Saudi oil pricing, import and export prices, Japan Manufactures’ sentiment

Posted on December 10, 2015 @ 1:13 pm (Thursday) by WARREN MOSLER

Not a lot of change for January, most ‘discounts’ still at or near the wides, so price action likely to be more of same:

Something the Fed takes into consideration:

Import and Export Prices

Highlights
Cross-border price pressures remain negative with import prices down 0.4 percent in November and export prices down 0.6 percent. Petroleum fell 2.5 percent in the month but is not an isolated factor pulling prices down as non-petroleum import prices fell 0.3 percent in the month. Agricultural exports are the wildcard on the export side and they fell a sizable 1.1 percent but here too, the deflationary pull is widespread with non-agricultural export prices down 0.6 percent.

Year-on-year contraction is perhaps less severe than prior months but not by much. Import prices are down a year-on-year 9.4 percent with non-petroleum import prices at minus 3.4 percent. Import prices from Canada are down the heaviest, at minus 18.0 percent on the year, with Latin America next at minus 12.7 percent. Showing the least price weakness are imports from China at minus 1.5 percent. Export prices are down 6.3 percent on the year with non-agricultural prices down 5.7 percent.

Of special concern are continuing incremental decreases for prices of finished goods, both imports and exports. Federal Reserve policy makers have been waiting for an easing drag from low import prices, not to mention oil prices as well, with neither yet to appear. Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars.

Japan big manufacturers’ mood worsens in Q4

Dec 10 (Reuters) — Big Japanese manufacturers’ sentiment worsened in October-December, a government survey showed. The business survey index (BSI) of sentiment at large manufacturers stood at plus 3.8 in October-December, compared with plus 11.0 in July-September, according to the joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office, released on Thursday. The BSI measures the percentage of firms that expect the business environment to improve from the previous quarter minus the percentage that expect it to worsen.

Copper, Japan, Corp tax policy

Posted on November 24, 2015 @ 10:17 am (Tuesday) by WARREN MOSLER

They must have found a way for their workers to live on fewer calories…

Copper Miners’ Pain Doesn’t Stop Buildup

Nov 23 (WSJ) —Global copper production is on track to hit an all-time high of 18.7 million metric tons this year, according to BMO Capital Markets. The cost of producing a pound of copper at Freeport’s Grasberg mine in Indonesia will drop to 61 cents next year, from an estimated $1.05 cents in 2015, according to BMO. Next year, four new mines will increase the world’s copper production by 5.1%, says Barclays. This year, rains, drought, earthquakes and labor strikes cut 9% from planned global mine output, versus typical annual losses of 4% to 5%, said Citigroup.

Capital Expenditure is one of the channels whereby agents spend more than their incomes which offsets those spending less than their incomes:

Japan Inc. tightens purse strings at home

Nov 24 (Nikkei) — Capital spending in Japan shrank an annualized 4.8% from the previous quarter in the April-June period and fell an annualized 5% in the three months ended in September. Aggregate pretax profit of listed companies in Japan is seen climbing to a record for the second consecutive year in fiscal 2015. Japanese companies M&A spending overseas topped 10 trillion yen ($80.6 billion) for the first time this year, according to M&A advisory Recof. R&D spending will be included in GDP data from the end of next year, but at this point, its omission makes corporate spending look even smaller than the reality.

The progressive response is to eliminate all corporate taxes, as they merely get passed through to consumers. But don’t count on either side picking up on that. Or that in no case should health care be a marginal cost of production, unless the work itself causes health problems, etc. etc. etc.

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

Posted on November 17, 2015 @ 1:56 pm (Tuesday) by WARREN MOSLER

Part of the Fed’s mandate is to hit it’s 2% inflation target:

Still at recession type levels:

This is also what recession looks like:

The anointed ‘driver of the economy’ continues to falter as previously discussed:

Housing Market Index

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

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

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

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

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

October 2015 Sea Container Counts Continue to Show Trade Recession Continues

By Steven Hansen

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

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

This is simply unspent income that reduces aggregate demand:

