calling for much strength in the first place with Econoday’s consensus at only 0.3 percent for manufacturing. Vehicle production, after a run of strength, understandably eased in November to only a 0.1 percent increase with selected hi-tech also slowing but to a still useful 0.3 percent gain. And production of business equipment was even more positive at 0.5 percent and with construction supplies at 0.6 percent. Weakness on the manufacturing side is once again in consumer goods where volumes fell 0.4 percent to underscore the nation’s lack of competitiveness in this important category.

Outside of manufacturing, mining volumes rose 2.0 percent in November to extend its leading performance to year-on-year growth of 9.4 percent. Utility output fell 1.9 percent with this year-on-year rate at 2.3 percent. Turning back for a comparison with manufacturing, this year-on-year rate is a very modest 2.4 percent.

Overall industrial production rose 0.2 percent while capacity utilization rose 1 tenth to a 77.1 percent rate that, in contrast to the slew of anecdotal readings on the factory sector, points to plenty of spare capacity remaining. One notable positive in today’s report is an upward revision to October’s manufacturing production which now stands at a very outsized 1.4 percent, an isolated gain however that reflects hurricane effects.

Given the strength of October manufacturing and despite November’s modest showing, most signals are pointing to an accelerating factory contribution to the fourth-quarter economy. Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.


Quite a bit better than expected, and last month revised up a bit. But not consistent with decelerating personal income stats:

Highlights

The consumer is in gear for the holidays as a very strong retail sales report lifts the outlook for fourth-quarter consumer spending. Retail sales surged 0.8 percent in November which is far beyond expectations and is 3 tenths over Econoday’s high estimate. The data include a strong upward revision to October which now stands at a 0.5 percent gain vs an initial increase of 0.2 percent.

November’s strength comes despite a 0.2 percent decline in auto sales excluding which sales rose a full 1.0 percent. Core readings underscore all the strength: up 0.8 percent for both ex-auto ex-gas and for the control group.

Most major components outside of autos show gains including a standout 2.5 percent jump in nonstore sales which speaks to unusual strength in e-commerce. Electronics & appliances appear to be early holiday favorites with these stores reporting a 2.1 percent jump on top of a 1.2 percent rise in October. Price discounting for apparel that was evident in yesterday’s consumer price report did not hold down totals for clothing stores which gained 0.7 percent for a second straight month. Restaurants also show strength, up 0.7 percent following October’s 0.4 percent rise.

Consumer spending proved a little soft in the third-quarter GDP report at only 2.3 percent annualized growth but today’s report, including the revision, is certain to lift the outlook for fourth-quarter GDP. And it may even encourage talk that the economy, fed by unusual strength in the labor market, could be at the risk of overheating.

Manufacturing up, services-the much larger sector- down:

Service sector slowdown contrasts with stronger manufacturing performance in December

Dec 14 (Markit) — Flash U.S. Composite Output Index at 53.0 (54.5 in November). Services Business Activity Index at 52.4 (54.5 in November). Manufacturing PMI at 55.0 (53.9 in November). Manufacturing Output Index at 55.7 (54.5 in November). Manufacturing production expanded at the fastest pace since January, while service sector output growth eased to a 15-month low. A similar easing in new business growth was seen across the private sector economy in December. Prices charged inflation eased in December.

Highlights

An 11-month high for manufacturing couldn’t offset a 15-month low for services which pulled down the PMI composite to 53.0 in the December flash and a 9-month low. Manufacturing, at 55.0, is the more closely watched sector for economic change and the results here are very positive with sharp increases posted for new orders, production and especially employment where growth in this sample is the best since September 2014. The gain in employment reflects efforts underway among manufacturers to expand capacity and meet what is strong domestic demand and fulfill the needs of new product launches.

Turning to services, however, the results become subdued at a reading of 52.4 and including loss of momentum for new orders which eased to their lowest level in 8 months. Hiring in this sample is at a 7-month low. Business optimism, which is very strong on the manufacturing side, is much softer in services, at the second lowest readings since June last year.

Outside of input costs for manufacturing, price data in today’s report are soft. Today’s mixed results are of interest, confirming what appears to be a very strong year-end finish for manufacturing and what may be, despite contrary hints in this morning’s retail sales results, a soft finish for services, a sector that may not signal economic pivots with certainty but what is a far larger sector than manufacturing.

