Producer Prices, Industrial Production, Rail Traffic, Container Exports


This is not a reason to hike rates, but the Fed has other reasons beginning with their mistaken belief that the current policy is ‘highly accommodative’ and potentially inflationary, etc. etc. etc. when the opposite is the actual case:

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Up a bit more than expected, but all due to auto production, and yesterday’s wholesale trade report told us it all went to building (unsold) inventory, with sales of domestic cars relatively flat, so look for a reversal over the next few months. And note the reference to weak exports:

Industrial Production
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Highlights
A 10.6 percent surge in motor vehicle production gave a very significant lift to industrial production which rose 0.6 percent in July. The manufacturing component, which has been flat all year, jumped 0.8 percent. Excluding vehicles, however, manufacturing rose only 0.1 percent. The lack of strength here is the result of business equipment which edged only 0.1 percent higher after declining 0.2 percent in June.

The rise in production drove capacity utilization up 3 tenths to 78.0 percent which is where it was back in April. Capacity utilization for manufacturing rose 5 tenths to 76.2 percent.

The two non-manufacturing components are mixed. Production at utilities, due to July’s cool weather, fell 1.0 percent with capacity utilization down 8 tenths to 79.1 percent, while mining production rose 0.2 percent with capacity utilization down 1 tenth to 84.4 percent.

Weak foreign demand and weakness in the energy sector may be hurting much of the industrial sector but these factors are not at play in the domestic auto industry. The readings in today’s report are mixed but the headline gain, driven by the convincing strength for autos, is an eye catcher and will certainly be ammunition for the hawks at next month’s FOMC meeting.

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Weaker than expected and continuing to fade some (in line with stocks…), and note that it peaked with the fall in oil prices:

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Rail Week Ending 08 August 2015: Continued Decline of One Year Rolling Average

By Steven Hansen
August 13 (Econintersect)

Econintersect: Week 31 of 2015 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction.

U.S. Containerized Exports Fall Off the Chart

By Wolf Richter
August 13 (Wolf Street)

“Many of our major trading partners are experiencing stalled or slowing economies, and the strength of the US Dollar versus other currencies is making US goods more expensive in the export market.” That’s how the Cass/INTTRA Ocean Freight Index report explained the phenomenon.

What happened is this: The volume of US exports shipped by container carrier in July plunged 5.8% from an already dismal level in June, and by 29% from July a year ago. The index is barely above fiasco-month March, which had been the lowest in the history of the index going back to the Financial Crisis.

The index tracks export activity in terms of the numbers of containers shipped from the US. It doesn’t include commodities such as petroleum products that are shipped by specialized carriers. It doesn’t include exports shipped by rail, truck, or pipeline to Mexico and Canada. And it doesn’t include air freight, a tiny percentage of total freight. But it’s a measure of export activity of manufactured and agricultural products shipped by container carrier.

Overall exports have been weak. But the surge in exports of petroleum products and some agricultural products have obscured the collapse in exports of manufactured goods

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Retail Sales, Jobless Claims, Import Export Prices, Business Inventories, Japan Machine Orders, Freight Transportation, Gas Prices


This is being touted as a strong report, but, again, looks to me like it’s dropped since year end and at best is moving sideways from there, and not to forget that a large share of auto sales are imports.

But I do agree the Fed is heck bent on raising rates in Sept, even without ‘some’ improvement, and will do so unless there’s a stock market decline severe enough to hold them back. So far that’s not happening.

Retail Sales
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Highlights
Big upward revisions underscore a very solid and very important retail sales report. Retail sales rose 0.6 percent in July with June revised to unchanged from an initial reading of minus 0.3 percent and with May revised to a jump of 1.2 percent from 1.0 percent. The revisions to June and May point to an upward revision for second-quarter GDP.

Vehicle sales, as expected, were the standout in July, jumping 1.4 percent to nearly reverse June’s 1.5 percent slide and nearly matching May’s historic 1.9 percent surge. But even outside vehicles, retail sales were strong with the ex-auto reading rising a solid 0.4 percent. Restaurants, in another strong signal of consumer strength, rose an outsized 0.7 percent following June’s 0.5 percent gain. These are very strong gains for this component. Excluding both vehicles and gasoline, retail sales rose 0.4 percent, again another solid reading.

Strength in both vehicles and restaurants point to the health of the US consumer and will likely give the hawks the courage, despite all the troubles in China, to push for a rate increase at the September FOMC.