FHA Meets Minimum Reserve Requirement for First Time Since 2009

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

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

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

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

Abe to call for supplementary budget topping 3tn yen

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

Capital spending delays took toll on July-September GDP

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

LA port traffic, Philly Fed Forecasting Survey, Job Growth Chart, Japan

Posted on November 16, 2015 @ 3:03 pm (Monday) by WARREN MOSLER

LA area Port Traffic declined in October

By Bill McBride

First, from the WSJ: Quiet U.S. Ports Spark Slowdown Fears

For the first time in at least a decade, imports fell in both September and October at each of the three busiest U.S. seaports, according to data from trade researcher Zepol Corp. analyzed by The Wall Street Journal. …

The declines came during a stretch from late summer to early fall known in the transportation world as peak shipping season, when cargo volumes typically surge through U.S. ports. It is a crucial few months for the U.S. economy as well: High import volumes can signal a confident view on the economy among retailers and manufacturers, while fears of a slowdown grow when ports are quiet.

Note: There were some large swings in LA area port traffic earlier this year due to labor issues that were settled in late February. Port traffic surged in March as the waiting ships were unloaded (the trade deficit increased in March too), and port traffic declined in April.

They’ve been starting too high and revising down for a very long time now!

Fourth Quarter 2015 Survey of Professional Forecasters Shave Their Growth Estimates for 2016 and 2017

from the Philadelphia Fed

Growth in real GDP in 2016 and 2017 looks a little slower now than it did three months ago, according to 45 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters currently see growth in the annual-average level of real GDP at 2.6 percent in 2016 and 2.5 percent in 2017. These current estimates represent downward revisions to the outlook of three months ago, when the forecasters thought 2016 growth would be 2.8 percent and 2017 growth would be 2.6 percent. Notably, the forecasters have raised their growth estimates for 2018. They now see real GDP growing 2.8 percent in 2018, up from the previous estimate of 2.4 percent.

Jobs growth slowing:

Japan economy shrinks 0.8 pct in Q3, back in recession

Mtg Purchase Apps, Arch. Billings, Japan Exports, Bernie Article

Posted on October 21, 2015 @ 1:33 pm (Wednesday) by WARREN MOSLER

After the up and down in front of the change in regulations new purchase apps are, so far, lower than before:

Fits with the permit spike/decline story, and there was also this note:

The multi-family residential market was negative for the eighth consecutive month – and this might be indicating a slowdown for apartments – or at least less growth.

Japan export growth slows sharply, raising fears of recession

By Tetsushi Kajimoto

Oct 21 (Reuters) — Japan’s annual export growth slowed for the third straight month in September, a worrying sign that overseas sales continued to drag on growth last quarter, adding to fears of a recession.

Ministry of Finance data showed exports rose just 0.6 percent in the year to September, against a 3.4 percent gain expected by economists in a Reuters poll.

That was the slowest growth since August last year and followed a 3.1 percent gain in August 2015. Compared with last month seasonally-adjusted shipments declined 1.7 percent.

Wednesday’s data is the first major indicator for September and is part of the calculation of third quarter gross domestic product. A third quarter contraction would put Japan into recession, given the second quarter’s negative GDP data.

China’s slowdown and soft domestic demand weighed on factory output and the broader economy, although the Bank of Japan saw the effects of China’s slowdown were limited for now, as it sticks to its rosy growth outlook, but that may change at the BOJ’s monetary policy review on Oct. 30.

The author is on the right track- it’s about aggregate demand and ‘inflation’ from excess demand.

But it’s not about rates per se, which are about the Fed’s reaction function, which does happen to include inflation, so to that extent it’s sort of ok…

Bernie Sanders doesn’t need to pay for his socialist utopia

By Jeff Spross

Without a doubt, presidential contender Bernie Sanders boasts the most ambitious policy proposals of anyone on the Democratic side. And sooner or later, the same question always comes up:

“Yeah, those are lovely ideas, but how’s he gonna pay for all this?”

For people who oppose Sanders’ program, it makes for a nice “gotcha.” But Sanders’ supporters bring it up sometimes too. Comedian Bill Maher pressed the senator on this last Friday, and Sanders dutifully listed off various ideas. They might bring in enough revenue or they might not; like his fellow candidates, Sanders’ proposals are still in their protean stage. What’s interesting is that Sanders and his fans are implicitly conceding that, yes, we would need to pay for this stuff.

May I humbly suggest this is wrong?

Not only do we not need to pay for Sanders’ programs, we shouldn’t pay for them. In fact, the federal government’s budget deficit is much too low.