Services:


Manufacturing:


Along with higher oil prices, this also hints at a growing trade deficit:

Trade has been strong – especially inbound – and setting record volumes most months recently. This suggests the retailers are optimistic about the Christmas Holiday shopping season.

In general imports have been increasing, and exports are mostly moving sideways to slightly down recently.

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

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Employment, Consumer sentiment, Inventories

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Higher than expected but last month revised lower, so seems best to wait a month (and sometimes more) for the revisions before passing judgement. And the wage data, if anything, is that of a very low demand economy with lots of excess capacity:

Highlights

Overheating may not be the description of the labor market but heating up definitely is. Nonfarm payrolls rose a stronger-than-expected 228,000 in November led by outsized gains for manufacturing at 31,000, construction at 24,000, and professional services at 46,000.

Pointing to the risk of labor constraints is a rise in the average workweek, up 1 tenth to 34.5 hours for private-sector employees. Another risk is the lack of available workers, reflected most clearly in the unemployment rate which is unchanged at a 17-year low of 4.1 percent.

Yet all this demand has yet to translate into wage inflation which remains subdued. Average hourly earnings, at $26.55, did rise 0.2 percent in the month but the prior month is revised 1 tenth lower and is now at minus 0.1 percent. The year-on-year rate is only 2.5 percent which is historically low for this reading.

The bumps have come and gone and the labor market is where it was before the hurricane season, continuing to grow and continuing to absorb what is a very thin pool of available labor. Still, for the fourth-quarter outlook, today’s report points to strong year-end momentum for the economy.

Comment on Employment Report: Some Additional Hurricane Bounce Back

By Bill McBride

The headline jobs number was strong at 228 thousand, probably somewhat due to an additional bounce back from the hurricanes, and above expectations. The previous two months were revised up slightly by a combined 3 thousand jobs.

The September jobs report was revised up again (now up to 38 thousand), and that keeps the record job streak alive, now at 86 consecutive months (93 months if we remove the decennial Census hiring and firing).

Earlier: November Employment Report: 228,000 Jobs Added, 4.1% Unemployment Rate

In November, the year-over-year change was 2.07 million jobs. This is still generally trending down.

Read more at http://www.calculatedriskblog.com/#2j1WAO4iIwrJIl2w.9

The annual growth rate’s overall downtrend remains intact, and this chart is not on a population adjusted basis:


Coming off more than expected:


Falling inventories at this point in time are not a sign of strength:

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Factory orders, Cash bonuses, Oil prices

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As the chart shows, year over year growth has gone to near 0 since the election, and the hurricane replacement effect has since dissipated:

Highlights

A big upward revision to core capital goods highlights today’s factory orders report which closes the book on what was a mixed October for manufacturing. The month’s 0.1 percent decline, which is better than expected and actually hits Econoday’s high estimate, reflects a 33 percent downswing for commercial aircraft orders that follows, however, a very strong recent run and looks to build again following Boeing’s success at November’s Dubai air show.

The split between the report’s two main components shows a 0.7 percent gain for nondurable goods — the new data in today’s report where strength is tied to petroleum and coal — and a 0.8 percent dip for durable orders which is 4 tenths improved from the advance report for this component. And driving the upward revision for durables is a major upward revision to October core capital goods (nondefense ex-aircraft) which is now up 0.3 percent from the initial 0.5 percent decline. This extends what is a very strong run for a component that offers leading indications on business investment.

Shipments of core capital goods are also revised higher, up an additional 2 tenths to 1.1 percent to extend what is also an impressive run, one that feeds directly into nonresidential fixed investment and marks a strong early plus for fourth-quarter GDP. Other readings include a 0.2 percent gain for inventories and a 0.6 percent gain for total shipments, a mismatch pointing to the need for restocking but not enough to change the inventory-to-sales ratio which holds at 1.37. Not a plus in the report is no change in unfilled orders which have yet to get going.

A plus in the report is a sharp 1.3 percent rise in vehicle orders as the auto sector responds to the hurricane-replacement sales surge of September and October. Looking past the headline, this report is very solid and points squarely at a rising contribution from the factory sector.