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Tough times for department store sales continue, which explains some of the weakness in construction:

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‘Some’ deterioration:

Jobless Claims
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‘Some’ deterioration for Fed hopes of higher inflation. It’s been failing to hit its target for longer than I can remember…

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Excess inventory building in June helps Q2 GDP but the likely subsequent production cuts will hurt Q3. The now persistently too high inventory to sales ratio is overdue for a correction:

United States : Business Inventories
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Highlights
Inventories rose relative to sales in June but the news isn’t that bad given that the build was centered in autos. Business inventories rose 0.8 percent in June which was well ahead of a 0.2 percent rise in sales. The mismatch lifts the inventory-to-sales ratio to 1.37 from 1.36.

But retail inventories at auto dealers were to blame, up 1.4 percent in June and contributing to a 0.7 percent rise for the retail component. Inventories at manufacturers and wholesalers, the two other components of the business inventory report, also rose, up 0.6 and 0.9 percent respectively.

Inventories are on the heavy side but the concentration in autos is welcome given how strong sales are, evidenced by the 1.4 percent surge for the motor vehicle component of the July retail sales report released earlier this morning. Note that this report, along with the retail sales report, are likely to lift revision estimates for second-quarter GDP.

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Global weakness continues:

Japan : Machine Orders
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Highlights
June seasonally adjusted machine orders (excluding volatile items) declined for the first time since February. They dropped a larger than anticipated 7.9 percent on the month and were up 14.7 percent on the year. Core orders were up 16.6 percent based on the original series. This was in contrast to expectations of a 17.5 percent increase.

Core machine orders are considered a proxy for private capital expenditures. The downward move followed a 0.6 percent gain a month before. The government repeated its assessment that machine orders would advance in the third quarter.

Nonmanufacturing orders excluding volatile items were up 5.0 percent while manufacturing orders dropped 14.0 percent. All orders including volatile items dropped 6.2 percent on the month. Manufacturing orders likely softened on continued weaker export demand while the sluggish domestic economy weighs on nonmanufacturers.”

Another weak looking index:

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And I’d call this ‘some’ deterioration in the ‘labor market’. Looks like it was weakening before the 2014 oil capex boom supported it, and then has fallen off since the oil price collapse:

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This is to the point I’ve been making that surveys are one man one vote, not one dollar one vote, so optimism remained high even as retail sales, for example, were fading. Yes, a lot more people saved $10 per week on gas but an equal amount of income was reduced for sellers of oil, including those earning royalties and holding leases, and investors of all sorts, and seems the spending cuts on domestic product by that group outweighed the additional spending from pump savings.

Fueled by low pump prices, U.S. motorists to drive more in August – survey

By Jarrett Renshaw

August 11 (Reuters)

U.S. motorists are paying an average of $2.58 per gallon, nearly a dollar less than a year ago, according to AAA, the nation’s largest motorist advocacy group. And a quarter of respondents expected prices to continue to decline, up from 10 percent a month ago.

The survey found that nearly 80 percent of people say gas prices influence how they feel about the economy. And with gas prices down nearly $1 from a year ago, U.S. motorists are feeling positive about the direction of the economy, the survey found.

“There is good news for retailers as consumer optimism picks up during peak vacation season,” said NACS Vice President of Strategic Industry Initiatives Jeff Lenard.

MTG Purchase Apps, EU Industrial Production, China Industrial Production, JOLTS

Yes, purchase apps are up 20% vs last year, but you can see from the chart the
number of applications has leveled off and declined a bit more recently this year, and remains
at depressed levels:

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The slump in industrial production is global:

European Union : Industrial Production
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Highlights
Industrial production declined more than expected in June. Following a decline of 0.2 percent on the month, output excluding construction dropped 0.4 percent. Annual workday adjusted growth was 1.2 percent, down from 1.6 percent last time.

Durable consumer goods led the monthly declines, falling by2.0 percent from the previous month, followed by capital goods (down 1.8 percent) and intermediate goods (down 0.5 percent). Energy production (up 3.2 percent) was the sole sub-category to record a monthly advance.

Regionally, the biggest declines were seen in Portugal (down 2.1 percent) and Ireland (down 2.0 percent) while the Netherlands (up 3.9 percent) and Slovakia (up 1.4 percent) led to the upside. In the larger countries, Germany’s industrial output contracted 1.4 percent on the month while output in France also weakened 0.1 percent.

The disappointing figures will likely impact analysts’ expectations for Eurostat’s flash estimate of second quarter Eurozone GDP, which is scheduled for Friday.

