More bad news:
Rolling over:
Consensus Outlook
The consensus for November’s index of leading economic indicators is an increase of 0.1 percent in what would follow three straight declines. Reversals for manufacturing and slowing in the labor market have been negatives for this index.
Light vehicle sales peaked a while back:
Been helping to support the $US:
Eurozone Retail Sales Fall Unexpectedly
Retail trade in the Euro Area fell 0.3% in May, following a 0.1% drop in April and missing expectations of a 0.3% growth, as sales declined for all main categories. Among the bloc’s largest economies, Germany’s retail trade decreased for the second month, while gains were recorded in France and Spain. Year-on-year, retail sales rose 1.3%, also missing forecasts of 1.6%.
Nothing here to get the Fed concerned about inflation:
Not good, less then expected and excluding autos, a ‘core reading’ even worse. Seems to me that perhaps the higher gas prices that caused the increases over the last couple of month’s have taken their toll on other spending. And at the macro level, without an increase in either private or public deficit spending top line growth won’t be there:
Highlights
Consumers spent their money on vehicles in July but not on much else as retail sales came in unchanged. When excluding autos, retail sales slipped 0.3 percent for the first decline in this reading since March. When excluding both autos and gasoline, the latter falling on lower prices, retail sales improve slightly but are still down 0.1 percent for the first decline since January. This core reading is telling and will likely define total consumer spending (which includes services) for the month of July.The big plus that saves the report is the 1.1 percent monthly surge in motor vehicle sales, one that follows a 0.5 percent gain in June. Spending elsewhere may be weak, but spending on vehicles is a signal of consumer confidence and strength. Elsewhere, positives are hard to find.
Supermarket sales fell in the month as did building materials. Sporting goods were especially weak as were restaurant sales, the latter a discretionary category that speaks to the month’s lack of non-vehicle punch. On the plus side once again are sales at nonstore retailers which, driven by ecommerce, jumped a sizable 1.3 percent for a second straight month and follows even larger gains in prior months. Sales at gasoline stations, reflecting lower prices, swung 2.7 percent lower following a 2.2 percent gain in the prior month.
The consumer is the driver of the economy and July’s weakness for retail sales makes for a slow start to the third quarter and will ease talk for now of a September FOMC rate hike. Upward revisions are footnotes in the report with June now at plus 0.8 percent, up 2 tenths from the initial reading which will pull GDP revision estimates for the second quarter higher.
You can see how retail sales growth peaked when oil capex collapsed at the end of 2014,
and that spending has yet to be ‘replaced’:
Business inventories corrected some due to what I think was a one time jump in auto sales (which remain down year over year). However inventories still look way too high to me and so the liquidation is likely to continue into q3. And note that the inventory growth began when oil capex collapsed:
This was also below expectations and doesn’t look to be recovering to prior levels:
Highlights
Consumer sentiment is flat, at 90.4 for the August flash for only a 4 tenths gain. Components are mixed with expectations higher, at 80.3 for a 3.5 point gain, but current conditions lower, down 2.9 points to 106.1. The gain in expectations points to rising confidence in the jobs outlook but the decline in current conditions hints at a second month of slowing for consumer spending.
This too peaked when oil capex collapsed:
Saudi oil sales have moved up a bit but are still far below their presumed output availability of 12 million bpd. So it’s still a matter of setting price, in this case via their posted discounts to benchmarks:
German GDP grows much faster than expected
By Todd Buell
Aug 12 (MarketWatch) — Germany’s economy grew at a much faster pace than expected in the second quarter. In quarterly adjusted terms, Europe’s largest economy and economic powerhouse grew by 0.4%. The statistics office said that growth came primarily from foreign trade. Quarterly growth in the first quarter was 0.7%.
Euro Area GDP Growth Rate
The Eurozone’s economy expanded 0.3 percent on quarter in the three months to June 2016 slowing from a 0.6 percent growth in the previous period and matching preliminary reading, second estimate showed. Among the largest economies of the Euro Area, GDP growth slowed in Germany and Spain; while growth in France and Italy was flat.
This just keeps going up, which fundamentally tends to drive up the euro which tends to continue to be subject to said upward pressure until the trade picture reverses:
Euro Area Balance of Trade
The Eurozone trade surplus increased to €23.6 billion in November of 2015 compared to a €20.2 billion surplus a year earlier. Exports recorded the highest annual gain in four months and imports rebounded.
Potential showdown that could drive up Spanish rates:
Guindos Ditches Pledge on Spain Deficit to Push Growth
By Maria Tadeo
Jan 14 (Bloomberg) — Spanish finance chief Luis de Guindos ditched his promise to meet European Union budget goals saying shoring up economic growth is more important for his country’s future.
De Guindos said worrying about whether the budget deficit comes in a few tenths of a percentage point above the country’s 4.2 percent target for 2015 would be a distraction from the fundamental challenge of protecting the economic recovery.
“What is important is to maintain the pace of growth of the Spanish economy,” he told reporters on Thursday before meeting euro-area finance ministers for the first time since December’s general election left the parliament divided between four major parties.
“The biggest risk for budget policy is that the Spanish economy slows down,” de Guindos added.
Spain risks being drawn into a clash with the European Commission which has been warning since October that the spending plans acting Prime Minister Mariano Rajoy pushed through ahead of the election don’t do enough to curb the currency union’s biggest budget shortfall. Eurogroup chief Jeroen Dijsselbloem, who saw off a challenge from de Guindos to hang on to his job last year, said this month that Spain won’t be allowed any more flexibility over its target, according to El Pais newspaper.