From this longer view I don’t see much to get excited about here, and the numbers are not adjusted for inflation:

And previously released credit aggregates, vehicle sales, and building permits are saying growth has already ended:

More Employers Skip The Cash Bonus

From Challenger Gray and Christmas

Higher corporate profits, low unemployment, and high economic confidence among employers is not translating to more cash-based year-end bonuses.

Saudi Arabia may raise January oil prices to Asia to over 3-year high

SINGAPORE, Dec 1 (Reuters) — Top oil exporter Saudi Arabia is expected to raise the January price for its flagship Arab Light crude in Asia to the highest in more than three years to track a stronger Dubai benchmark, trade sources said on Friday.

Robust demand in Asia and continuing supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia are rebalancing global oil markets. The producers agreed on Thursday to extend those supply cuts to end-2018, a decision that pushed Brent above $64 a short time later.

A price hike would track a wider price spread between prompt and third month cash Dubai that rose 31 cents last month from October, trade sources said. Front-month Dubai is higher than those in future months, indicating strong demand for prompt oil.

The survey respondents also expect an increase of 50-60 cents in Arab Extra Light’s OSP in January after naphtha margins surged last month to the highest since early 2016.

January price hikes for Arab Medium and Heavy grades were likely to be smaller than those for light grades as fuel oil cracks weakened last month, the respondents said.

One of the four respondents expected a price cut for Arab Heavy crude.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

Below are expected Saudi prices for January (in $/bbl against the Oman/Dubai average):

DEC Change est.JAN OSP

  • Arab Extra Light +2.45 +0.50/+0.60 +2.95/+3.05
  • Arab Light +1.25 +0.25/+0.40 +1.50/+1.65
  • Arab Medium +0.00 +0.10/+0.35 +0.10/+0.35
  • Arab Heavy -1.15 -0.15/+0.30 -1.30/-0.85
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    Construction spending, Rig count, Fed US leading index, Flynn news

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    Up a bit this month but as per the chart it’s bumping along at recession type levels:

    Highlights

    It’s not housing that drove construction spending up a very sharp 1.4 percent in October but non-residential activity which had been lagging in this report. Spending on private non-residential construction jumped 0.9 percent in the month with strength centered in office construction and transportation construction. Despite the improvement, year-on-year spending on the non-residential side is still negative, at minus 1.3 percent. Public building also had a strong month with educational building up 10.9 percent for a standout year-on-year rate of 14.6 percent. Spending on highways & streets was also strong in October, up 1.1 percent though still down on the year, at minus 8.5 percent.

    Residential spending has been leading this report but October was moderate, up 0.4 percent overall and held back by a 1.6 percent decline for multi-units. But home improvements were strong in the month, up 1.4 percent for an 8.7 percent yearly rate. Total residential spending is up a year-on-year 7.4 percent with spending on new single-family homes up a very significant 8.9 percent.

    But new homes aside, overall construction spending is up only 2.9 percent which is a very moderate total that evokes this week’s Beige Book where modest-to-moderate still dominated the description of the economy.

    This is not adjusted for inflation:


    Seems to go up when the price of oil goes up…


    Looks like we’ve crossed the line?

    Keeps getting worse:

    Flynn says Trump transition official told him to make contact with Russians

    As part of a plea deal, former national security adviser Michael Flynn has admitted that a senior member of the Trump transition team directed him to make contact with Russian officials in December 2016.

    Flynn pleaded guilty Friday to making false statements to the FBI, becoming the first official who worked in the Trump White House to make a guilty plea so far in a wide-ranging investigation led by special counsel Robert Mueller into possible coordination between Russia and the Trump campaign to influence the outcome of the 2016 election.

    The government did not reveal the identity of the senior transition official.

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    Personal income and spending, Chicago PMI, corporate profits, Comments on tax reform

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    Income a bit higher than expected due to higher interest income, but as per the charts income growth has slowed and seems the only thing keeping spending growing even at these very modest levels is consumers dipping into savings:

    Highlights

    Inflation is showing the slightest bit of life yet probably more than enough to assure a rate hike at this month’s FOMC. The core PCE price index, which is the inflation gauge FOMC members most closely watch, rose an as-expected 0.2 percent in October with September revised 1 tenth higher and now also at 0.2 percent. October’s year-on-year rate also made expectations at 1.4 percent with the prior month again revised 1 tenth higher and also at 1.4 percent. These rates are far from overheating but the forward direction, however glacial, is favorable for policy makers who are trying to push inflation gradually higher.