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And the latest from China was below expectations as the downtrend continues:

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This turned a bit lower which ordinarily doesn’t mean much, but when the Fed is looking for ‘some’ improvement this is not that:

United States : JOLTS
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Highlights
Job openings contracted in June to 5.249 million from 5.357 million in May. The decline likely reflects, at least in part, new hiring as the hiring rate rose 1 tenth to 3.7 percent. But layoffs point to weakness in labor demand with the layoff rate up 1 tenth to 1.3 percent. The quits rate was unchanged at 1.9 percent. Job growth has been no better than moderate this year and this report, which is mixed, doesn’t point to acceleration.

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ISM, Employment, Trade

Nice jump up here to 2005 highs. First unambiguous positive indicator I’ve seen in quite a while.

United States ISM Non Manufacturing PMI

July 5 (Trading Economics)

The ISM Non-manufacturing PMI index registered 60.3 percent in July, 4.3 percentage points higher than the June reading of 56 percent. It is the highest reading since August of 2005 as 15 out of 17 services industries reported growth. Non Manufacturing PMI in the United States averaged 54.15 percent from 1997 until 2015, reaching an all time high of 62 percent in August of 1997 and a record low of 37.60 percent in November of 2008. Non Manufacturing PMI in the United States is reported by the Institute for Supply Management.

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Another payroll chart:

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Another trade chart:
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Redbook Retail Sales, Factory Orders, Econ Confidence

Speaks for itself:

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Nice to see an up month after a down one, but the year over year chart says it all:

Factory Orders
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Highlights
Factory orders rose nearly as expected in June, up 1.8 percent for only the second gain in the last 11 months. The durable goods component, initially released last week, is unrevised at plus 3.4 percent in a gain distorted by aircraft orders but one that does reflect a pop higher for capital goods. The non-durables component, data released with today’s report, rose 0.4 percent on order gains for oil and chemicals.

Orders for civilian aircraft jumped 65 percent in the month following, in routine up-and-down fashion for this component, a 32 percent downswing in May. Industries reporting respectable gains include 0.5 percent for furniture and 0.6 percent for motor vehicles as well as a 1.5 percent gain for machinery. Orders for energy equipment bounced back 5.5 percent after sinking 25 percent in May. Year-on-year, energy equipment is down 51 percent.

Looking at totals again, shipments rose a very solid 0.5 percent with shipments of core capital goods up 0.3 percent. The latter, which is a key reading that excludes aircraft, isn’t spectacular but is still a solid gain for business investment. Unfilled orders, which have been in contraction most of the year, were unchanged in June. Inventories rose 0.6 percent in a build that falls in line with shipments, keeping the inventory-to-shipments ratio at a manageable 1.35.

Today’s report offers rare good news for a factory sector that, due to weak exports and the collapse in oil & gas equipment, has been struggling to stay above water for the last year.

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Minor index but another indicator of a drop in ‘confidence’:

Gallup US ECI
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Highlights
July’s Economic Confidence Index averaged minus 12 in July, down from minus 8 in June and the lowest monthly average since October 2014. The drop is attributable chiefly to Americans’ increasing view that the economy is getting worse rather than better.

PMC, Personal Income, ISM Manufacturing, Construction Spending, Car Sales

Another PMC, and an estimated $45 million check to Boston’s Dana Farber for cancer research! Congrats to all the donors and participants- over 6,000 riders and thousands of volunteers handling the logistics!

Special nod to Billy and Meredith Starr for a most successful 35th PMC and total donations approaching $500 million!!!

And thanks to all of you who contributed and those who will be contributing… ;)

(Note Elizabeth’s sandals with spd clips :)
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Personal Income and Outlays

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Highlights
The consumer showed less life in June with inflation remaining very quiet. Consumer spending rose an as-expected 0.2 percent in June, down from a revised spike of 0.7 percent in May with the slowing tied in part to lower vehicle sales. Personal income, boosted by gains for rents and transfers that offset slight slowing in wages, rose slightly more than expected at 0.4 percent.

The key inflation reading in this report, the core PCE price index, rose only 0.1 percent for a very quiet 1.3 percent year-on-year rate that won’t be moving up expectations for the Federal Reserve’s rate hike. The year-on-year rate is at a 4-1/2-year low and has remained below 1.5 percent since November. The overall price index rose 0.2 percent in June with its year-on-year rate, reflecting the collapse in oil prices, at only plus 0.3 percent.