How could I possibly suggest anything so loony? Contrary to popular belief, smaller deficits are not always better. How big or small the deficit should be is determined by how it interacts with the rest of the U.S. economy and other international economies. And there are two key metrics to look for there: interest rates and inflation.

Like you or me or any company, when the U.S. government borrows money, it pays its lenders interest. This is an investment by the lender based on how much risk they want to take. So if they consider you a safe investment, they’ll demand low interest rates, and if they consider you a risky investment, they’ll demand higher rates. And interest rates on U.S. debt are currently the lowest they’ve been in at least half a century:

Equally important is why. If investors consider government debt unusually safe, it’s because they aren’t seeing lots of other places in the economy worth investing in. This shouldn’t be surprising: Our economic growth and job creation remain sluggish, there are no signs of wage growth, work force participation isdown, and economic insecurity remains high. There’s just not a lot of exciting economic ferment going on out there.

One big reason for this is that the government itself has pulled way back from spending money in the economy and hiring people. Economic ferment breeds economic ferment. More government aid, investment and hiring would mean more people with incomes to spend, creating more jobs in the private sector. So there should be a natural corrective here: Interest rates on government debt fall because it’s the only safe investment, so government borrows more and spends it, the economy picks up, and interest rates on the debt rise as investors find other places to park their cash.

But American policymakers moralize debt and deficits and think they should always be smaller, so that doesn’t happen.

Which brings us to the other key metric: inflation. Unlike you or me or any company, the U.S. government can print (or, in the digital age, create) money. At the end of the day, if you’re worried that government borrowing will drive up interest rates, you can always just have your central bank print more money and buy up government debt. One of the big reasons investors view the debt of advanced governments as safe is because, at the end of the day, they can always pay you back with money creation. And the central bank buying debt raises the demand for it, which brings interest rates back down.

But it also adds to the money supply, which threatens inflation — except that, as with interest rates, inflation is only going to rise once we’ve attained full employment. That’s when the new money stops being soaked up by new economic activity, and starts going into price increases instead. But the Federal Reserve has actually been creating a ton of new money recently, and it hasn’t really goosed the economy. That’s probably because the normal ways the Fed injects money into the economy don’t work as well as going in via government hiring and state aid.

So at the highest conceptual level, money printing and borrowing — monetary policy and fiscal policy — collapse into one another. This makes inflation, even more than interest rates, the key upper limit to government borrowing.

And the inflation rate is, well, about as low as it’s been in half a century:

The conclusion, by now, should be obvious: Government deficits are too low, and have been too low for agood long while.

Once you realize all this, it actually upends a lot of conventional wisdom. People usually talk about taxes and spending as being in balance with one another, but they’re actually both in balance with two other forces: the money supply and the overall health of the economy. You really can’t think of the government as just another economic actor, like an individual person or a business. It’s a unique thing unto itself: a hub or ballast tank for the overall flow of money and activity through the economy. No, its capacities to borrow and print money aren’t infinitely elastic. But it’s perfectly plausible that we could enter periods, like the current global doldrums, where government should run really big deficits and print lots of money for extended periods.

Take Bernie Sanders’ own favored example of Denmark: The Danes run a very generous welfare state, and have taxes high enough to pay for it. But Denmark is also facing a sluggish economy and rock-bottom inflation. So it’s actually being much too fiscally responsible. Denmark should expand its deficit — in this case, given the size of its deficit, by cutting its tax rates — and loosen up its monetary policy to buy up all that new debt. Taxes, under this logic, aren’t really about bringing in revenue — rather, they’re just another dial for managing this flow. And it’s conceivable that they would never need to balance with spending.

What’s funny is that Sanders might be gearing up to make this very argument. His chief economic adviser, University of Missouri-Kansas City economist Stephanie Kelton, is a fan of something called modern monetary theory: a batch of ideas that sketches out a very similar case to the one above.

Of course, Sanders hasn’t done this yet. And maybe he won’t.

But if he ever chose to throw down in favor of bigger deficits and more money-printing — on the national stage of a presidential election, no less — he’d be doing the country a tremendous service.