    Other readings in the report are mixed with personal income getting a special boost from interest income and rising 0.4 percent which is 1 tenth above expectations and actually at the high estimate. Yet the wages & salaries component for income, which is key, is up only 0.3 percent which is soft and down 2 tenths from September. Spending is also soft, up 0.3 percent as expected and reflecting a slight downtick in durable goods as vehicle sales in October, though strong, couldn’t match September’s hurricane-replacement spike.

    The savings rate remains low though it did rise 2 tenths to 3.2 percent. In comparison to employment or the sparks appearing in the factory and housing sectors, this report offers a more subdued view of the economy, much like yesterday’s Beige Book where modest-to-moderate was the theme. For Fed policy, spending and income don’t point to any urgency for a rate hike but the high level of employment does as it threatens, at least in theory, to ignite a burst of wage-push inflation.

    The income curve remains bent, as the rate of growth shifted as oil related capital expenditures collapsed late in 2014


    This is not sustainable:


    Survey data continues to show optimism so far generally unmatched by the hard data:


    Corporate profits are up about 10% from a year ago, which was a low point, but nearly flat over the last 6 years or so:

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    Trade, New home sales chart, Redbook retail sales, Consumer confidence

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    As previously discussed, the food export spike was a one time event:

    Highlights

    With housing and manufacturing showing strength the outlook for fourth-quarter GDP was building, until that is this morning’s advance trade and inventory data. October’s goods deficit was much higher-than-expected, at $68.3 billion for a very sizable $4.2 billion increase from September. The details speak to weakness with exports down 1.0 percent, reflecting declines for food products and capital goods, while imports rose 1.5 percent on increases in industrial supplies and, once again, consumer goods.

    Inventory data for October show draws for both wholesalers and retailers, at minus 0.4 percent and minus 0.1 percent respectively which are both negative for GDP.

    Both trade, where the deficit had been narrowing, and inventories, where builds had been rising, were positives for second- and third-quarter GDP but the opening fourth-quarter look at these two components point to understandable give back.

    Definitely looking up for ‘same store sales’ and heading back to ‘normal’ levels, but not sure why. Could be due to fewer retail outlets or maybe higher prices?


    Up nicely, but check out the details:

    Highlights

    Consumer confidence continues to soar, at 129.5 in November which is a new 17-year high and easily surpasses Econoday’s top estimate. The strength is derived from the labor market where a very low 16.9 percent describe jobs as currently hard to get. This reading is closely watched and will boost expectations for another strong monthly employment report. And extending strength is expected for the labor market with optimists on the jobs outlook surging nearly 4 percentage points to 22.6 percent and nearly double pessimists who are down 6 tenths to only 11.0 percent. Confidence is likewise booming for the stock market where 46.0 percent see stocks rising over the next year which is up 3.8 points from October. Bears are down to 19.0 percent from last month’s 22.7 percent.

    The combination of expected gains in jobs together with expected gains for stocks is making for unusual confidence in the year-ahead income outlook where 20.1 percent see gains and only 7.6 percent see declines. This is a core reading and underscores the report’s level of strength.

    Not favorable, however, are inflation expectations which are down 2 tenths to 4.5 percent which is very low for this reading. Buying plans are mixed with cars, after a spike in October, back down but with housing up.

    Wage growth has been limited but so has price inflation which perhaps is another factor boosting income expectations. In any case, consumer confidence as measured by this report and others is enjoying its best run in a generation.

    Survey data still optimistic:

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    Mtg purchase apps, Durable goods orders

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    I don’t see any convincing evidence of a housing market revival, particularly with the growth of real estate lending remaining well below that of last year:

    Highlights

    Purchase applications for home mortgages rose a seasonally adjusted 5 percent in the November 17 week, though overall mortgage activity was only barely higher (by 0.1 percent) than in the prior week as the increase in buyers was offset by a 5 percent decline in refinancing activity. On an unadjusted basis, the purchase index rose only 1 percent from the prior week, putting the year-on-year gain at 4 percent, down a sharp 14 percentage points from last week’s reading due to an outsized weekly jump higher in the index in the comparable week last year. The slowdown in refinancing took its share of mortgage activity down 1.4 percentage points from the prior week to 49.9 percent. Mortgage rates rose slightly though remaining at historically low levels, with the average interest rate on 30-year fixed-rate mortgages ($424,100 or less) up 2 basis points to 4.20 percent. Today’s report shows home-buyers quite active and adds to recent evidence of a housing market reviving in the fourth quarter, though the year-on-year gain, now at just 4 percent after much stronger readings for most of the year, suddenly looks much less impressive.


