Presidential poll, Euro area current account, Saudi output, Russian nukes

Posted on October 20, 2016 @ 9:33 am (Thursday) by WARREN MOSLER

Clinton Vs. Trump: IBD/TIPP Presidential Election Tracking Poll (IBD/TIPP) The IBD/TIPP poll — a collaboration between Investor’s Business Daily (IBD) and TechnoMetrica Market Intelligence (TIPP) — has been the most accurate poll in recent presidential elections (About IBD/TIPP Poll). The latest results for the IBD/TIPP Presidential Election Tracking Poll will be released each morning by 6 a.m. ET.

Trump Leads Clinton By 1 Point Going Into Debate (IBD/TIPP) Donald Trump has managed to pull ahead of Hillary Clinton by a 1.3 percentage point margin — 41.3% to 40% — in a four-way matchup. Libertarian Gary Johnson got 7.6% and Green Party Jill Stein got 5.5%. In a two-way matchup, Clinton is up by 3 points — 43.6% to 40.6%. 67% of Trump backers saying they strongly support him, compared with 58% of Clinton supporters who say they strongly back their candidate. Clinton does much better among women — 47% to 37% — but Trump’s lead among men is just as strong at 47% to 32%.

Euro Area Current Account

Eurozone’s current account surplus increased to €23.6 billion in August 2016 from a €20.7 billion a year earlier. If adjusted for seasonal factors, the current account surplus rose to €29.7 billion compared to €27.7 billion in August 2015, as the goods surplus widened to €30.9 billion (from €26.2 billion a year earlier) and the primary income surplus rose to €6.6 billion (from 3.4 billion). Meanwhile, the services surplus narrowed to €4.8 billion (from €5.3 billion) and the secondary income deficit increased to €12.6 billion (from €10.6 billion).

Saudi output went down some, indicating a lack of residual net global demand, as they set prices (via discounts or premiums to benchmarks) and let the market buy all it wants at those prices:

As if our government has any ideas on what we can do anything about this:

U.S. says Russia broke nuclear missile treaty – The U.S. has summoned Russia to a mandatory meeting before a special treaty commission to answer accusations that Moscow has violated a Cold War-era pact that bans the production, maintenance or testing of medium-range missiles, according to U.S. and Western officials. {http://on.mktw.net/2emOBY8}

Fed labor market conditions index, NFIB chart, Oil comment

Posted on October 11, 2016 @ 8:00 pm (Tuesday) by WARREN MOSLER

No one seems to know how much weight the Fed gives to this index:

Highlights

The labor market conditions index came in at minus 2.2 in September, extending its soft trend this cycle.

Definition

The Labor Market Conditions Index is an experimental indicator compiled by the Federal Reserve to track labor market activity. It is a broad composite with 19 components.

Just my imagination that this has been decelerating since the drop in oil capex?

My oil related comments:

Any kind of oil deal with Russia would likely include a price and a quantity. There’s not enough demand for them all to pump flat out, which means they need to set a price and then ‘ration’ who gets to pump how much at that price.

So they probably are discussing how high then can price their oil without triggering excess supply, particularly from the US. And the price has to be specifically defined as either a price in one currency, such as $US, or some kind of basket of currencies, etc.

This kind of comprehensive agreement is a lot more problematic to engineer than a simple output cut.

Meanwhile, Saudis continue as price setter.

This longer term chart shows how low this series is, and note the acceleration during the 2014 shale boom followed by the following deceleration from the collapse of oil prices and oil consequent oil capex that happened about 2 years ago:

China and Russia buying gold

Posted on February 5, 2016 @ 12:00 pm (Friday) by WARREN MOSLER

Seems it’s always a central bank story.

Goes up when they buy, down when they sell.

Furthermore gold buying is supported by how it’s accounted for. That is, it doesn’t count as deficit spending or part of the pubic debt, even though the ‘taxpayer’ has to pay interest on the funds spent, just like any other deficit spending. Gold purchases are accounted for not as an ‘expense’ as ‘normal’ govt spending, but as purchases of an asset that remains on the balance sheet at ‘cost’. And yes, the funds spent provide the economy with ‘that which is needed to pay taxes’ just like any other govt spending, and thereby ‘use up’ aggregate demand (‘fiscal space’) created by taxation and residual savings desires just like any other govt spending.

So it’s a political choice promoted by institutional structure that allows central bankers to buy all the gold they want without the political restrictions of other spending.