The savings rate is below 5.0 percent at 4.8 percent but remains on the high side, which points to consumer health and hints at underlying spending strength. The economy is just bumping along right now, pointing to no urgency for policy change.

Wage income down:

PERSONAL INCOME AND OUTLAYS: JUNE 2015

August 3 (Bureau of Economic Analysis)
Wages and salaries increased $18.3 billion in June, compared with an increase of $32.0 billion in May. Private wages and salaries increased $16.0 billion in June, compared with an increase of $29.6 billion in May. Government wages and salaries increased $2.3 billion, compared with an increase of $2.4 billion.

Without the big jump in reported personal dividend income personal income would have been lower:

Rental income of persons increased $7.4 billion in June, compared with an increase of $7.7 billion in May. Personal income receipts on assets (personal interest income plus personal dividend income) increased $20.2 billion, compared with an increase of $8.4 billion. Personal current transfer receipts increased $8.6 billion, compared with an increase of $8.9 billion.

Lower tax payments helped disposable personal income but it’s still a very low rate of growth:

Personal current taxes increased $7.5 billion in June, compared with an increase of $12.5 billion in May. Disposable personal income (DPI) — personal income less personal current taxes — increased $60.6 billion, or 0.5 percent, in June, compared with an increase of $53.8 billion, or 0.4 percent, in May.

Real DPI — DPI adjusted to remove price changes — increased 0.2 percent in June, compared with an increase of 0.1 percent in May.

Like most all indicators, there’s been a falling off since oil prices broke during Q4 2014:

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source: Bureau of Economic Statistics
Disposable personal income was revised up $19.7 billion, or 0.2 percent, for 2012; was revised down $109.5 billion, or 0.9 percent, for 2013; and was revised down $76.1 billion, or 0.6 percent, for 2014.

Personal outlays was revised down $30.8 billion, or 0.3 percent, for 2012; was revised down $91.4 billion, or 0.8 percent, for 2013; and was revised down $63.7 billion, or 0.5 percent, for 2014. Revisions to personal outlays primarily reflected downward revisions to PCE.

Exports again, and now employment showing weakness in the latest reports:

ISM Mfg Index

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Highlights
Weak employment and continued contraction in exports held down the manufacturing index which slipped 0.8 tenths in July to a lower-than-expected 52.7 to indicate slowing monthly activity for ISM’s sample. Employment growth slowed nearly 3 points to 52.7 while new export orders fell 1.5 points to 48.0 for the 5th sub-50 contractionary reading of the last 7 months.

But there are signs of strength in the report led by new orders which rose 1/2 point to 56.5 which is the strongest reading of the year for this most important of all readings. The gain contrasts with the drop in export orders and points to strength in the domestic economy. Production is also strong at 56.0.

But another negative in the report is sharp contraction in backlogs, down 4.5 points to 42.5 to signal the sharpest draw in nearly 3 years. This drop helps explain the slowing in employment but is offset in the longer term outlook by the rise in new orders.

This report is mixed with export orders pointing to continuing headwinds for the manufacturing sector though total new orders are a plus. Note that this report was posted before its usually scheduled 10:00 a.m. ET release time.

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Construction up nicely vs last year this time, but not so much vs earlier this year, and some of it is the NY thing regarding getting started ahead of expiring credits as previously discussed, which look to have been followed by a sharp fall off:

Construction Spending

source: Econoday.com
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Highlights
Held back by a slight and unexpected decline in single-family homes, construction spending inched only 0.1 percent higher in June. Spending on new single-family homes slipped 0.3 percent in June following gains of 0.5 percent and 1.0 percent in the prior two months. Showing much greater strength are multi-family units, up 2.8 percent in June following prior gains of 1.3 and 3.4 percent. Year-on-year, single-family homes are up a very strong 12.8 percent while multi-family is up 23.7 percent.

The biggest drag to June comes from the private non-residential category which fell 1.3 percent reflecting sweeping monthly declines for offices, commercial structures, factories along with power and transportation spending. On the plus side were construction for highways and education.

Housing permit data point to strength ahead for single-family construction spending along with continued standout strength for the multi-family category. But the decline on the non-residential side does underscore weakness right now in business investment. But taken together, total spending is still up a very constructive 12.0 percent year-on-year and the second-half outlook is still positive.

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Not adjusted for inflation:

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Motor vehicle sales looking up, estimated at a 17.5 million annual rate, almost as high as May and split between domestic and imports isn’t out yet. Domestically produced car sales have been down year over year:

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