    Less than expected but still showing modest year over year growth:

    Highlights

    Durable goods orders, down 1.2 percent in October, couldn’t post three straight gains but there are positives in the report. But first the negatives which include a 33 percent reversal for commercial aircraft orders and a 0.5 percent decline for core capital goods orders (nondefense ex-aircraft). These two components have been very strong in recent months so a step back isn’t a surprise, and aircraft orders appear certain to jump sharply in next month’s report given Boeing’s major success at this month’s Dubai Air Show.

    Ex-transportation offers an underlying reading and this is solid with a 0.4 percent gain. The revision to this reading for September is also positive, up 4 tenths to 1.1 percent. And core capital goods get an even bigger revision, an 8 tenths upgrade to 2.1 percent in September which helps offset October’s decline. Shipments of core capital goods, which are direct inputs into GDP, are also revised higher, up 5 tenths in September to 1.2 percent with October coming in at a constructive plus 0.4 percent. Other positives in the report are a 1.7 percent rise in vehicle orders and a 1.5 percent increase in vehicle production, both of which follow the ex-hurricane spike in vehicle sales.

    Other readings are mixed including very modest 0.1 percent gains for both total shipments and total inventories and a disappointing no change for unfilled orders.

    This report isn’t a step forward but the factory sector, nevertheless, still looks to be a positive contributor to fourth-quarter growth.

    Modest growth recently but still not back on track since the collapse in oil capex at the end of 2014. And these charts are not adjusted for inflation:

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    Industrial production, Household debt, Business sales and inventories, Container counts, Animal trophies

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    A dip and a recovery due to the hurricane (as per vehicle sales data), chugging along at modest rates of growth, and still down from high a couple of years back, not adjusted for inflation:


    The NY Fed reports household debt growth decelerated in q1, in line with the deceleration in bank lending:


    Note the deceleration since January for both of these charts, inline with decelerating bank loan growth:

    Analyst Opinion of Business Sales and Inventories

    This was a worse month for business sales compared to last month – and inventories remain elevated. Our primary monitoring tool – the 3 month rolling averages for sales – declined and remains in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series.

    Now he’s gone too far…
    ;)

    The Trump administration reversed an Obama-era policy today banning the import of elephant trophies from Zimbabwe and Zambia. Americans hunting in the African countries will now be permitted to bring back their trophies of the killed animals, a U.S. Fish and Wildlife Service official told ABC News.

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    Personal income and spending, GDP, Trump meeting, North Korea tests

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    Personal income growth continues to be depressed, which tends to keep spending down as well over time, though this month it had a nice one time increase due to the hurricanes, and the drop in the personal savings rate tells me it’s entirely unsustainable. Also the low inflation readings also support the notion of a general lack of aggregate demand:

    Highlights

    Core inflation remains lifeless in an unwanted highlight of an otherwise solid income and spending report. Personal income rose 0.4 percent in September and was underpinned by wages & salaries which also rose 0.4 percent. Consumer spending jumped 1.0 percent driven by a 2.1 percent surge in durable goods that was tied to vehicle replacement following Hurricanes Harvey and Irma.

    But the rise in income and spending didn’t heat up ex-food ex-gas core inflation which posted a marginal 0.1 percent gain. This is the 5th straight 0.1 percent gain for this key reading. The core’s year-on-year rate has been stuck at a rock bottom 1.3 percent for the last two months. Total inflation, reflecting a hurricane-related gain for energy prices, rose 0.4 percent with this year-on-year rate rising 2 tenths to 1.6 percent.

    But the pressure on energy prices has already faded and unless wage pressures can extend their emerging gains, inflation readings are not going to be climbing in the direction of the Federal Reserve 2 percent goal. Also helping spending in September was a sharp 5 tenths decline in the savings rate to 3.1 percent and a 10-year low in what, however, is likely to be another hurricane effect that will be quickly reversed.