Exports, Bank Revenues, Chips, Japan, Mtg Purchase Apps, Oil Comment

Posted on October 14, 2015 @ 9:21 am (Wednesday) by WARREN MOSLER

At U.S. Ports, Exports Are Coming Up Empty

Oct 13 (WSJ) — In September, the Port of Long Beach Calif. handled 197,076 outbound empty boxes. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports. Last month, however, Long Beach and the Port of Oakland both reported double-digit gains in exports of empty containers. So far this year, empties at the two ports are up more than 20% from a year earlier. Long Beach’s containerized exports were down 8.2% this year through September, while Oakland’s volume of outbound loaded containers fell 12.7% from a year earlier in the January-September period.

J.P. Morgan’s Revenue Slides

Oct 13 (WSJ) — J.P. Morgan Chase reported a profit of $6.8 billion, or $1.68 a share. That compares with a profit of $5.57 billion, or $1.35 a share, in the same period of 2014. Excluding $2.2 billion of tax benefits and other one-time items, earnings were $1.32 a share. Revenue fell 6.4% to $23.54 billion. Return on equity was 12% in the third quarter compared with 10% a year earlier. The bank continued to cut its workforce last quarter, shedding 1,781 people to 235,678. That includes reductions across its consumer & community banking and corporate divisions.

Intel Profits Slide Amid PC Slump

Oct 13 (WSJ) — Intel said its third-quarter profit fell 6.3% from the year-earlier period on a small revenue decline. Intel issued an outlook for the current quarter that was in line with Wall Street estimates. In all, the chip maker reported third-quarter net income of $3.11 billion, or 64 cents a share, down from profit in the year-earlier period of $3.32 billion, or 66 cents a share. Revenue for the period ended Sept. 30 declined to $14.47 billion from $14.55 billion. Intel’s gross profit margin declined to 63% from 65%. It said 2015 capital spending will be about $7.3 billion, down from a projected $7.7 billion.

Good time to hit the brakes:

Abe orders preparation of multiple rates for 2017 sales tax hike

Oct 1(Kyodo) — Prime Minister Shinzo Abe on Wednesday ordered preparations for the introduction of multiple tax rates under the planned consumption tax hike in April 2017. Abe gave the instruction to former industry minister Yoichi Miyazawa, who is to replace Takeshi Noda as chairman of the ruling Liberal Democratic Party’s tax panel. The prime minister believes it is necessary to consider measures to avoid unnecessarily burdening smaller businesses, Miyazawa said. To ease the impact the government is considering introducing reduced tax rates for some items such as daily necessities.

Slowdown in emerging economies weakens Japanese real GDP outlook

Oct 14 (Nikkei) — Japan’s real gross domestic product inched up an annualized 0.55% from the previous quarter during the July-September period, a new survey of professional forecasters showed Tuesday, a considerable retreat from the 1.67% growth predicted in September. The experts saw exports growing 0.62%, less than half the 1.39% outlook in September. The survey pegged real economic growth for fiscal 2015 at 0.97%, down from September’s outlook of 1.11%. Official government estimates from July see a 1.5% advance. The economists also cut real GDP growth for fiscal 2016 from 1.7% in September to 1.59%.

Giving back last week’s gains, and then some as housing remains depressed:

MBA Mortgage Applications

Mortgage applications decreased 27.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 9, 2015.

The Refinance Index decreased 23 percent from the previous week. The seasonally adjusted Purchase Index decreased 34 percent from one week earlier. The unadjusted Purchase Index decreased 34 percent compared with the previous week and was 1 percent lower than the same week one year ago.

Don’t forget, Saudis did cut price/increased discounts on October 5 for November deliveries:

German Trade, Japan

Posted on October 8, 2015 @ 8:27 am (Thursday) by WARREN MOSLER

Exports down but so are imports, indicating a weak global economy and continued euro support from trade net flows:

Germany : Merchandise Trade

German exports plunge at fastest pace since global financial crisis

Oct 8 (Reuters) — German exports plunged in August. Data from the Federal Statistics Office showed seasonally-adjusted exports sliding by 5.2 percent to 97.7 billion euros month-on-month, the steepest drop since January 2009. Imports tumbled by 3.1 percent to 78.2 billion euros, the biggest one-month decline since November 2012. Germany’s trade surplus narrowed to 19.6 billion euros. Germany’s auto industry accounts for roughly one in five jobs. It accounted for 17.9 percent of Germany’s 1.1 trillion euros ($1.25 trillion) in exported goods last year.