China, Russia lead central banks gold buying spree

By Cecilia Jamasmie

Jan 13 — China and Russia added more gold to its reserves in November, leading the latest global central banks buying spree that saw them adding 55 tonnes of the yellow metal to their coffers, up almost 90% from the prior month.

According to the latest World Gold Council’s gold reserve data, released Wednesday, China and Russia were once again the biggest buyers, with 21 tonnes and 22 tonnes added to their respective reserves.

The People’s Bank of China (PBoC) released data last week that showed 19 tonnes were added in December as well. But based on official figures, released last June for the first time since April 2009 and updated monthly ever since, the amount of gold held by the PBOC still only accounts for around 1.7% of its total reserves.

The increased purchases by the world’s sixth largest official sector gold holder could lend support to international prices of the precious metal, say analysts.

China, Russia lead central banks gold buying spree

Despite a jump in prices at the start of the year, gold is still trading close to historic lows. February gold was last up $3.00 at $1,088.50 an ounce, well down from last week’s two-month high of $1,113.10 an ounce, basis February Comex futures.

Housing starts, High end weakness

Posted on November 19, 2015 @ 9:55 am (Thursday) by WARREN MOSLER

Falling off, as previously discussed, particularly multi family, which had been the driver:

Housing Starts

Highlights
Pulled down by a big drop in multi-family homes, housing starts fell a steep 11.0 percent in October to a 1.060 million annualized rate that is far below Econoday’s low estimate. Starts for multi-family homes, which spiked in September following a springtime jump in permits for this component, fell back 25 percent in the month to a 338,000 annualized rate. Single-family starts fell a much less severe 2.4 percent to 722,000.

And there is important good news in this report. Permits are up, rising 4.1 percent to a 1.150 million rate that hits the Econoday consensus. Single-family permits are up 2.4 percent to a 711,000 rate with multi-family up 6.8 percent to 439,000.

Housing completions fell back in October, down 6 percent to a 965,000 rate that reflects lower work in the Northeast and Midwest. Homes under construction rose 0.9 percent to a recovery best 938,000 rate and are up a very strong 16.4 percent year-on-year, pointing, despite the slip in starts, to ongoing strength for construction spending, at least for October.

But the big drop in starts is definitely a negative for the near-term construction outlook, though the rise in permits points to subsequent strength.

Sotheby’s Offers Employees Voluntary Buyouts to Cut Costs

Nov 13 (Bloomberg) — Sotheby’s is offering employees voluntary buyouts to cut costs after a drop in third-quarter revenue grabbed more attention from the company’s investors than its largest ever semiannual auction season.

San Francisco in housing ‘correction’

Nov 5 (CNBC) — San Francisco homes are still some of the priciest in the nation, but sales of those houses are showing significant weakness. September sales were down 19.5 percent in the city from a year ago, according to the California Association of Realtors.

“We’re going through a kind of correction, as we have a lot of new developments being built right now. The supply is definitely on the rise,” said Justin Fichelson, an agent at Climb Real Estate Group in San Francisco. “The market is not going to continue going up like we’ve seen in the past two years, because prices are already high.”

London Mansion Prices Fall 11.5% as Home `Bubble’ May Have Burst

Nov 12 (Bloomberg) — Prices of homes valued at 5 million pounds ($7.6 million) or more fell 11.5 percent on a per square foot basis in the third quarter from a year earlier, according to Richard Barber, a director at broker W.A. Ellis LLP, a unit of Jones Lang LaSalle Inc. Sales volumes across all homes in the best parts of central London dropped 14 percent in the period, the realtor said on Thursday.

“The bubble may already have burst” for the most expensive homes, Barber said. Now, “36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent.”

Luxury-Jet Market Value Seen Slipping for First Time Since 2009

Nov 15 (Bloomberg) — Global long-term spending on private jets is starting to slow for the first time since 2009 as slumping commodity prices sap demand in emerging markets, according to an industry forecast.

Deliveries for the 11 years ending in 2025 will be valued at $270 billion, Honeywell International Inc. said Sunday in its annual survey of the luxury-aircraft market. That’s down 3.6 percent from last year’s comparable projection, and snapped a streak of gains since the last U.S. recession ended.

The decline reflects weakness in Brazil, Russia, India and China, the group known as the BRIC countries, and the impact of political conflicts in the Middle East and Africa, according to Brian Sill, chief of Honeywell’s business and general aviation unit. Delays in some new plane models are also pushing back demand, he said.