    For me, the numbers still don’t ‘add up’. Yes, subtracting inventories, trade, etc. bring the number down closer to 2%, but that’s still at odds with the bank lending reports, depressed personal income, decelerating employment, and the large drop in the personal savings rate. I suspect something has to give, and very soon, and most likely a further and larger drop in consumption:

    The changes from the prior quarter reflect a general weakening of consumer and commercial spending growth, nearly offset by increased inventories and reduced imports. The contribution from consumer spending on goods dropped -0.24%, while the contribution from spending on services dropped -0.38% (a combined -0.62%). The inventory contribution became significant, at +0.73%, roughly a quarter of the entire growth. The contribution from fixed commercial investment was halved to +0.25% (from +0.53%). Governmental spending remained in a very minor contraction (-0.02%). The contribution from exports dropped -0.14% to +0.28%, while the contribution from imports turned positive, at +0.12%.

    The BEA’s “bottom line” (their “Real Final Sales of Domestic Product”, which excludes inventories) decreased to +2.25%, down -0.69% from the prior quarter.

    Real annualized household disposable income dropped -$19 to $39,280 (in 2009 dollars). The household savings rate also dropped -0.4% to 3.4%, the lowest level since the fourth quarter of 2007.

    For this revision the BEA assumed an effective annualized deflator of 2.16%. During the same quarter (July 2017 through September 2017) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was 4.31%. Underestimating inflation results in optimistic growth rates, and if the BEA’s “nominal” data was deflated using CPI-U inflation information the headline growth number would have been materially lower at an +0.89% annualized growth rate.

    Among the notable items in the report :

  • The headline contribution from consumer expenditures for goods was reported to be +0.92% (down -0.24% from the prior quarter).
  • The contribution to the headline from consumer spending on services weakened to +0.70% (down -0.38% from the prior quarter). The combined consumer contribution to the headline number was +1.62%, down -0.62% from 2Q-2017.
  • The headline contribution from commercial private fixed investments decreased to +0.25%, down more than half (-0.28%) from the prior quarter. That continued to reflect a contraction in residential construction.
  • Inventory growth provided a material boost to the headline number (+0.73%). This was a +0.61% improvement from the prior quarter. It is important to remember that the BEA’s inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity price or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.
  • Governmental spending was reported to be contracting very slightly, at a -0.02% rate. This was a +0.01% improvement from the prior quarter.
  • Exports contributed +0.28% to the headline number, down -0.14% from the prior quarter.
  • Imports added +0.12% to the headline, which was up +0.34% from the prior quarter. In aggregate, foreign trade added +0.42% to the headline number.
  • The “real final sales of domestic product” grew at an annualized 2.25%, down -0.69% from the prior quarter. This is the BEA’s “bottom line” measurement of the economy and it excludes the inventory data.
  • As mentioned above, real per-capita annual disposable income reportedly dropped -$19 per annum. At the same time the household savings rate was reported to have dropped to 3.4% (down -0.4% from the prior quarter). It is important to keep this line item in perspective: real per-capita annual disposable income is up only +7.10% in aggregate since the second quarter of 2008 — a meager annualized +0.74% growth rate over the past 37 quarters.
  • Household disposable income took another hit. Less money was available, and less money was saved — so that a significant portion of the already softening consumer spending came from savings, not pay checks.


    • At this meeting Papadopoulos told everyone he was setting up a meeting with Putin:

    North Korea on verge of ‘catastrophe’ at nuclear site – China warns Kim to STOP tests

    North Korea on verge of ‘catastrophe’ at nuclear site – China warns Kim to STOP tests (Express) Scientists from Beijing believe the Punggye-ri nuclear facility is unstable and that just one more explosion could blow the top off of Mount Mantap, beneath which all six of North Korea’s nuclear tests have been conducted. That could lead to the mountain collapsing, causing radioactive waste to escape and blow across the border into China just 50 miles away. Researchers from the Chinese Academy of Sciences’ Institute of Geology and Geophysics warned Pyongyang delegates of the risk during a briefing in Beijing soon after North Korea’s last nuclear test on September 3, according to the South China Morning Post.