Out of the frying pan and into the fire:

Japan : Machine Orders

Highlights
Core machine orders retreated for a third month in August. Core machine orders sank 5.7 percent on the month – expectations were for an increase of 3.2 percent. The monthly decline followed drops of 3.6 percent in July and 7.9 percent in June. On the year, orders were 5.2 percent lower. Total orders plunged 14.6 percent.

Manufacturing orders slid 3.2 percent while nonmanufacturing orders dropped 6.1 percent on the month. In an indication of weak international trade, overseas orders plummeted 26.1 percent on the month.

Needless to say, the government downgraded its view – said orders are marking time. Core machine orders are considered a proxy for private capital expenditures.

Japan out of deflation, Kuroda says

Oct 8 (Nikkei) — Japan has exited deflation and the overall inflation trend has risen steadily, Bank of Japan Gov. Haruhiko Kuroda said Wednesday. Kuroda emphasized price hikes, arguing that daily and weekly price indexes show a significant change from last year. Growth in the UTokyo Daily Price Index, which tracks changes in supermarket prices using data from Nikkei Inc., is hovering near 1.5%. Companies are passing higher labor and other costs on to customers, who are accepting the resulting price increases. Kuroda hinted that even a cut to inflation projections caused by the slump in crude oil would not be enough to merit more stimulus.

Japan’s August core machinery orders down 5.7% on month

Oct 8 (Kyodo) — Japan’s core private sector machinery orders fell a seasonally adjusted 5.7 percent in August from the previous month to 759.4 billion yen ($6.33 billion). The government cut its basic assessment, saying core machinery orders are “at a standstill.” Orders from the manufacturing sector dropped 3.2 percent to 347.9 billion yen in August, down for the third straight month, while those from the nonmanufacturing sector slid 6.1 percent to 422.1 billion yen for the second straight monthly fall. Overseas demand for Japanese machinery, an indicator of future exports, plunged 26.1 percent to 872.3 billion yen.

Japan service sector sentiment worsens in September

Oct 8 (Economic Times) — Japan’s service sector sentiment index fell to 47.5 in September, a Cabinet Office survey showed on Thursday. The survey of workers such as taxi drivers, hotel workers and restaurant staff – called “economy watchers” for their proximity to consumer and retail trends – showed their confidence about current economic conditions slipped from 49.3 in August. The outlook index, indicating the level of confidence in future conditions, rose to 49.1 in September from 48.2 the previous month. The Cabinet Office started compiling the data in comparative form in August 2001.

Japan Downgrade, China GDP Model, Earnings Reports, Italian Trade, Housing Starts, Rail Traffic, Fed Comment

Posted on September 18, 2015 @ 12:06 pm (Friday) by WARREN MOSLER

Yields on JGB’s fall a bit with S&P downgrade. I’ve spoken to S&P. They know better. They are intellectually dishonest.

I included these as they give some indication of the macro outlook:

FedEx Trims Outlook on Weak Freight Demand

Sept 16 (WSJ) — FedEx said it expects adjusted earnings of $10.40 to $10.90 a share for the year ending May 31, down from its previous guidance of $10.60 to $11.10 a share. Average daily volume for Ground’s package business grew 4% in the quarter, which was about in line with the company’s expectations. Ground’s operating income slipped 1% to $537 million, while revenue shot up 29% to $3.83 billion in part from the addition of GENCO. For the first quarter ended Aug. 31, FedEx posted a profit of $692 million, or $2.42 a share, up from $653 million, or $2.26 a share, a year earlier. Revenue increased 5% to $12.3 billion.

Oracle Reports Decline in Profits

Sept 16 (WSJ) — Oracle said net income fell 20% in the period ended Aug. 31, but was off only 8% excluding currency effects. Total revenue, off 2%, was up 7% on a constant-currency basis, Oracle said. Oracle said new licenses declined 16% in dollars, or 9% in constant currency. Overall, Oracle reported a profit of $1.75 billion, or 40 cents a share, down from $2.18 billion, or 48 cents a share, a year earlier. Excluding stock-based compensation and other items, profit would have been 53 cents a share, compared with 62 cents a year earlier. Total revenue declined to $8.45 billion from $8.6 billion a year earlier.

Euro friendly:

Italy : Merchandise Trade

Highlights
The seasonally adjusted trade balance was in a E3.7 billion surplus in July, up from an unrevised E2.6 billion excess in June.