Jet shipments will drop 2.6 percent to 9,200 planes, according to Honeywell, whose forecast had predicted fluctuations in deliveries but no drop in the planes’ list value in the post-recession years. Large planes that had spearheaded the recovery are now seeing slower growth.

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

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

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

Housing Starts

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

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

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

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

Still stone cold dead for all practical purposes:

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

European Union : Merchandise Trade

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

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

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

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

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

Saudi discounts altered

Posted on February 6, 2015 @ 4:35 pm (Friday) by WARREN MOSLER

Remember when they reduced some of their discounts I suggested they may be stabilizing prices?

Now they are increasing a discount, indicating they are trying to soften prices?

Saudis Deepen Asia Light-Oil Discount to Low in Market Fight

By Anthony DiPaola and Mark Shenk

Feb 6 — State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks, the company said in an e- mailed statement Thursday. That’s the lowest in at least the 14 years since Bloomberg began gathering data.

“This is further evidence that they are hellbent on protecting their market share in China,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone Thursday. “They are trying to stay competitive in what is the biggest area of growth.”

Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia. China was the world’s second-biggest crude consumer after the U.S. in 2014, according to International Energy Agency data.

Oil prices have collapsed since the Organization of Petroleum Exporting Countries decided to maintain its output target on Nov. 27, fanning speculation that Saudi Arabia and other members were determined to let North American shale drillers and other producers share the burden of reducing an oversupply.

Raised Premium

Brent crude, the benchmark for more than half of the world’s oil, rose as much as $2.31 a barrel, or 4.1 percent, to $58.88 on the London-based ICE Futures Europe exchange and traded at $58.47 at 10:53 a.m. local time. West Texas Intermediate, the U.S. benchmark, rose $1.78 to $52.26 a barrel on the New York Mercantile Exchange.

Saudi Aramco, as the producer is known, cut differentials on each of the four other grades it sells to Asia, its largest market, and raised them to the U.S., northwest Europe and the Mediterranean region, according to Thursday’s statement. The discount on Extra Light crude to Asia also dropped to a low of at least 14 years and Arab Medium was cut to within 10 cents of its record discount for buyers in Asia.

“Asia is still the market that they want to keep, so they are pricing to keep the crude attractive,” Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, said by phone Friday. Saudi Aramco increased pricing to the Mediterranean region where “demand has been good because refining margins are good,” he said.

Refiners and traders in Asia had expected Saudi Aramco to cut Arab Light crude by $1 a barrel, according to the median estimate of eight buyers in a Bloomberg survey this week.

Persian Gulf oil producers sell most of their crude under long-term contracts to refiners. Most of the region’s state oil companies price their oil at a premium or discount, also known as the differential, to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

China Market

Saudi Arabia’s share among the top three suppliers to China fell to 37 percent in December, from 44 percent in October, as the country lost ground to Angola and Russia, according to Julian Lee, an oil strategist for Bloomberg First Word. In the U.S., Saudi Aramco is in contention with Mexico to be the second-largest supplier behind Canada, Lee said.

The kingdom’s state oil producer raised the differentials on all crude it will ship to the U.S. next month by 15 cents a barrel, pushing the premium for Arab Light to 45 cents more than the U.S. Gulf Coast benchmark.

Saudi Aramco took the oil market by surprise when it trimmed its November crude pricing to five-year lows for Asia, signaling the biggest producer in OPEC would defend its market share rather than seek to prop up prices.

“The U.S. used to be the market the Saudis were most concerned about preserving market share in, but that’s no longer the case,” O’Grady said. “China is where they see growth coming from in the decades ahead and the U.S. is also producing a greater share of the oil it needs.”

Saudi Arabia Raises Price of Main Oil Grade for Asian Buyer

Posted on January 6, 2015 @ 10:42 am (Tuesday) by WARREN MOSLER

oil priced in rubles chart

Posted on December 17, 2014 @ 10:05 am (Wednesday) by WARREN MOSLER

Any coincidence that oil priced in rubles hasn’t moved all that much recently?
;)

today’s observations

Posted on September 2, 2014 @ 10:47 am (Tuesday) by WARREN MOSLER

Not much sign of any move towards higher deficits today. Just talk of more bank liquidity, which doesn’t matter, and more to weaken the euro, which doesn’t work either.