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    New home sales, Durable goods orders, Vehicle sales

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    Nice uptick, but subject to revision and at best indicating continued very modest growth well below the last cycle with a population that’s maybe 10% higher than it was 10 years ago:

    Highlights

    Volatility tied to low sample sizes is what the new home sales report is known for, proving its reputation again as September surged 18.9 percent to a 667,000 annualized rate. This is the largest percentage gain in nearly 28 years and is the highest level of the economic cycle, since October 2007. The revision to August is surprisingly slight, now at 561,000 vs an initial 560,000.

    If hurricanes affected the South in September, then they apparently lifted sales which rose 26 percent in the month to a 405,000 rate. Sales in the three other regions also rose, led by a 33 percent gain in the Northeast to a 48,000 rate and an 11 percent increase in the Midwest to 73,000. Sales in the West rose 2.9 percent to 141,000.

    The surge in sales makes inventories look even more tight. The number of new homes on the market did hold unchanged in the month at 279,000 yet, relative to sales, supply fell 1 full month to 5.0 months.

    Underscoring the strength of the data is strength in prices as sellers were not giving discounts. The median rose a very steep 5.2 percent in the month to $319,700. And prices may have further to run as the year-on-year gain, at only 1.6 percent, is far below the yearly sales rate of 17.0 percent.

    The volatility that this report is subject to makes today’s results feel uneasy. The 3-month average tells a less dramatic story, at 603,000 which is roughly where the trend line has been much of the year. But September’s surge is still something to take notice of, and unless it’s revised away or simply proves a one-month wonder, the new home market may be accelerating sharply into year end.

    There was clearly some rebound following hurricane Harvey. Sales in the South were up sharply from August, and at the highest level since July 2007. Some contracts in the South, that would have been signed in August, were probably delayed until September. Also some people who lost homes might have signed contracts for new homes in September (New home sales are counted when contracts are signed).
    Read more at http://www.calculatedriskblog.com/#1C0h8I1iEJmLPf4I.99


    And the number circled in red looks a bit suspect?


    Better than expected, supported by a large aircraft order, as manufacturing chugs along at modest rates of growth, with core capital goods looking up as well. However as per the chart, it’s not wrong to say it’s all been going sideways for the last several years:

    Highlights
    Business investment is picking up sharply based on capital goods orders which highlight a very favorable durable goods report. Durable orders jumped 2.2 percent in September which is right at Econoday’s high estimate. A second straight strong month for commercial aircraft, up 64 percent following a 52 percent gain in August, skewed the headline higher but when excluding transportation equipment, orders still managed a strong 0.7 percent gain.

    But its core capital goods orders (nondefense ex-aircraft) that show the most important strength, up 1.3 percent with the two prior months also at 1.3 percent. Shipments for this series, which are direct inputs into the business investment component of the GDP report, are building momentum with monthly gains of 0.7 percent in September following 1.2 and 1.0 percent gains in August and July.

    One soft spot is vehicle orders which rose only fractionally. Hurricanes effects could not be isolated in September’s data and seasonal adjustment procedures were unchanged. Note that upward revisions to August data were first posted in the factory orders report.

    Unfilled orders have been flat but rose 0.2 percent which are another positive of September’s report. And a rise in inventories will be another plus for GDP, up 0.6 percent and pointing to a monthly build for total factory inventories.

    Year-on-year rates are really telling the story, now hitting highs last seen before the oil price collapse of 2014. Total orders are up a yearly 8.3 percent with ex-transportation up 7.5 percent and core capital goods up 7.8 percent.

    With only one exception remaining, and that is manufacturing production in the Federal Reserve’s industrial production report, factory data are accelerating going into year end. Watch for the Kansas City manufacturing report on tomorrow’s calendar.

    These charts are not inflation adjusted:


    Consumer not looking so good:


    Settling back down after replace orders from hurricane damage:

    From WardsAuto: U.S. Forecast: October Auto Sales Rate Flat with Prior-Year

  • A WardsAuto forecast calls for U.S. automakers to deliver 1.31 million light vehicles in October. A daily sales rate of 52,579 units over 25 days is nearly equivalent to like-2016’s 52,584 units for 26 days.

    • …

  • The report puts the seasonally adjusted annual rate of sales for October at 17.55 million units, behind year-ago’s 17.80 million and prior-month’s 18.48 million mark.

    • emphasis added

    Read more at http://www.calculatedriskblog.com/#f5XXWIM4C9kTSV7l.99

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