However, the headline improvement masked contractions in both sides of the balance sheet. Hence, exports fell 0.4 percent on the month, their third decline since March but only due to weakness in energy (ex-energy exports grew 0.4 percent). Imports were off a steeper 3.7 percent (minus 4.0 percent ex-energy). Compared with a year ago, exports were up 6.3 percent after a 9.4 percent rise in June and imports 4.2 percent higher following a 12.2 percent gain last time.

The July black ink was more than 6 percent above its average level in the second quarter. This suggests that net exports could provide a boost to real GDP this quarter having been a drag in the previous period.

They talk about the ‘portfolio balance channel’ meaning investors shifting to ‘riskier assets’ due to QE, etc. But at the macro level, it’s about the total ‘risky assets’ available, and it looks like the growth rate is declining:

No sign of a burst in issuance here:

Housing Starts

Highlights
Housing starts fell back in August but not permits which gained and point to strength for starts ahead. Starts fell 3.0 percent in the month to a lower-than-expected 1.126 million annual pace while permits rose 3.5 percent to a higher-than-expected 1.170 million. Starts for single-family homes, like the headline for starts, also fell 3.0 percent in August but follow a 10.9 percent surge in July. Permits for single-family homes rose 2.8 percent in the latest month to 699,000 which is the highest since 2008.

Housing under construction is also at a 2008 high, at 920,000 vs 908,000 in July. But completions were down in the month, from July’s 966,000 pace to a still healthy 935,000.

By region, starts data show increasing strength for the South which is by far the largest region, up 7.1 percent in the month. Permits in the South rose 2.4 percent for a 10 percent year-on-year gain. Permits in the West are the strongest of any region, up 9.6 percent in the month for a year-on-year rate surge of 36 percent.

Revisions to July were mixed with starts revised lower but permits higher. On net, this report is another positive for housing which is proving to be a key sector for the 2015 economy.

Steady progress but still depressed and still well below the lows of the 2001 recession:

Too soon to tell if the prior spike will be followed by a more serious collapse:

Philadelphia Fed Business Outlook Survey

Highlights
There may very well be something wrong with the manufacturing sector, at least in the Northeast where the Empire State index has been in deep negative ground for the last two months followed now by a minus 6.0 headline for the Philly Fed index. This is the first negative reading since February 2014.

But the headlines for both of these reports, which are not composite scores of separate components, are sentiment scores of sorts, rough month-to-month assessments of general conditions. A key positive in today’s is continued strength in new orders which rose 3.6 points to 9.4. Unfilled orders, nevertheless, have been trending into contraction, at minus 6.6 for the third straight negative reading.

But some details are very strong with shipments at plus 14.8 and employment at plus 10.2 for a 5-month high. In a negative signal also seen in the Empire State report, prices received, that is prices for final goods, is in contraction at minus 5.0.

The Fed is wondering whether global volatility and stock market losses are affecting consumer confidence. Early data this month from regional Feds suggest the effects may also be extending to business sentiment.

Rail Week Ending 12 September 2015: Tremendous Unimprovement After Previous Week’s Improvement

Sept 17 (Econintersect) — Week 36 of 2015 shows same week total rail traffic (from same week one year ago) collapsed according to the Association of American Railroads (AAR) traffic data. Intermodal traffic significantly declined year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction. It could be that the data last week was screwed up – and the data this week was an adjustment.

And so how good can the US economy be if the Fed thinks the appropriate fed funds rate is still near 0%?

;)

Dallas Fed, Chicago PMI, Japan Industrial Production, Italy Retail Sales, Comments on GDI and GDP

Posted on August 31, 2015 @ 11:18 am (Monday) by WARREN MOSLER

Shockingly negative:

Dallas Fed Mfg Survey

Not so good:

Chicago PMI

Highlights
The headline for August looks solid, at 54.4 for the Chicago PMI, but the details look weak. New orders and production both slowed and order backlogs fell into deeper contraction. Employment contracted for a fourth straight month while prices paid fell back into contraction. Lifting the composite index are delays in shipments which point to tight conditions in the supply chain. Inventories rose sharply in the month and the report hints that the build, despite the weakness in orders, was likely intentional. But strength is less than convincing and this report suggests that activity for the Chicago-area economy may be flat going into year end.