Hard to say why the euro has been going down, but it’s not ECB policy per se which, while meant to weaken the euro, instead continues to be ‘strong euro’ biased. So must be portfolios selling euro, maybe in response to Russia’s actions.

“French Prime Minister Manuel Valls called for more action from the ECB to lower the value of the euro.Mr Valls said: “the monetary policy has started to change”. While he called the ECB’s package of measures taken in June a “strong signal,” he also said that “one will have to go even further.”

German Finance Minister Mr Schaeuble said deficit-fueled growth leads to economic decline, signalling discord with Italy and France as euro-area policy makers seek ways to avoid deflation and spur growth. Euro-area countries that pursued austerity policies in return for sovereign bailouts are “doing much better than all the others in Europe,” Schaeuble.

ECB’s Coeure says ready to adjust monetary policy if needed: In an article published in Greek daily Ta Nea, ECB’s Coeure said that ECB’s measures so far, have contributed to stability in the euro zone while its recent decisions have ensured a particularly accommodative direction in monetary policy in the single-currency bloc. “The ECB will provide additional liquidity to banks on the condition that they increase credit directed to the real economy, and it is ready to further adjust the direction of its monetary policy, if needed,” Coeure said (Ta Nea, Reuters) ”

Consumer credit, wholesale trade, productivity and costs

Posted on August 8, 2014 @ 2:07 pm (Friday) by WARREN MOSLER

This has been going the wrong way since the post winter April ‘surge’:

Highlights
Consumer credit rose $17.3 billion in June and was driven once again by the nonrevolving component, which rose $16.3 billion on vehicle financing and also the government’s continued acquisition of student loans from private lenders. The revolving component, which is key for retailers, did rise but not very much, up $0.9 billion following a revised $1.7 billion rise in May that followed a rare surge in this category of $8.8 billion April. Aside from vehicles, consumers remain reluctant to take on new debt.

Growth rate of student loans continues to slow:

Trade numbers resulted in upward Q2 GDP revisions, while today’s inventory report means downward revisions:

Wholesale Trade

Highlights
Wholesale inventories rose 0.3 percent in June, a modest rise in line with a modest 0.2 percent gain in wholesale sales that leaves the stock-to-sales ratio unchanged at a lean 1.17. Activity has been strong in the auto sector with wholesale sales of autos jumping 2.1 percent, following gains of 1.4 percent and 3.1 percent in the prior two months. The gain in sales made for a 0.3 percent draw in wholesale inventories of autos, one that will have to replenished which is a plus for auto production.

Outside of autos, inventory draws are scarce but do include a major 5.3 percent draw in farm products which follows prior consecutive monthly draws of 4.4 percent and 0.4 percent. How much the draws in farm products will be replenished is uncertain given an 8.1 percent drop in wholesale sales for farm products during the month, not to mention current concern over the Russian embargo of US food products.

Turning back to sales, paper products, professional equipment (including computers), lumber, and metals show strong gains, all matched by what are likely desired builds on the inventory side. Weakness in sales, outside of farm products, includes chemicals, hardware, groceries, and apparel, groups all showing on the inventory side what are likely to be unwanted builds.

Outside of autos, this report on net points to soft growth in the wholesale sector during June. Next inventory data will be the business inventories report next Wednesday.

“Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP—wholesale stocks excluding autos—increased 0.4 percent.

A report this week showed stocks of nondurable goods at manufacturers rose far less than the government had assumed in its advance second-quarter gross domestic product estimate published last week.

In that report, the government said inventories contributed 1.66 percentage points to GDP growth, which expanded at a 4.0 percent annual pace.

Wholesale inventories in June were held back by a decline in automobiles and nondurable goods.

Sales at wholesalers rose 0.2 percent after increasing 0.7 percent in May. There were declines in sales of nondurable goods, hardware and apparel.”

Unit labor costs below expectations:

Mosler Economics / Modern Monetary Theory

The Site of Economist Warren Mosler

Category Archives: Russia

Presidential poll, Euro area current account, Saudi output, Russian nukes

Fed labor market conditions index, NFIB chart, Oil comment

China and Russia buying gold

China, Russia lead central banks gold buying spree

Housing starts, High end weakness

Sotheby’s Offers Employees Voluntary Buyouts to Cut Costs

San Francisco in housing ‘correction’

London Mansion Prices Fall 11.5% as Home `Bubble’ May Have Burst

Luxury-Jet Market Value Seen Slipping for First Time Since 2009