Japan : Industrial Production

Italy : Retail Sales

Highlights
Retailers had another poor month in June as nominal sales fell 0.3 percent versus May when they declined a slightly steeper revised 0.2 percent. Unadjusted annual growth actually accelerated from 0.1 percent to 1.7 percent but this was due to extra shopping days in this year’s report. Volume purchases were also 0.3 percent lower on the month.

Real gross domestic income (GDI) was up at only a .6% annual rate, only a bit higher than Q1, and in contrast to GDP being up 3.7% for the same quarter. This time looks to me like it’s GDP that’s out of line, as per my narrative where I don’t see any signs of any other sector stepping up and replacing the GDP supported by the now lost oil capital expenditures:

The capital goods sector remains in retreat:

Lots of anecdotals don’t jibe with 3.7% growth:

21 August 2015: ECRI’s WLI Growth Index Sinks Slightly More Into Contraction

(Econintersect) — ECRI’s WLI Growth Index which forecasts economic growth six months forward – remains in negative territory. This index had spent 28 weeks in negative territory then 15 weeks in positive territory – and now is in its second week in negative territory.

Rail Week Ending 22 August 2015: Some Improvement But Continued Deterioration Of Year-over-Year Rolling Averages

(Econintersect) — Week 33 of 2015 shows same week total rail traffic (from same week one year ago) marginally expanded according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for approximately half of movements. but weekly railcar counts continued in contraction.

Lots of reasons to suspect net exports will revert in Q3, or be revised down for Q2 as blips up like this latest one tend to quickly reverse, especially with all the surveys showing exports in retreat:

The goods component is looking in full retreat:

And the service component of exports isn’t offering any material support either:

And the Atlanta Fed’s Q3 GDP forecast of only 1.2% remains well below mainstream forecasts:

Personal Income and Outlays, Consumer Sentiment, Japan Household Spending, China Profits

Posted on August 28, 2015 @ 11:45 am (Friday) by WARREN MOSLER

Everything pretty much as expected and the same, helped by vehicle sales which are both volatile and leveling off:

United States : Personal Income and Outlays

Highlights
There’s no hurry for a rate hike based on the July personal income and outlays report where inflation readings are very quiet. Core PCE prices rose only 0.1 percent in the month with the year-on-year rate moving backwards, not forwards, to a very quiet plus 1.2 percent. Total prices are also quiet, also at plus 0.1 percent for the monthly rate and at only plus 0.3 percent the yearly rate.

On the consumer, the data are very solid led by a 0.4 percent rise in income that includes a 0.5 percent rise in wages & salaries which is the largest since November last year. Other income details, led by transfer receipts, also gained in the month. Spending rose 0.3 percent led by a 1.1 gain in durables that’s tied to vehicle sales. The savings rate is also healthy, up 2 tenths to 4.9 percent.

The growth side of this report is very favorable and marks a good beginning for the third quarter. This at the same time that inflation pressures remain stubbornly dormant. And remember this report next month will reflect the August downturn in fuel prices. With the core PCE index out of the way, next week’s August employment report looks to be the last big question mark going into the September 17 FOMC.

First the recession then the tax hikes and sequesters ratchet down after tax income, and the growth rate is both low and never enough to ‘catch up’:

And over the last year you can see how the drop in oil capex after the price fell did the same thing though on a smaller scale, at least so far:

This is further decelerating from already weak numbers, not to forget health care premiums count as consumption expenditures, with a one time adjustment in progress as previously uninsured people become insured and begin paying premiums:

This is a quarterly number updated yesterday. The ‘one time’ increase may be cresting:

Starting to decelerate, even with low gas prices:

Japan : Household Spending

China’s industrial profits fell faster in July

Aug 28 (Xinhua) — Profits of China’s major industrial firms fell 2.9 percent year on year in July, sharply down from the 0.3-percent decline posted in June. The NBS attributed the poor performance to weak domestic demand and a continuous fall in factory gate prices, which have suffered 41 consecutive months of declines. Profits at industrial companies with annual revenues of more than 20 million yuan (about 3.1 million U.S. dollars) totaled 471.6 billion yuan in July. During the first seven months, industrial profits dropped one percent from a year earlier, compared with a fall of 0.7 percent registered in the first half of the year, the NBS said.