Speaking to reporters on Thursday, Dijsselbloem said Brussels would “wait for the outcome of the domestic political process,” before taking further action.
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.
How Have Prime-Age Workers in School Affected the Labor Market?
Just one of several possible factors keeping the participation rate down and the reported unemployment rate lower than otherwise, which in my narrative are the consequences of low aggregate demand/the federal deficit is too small, etc.
From the St. Louis Fed:
In the first scenario, we kept the increase in schooling of the population 16-21 that has occurred over the past 10 years. But we kept the share of the population 22 and older that attends school in 2015 at its 2005 levels. In this scenario, the May unemployment rate would have been 6.6 percent instead of the 5.5 percent observed that month.
And this:
How Long Until “Slack” Is Out of the Labor Market?
Presentation in Vila-real:
Fyi, we will be in Spain next week.
Here are some of the details:
There is a newly formed MMT Group in Spain called APEEP which stands for “Asociación para el Pleno Empleo y la Estabilidad de Precios”.
In an effort to bring MMT into the political debate in Spain, they will be hosting me for a presentation of the Spanish translation of “The Seven Deadly Innocent Frauds of Economic Policy”, starting with a presentation in Madrid on the 14th of September, Valencia on the 15th of September, and Vila-real on the 17th of September.
Here are links for the events, including time/date/location
14th September Madrid
15th September Valencia
17th September VilaRealAnd this is the press release for the events containing more details.
Also:
Asociación Para el Pleno Empleo y la Estabilidad de Precios (APEEP) (Association for Full Employment and Price Stability), is a non-profit organization devoted to raising awareness and disseminating Modern Monetary Theory amongst the Spanish public. APEEP believes that full employment and price stability are compatible if public policy is conducted within an MMT framework. The current economic crisis within the Eurozone highlights the need for a Post Keynesian and MMT approach to public policy.
You’d think by now word would be out it’s just a placebo, but ancient beliefs tend to linger on…
Not good- sales down and inventories remain elevated:
United States : Wholesale Trade
Highlights
Factory inventories held stable in July as did wholesale inventories, down 0.1 percent against a 0.3 percent decline in sales that leaves the stock-to-sales ratio unchanged at 1.30. Wholesale inventories look light for machinery and apparel but heavy for farm products and metals.
The nation’s inventories are heavier than they were last year which may limit future production and hiring. Next data on inventories will be the business inventories report on Tuesday.
MONTHLY WHOLESALE TRADE: SALES AND INVENTORIES July 2015 Sales. The U.S. Census Bureau announced today that July 2015 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $449.5 billion, down 0.3 percent (+/-0.5)* from the revised June level and were down 4.2 percent (+/-1.4%) from the July 2014 level. The June preliminary estimate was revised upward $1.0 billion or 0.2 percent.
This chart is now looking a lot like prior recessions:
Inventories/Sales Ratio. The July inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.30. The July 2014 ratio was 1.19.
Great Britain : Industrial Production
France : Industrial Production
United States : Import and Export Prices
None of this is considered the ‘some improvement’ Chairman Yellen was looking for going into the Fed meeting next week…
France : PMI Composite
Highlights
French private sector activity in August expanded at a significantly slower pace than indicated in the flash report according to the final PMI data for the month. At just 50.2, a 7-month low, the key composite output index was revised down an unusually large 1.1 points versus its preliminary reading to stand 1.3 points below its final July mark and close enough to 50 to signal a period of virtual stagnation in economic activity.
The flash service sector PMI was reduced by 1.2 points to 50.6, also a 7-month trough. As previously indicated, what growth there was reflected stronger new orders and rising backlogs although the growth rate of both hit multi-month lows. Certainly firms were not confident enough to add to headcount although, rather surprisingly, business expectations still climbed to their highest level since March 2012.
Meantime, another increase in input costs saw margins squeezed still further as service provider charges continued to fall.
The final PMI figures suggest that the French economy was really struggling last month. Total output was only flat in the April-June period and the survey data so far suggest little better this quarter.
Germany : PMI Composite
Highlights
August’s flash composite output index was revised up a full point to 55.0 in the final data for the month. The new level was 1.3 points above July’s final reading, a 5-month high and strong enough to indicate a solid performance by the economy in mid-quarter.
The adjustment to the composite output gauge came courtesy of the service sector for which the preliminary PMI was revised some 1.3 points firmer to 54.9, also its best reading in five months. New orders rose strongly, backlogs were up and employment posted its largest gain since February. Against this backdrop, business expectations for the year ahead climbed to a 4-month peak.
What little progress they continue to make will evaporate with a strong euro, which I see as inevitable given their trade surplus:
European Union : PMI Composite
Highlights
The final composite output index for August weighed in at 54.3, a couple of ticks stronger than its flash estimate and 0.4 points above its final July mark.
The flash services PMI was nudged just 0.1 points higher but, at 54.4, now matches June’s 4-year high. Increased output was supported by rising new orders and a sizeable increase in backlogs which, in turn, helped to ensure that employment growth remained respectably buoyant. Firms also became more optimistic about the economic outlook and business expectations for the year ahead climbed higher following July’s 7-month low. Meantime, inflation developments were mixed. Hence, although higher wages and salaries prompted another rise in input costs, margins were squeezed further as service provider charges declined for a remarkable forty-fifth consecutive month.
Regionally, the best performer in terms of the composite output measure was Ireland (59.7) ahead of Spain (58.8) and Italy (55.0 and a 53-month high). Germany (55.0) also had a good month but France (50.2 and a 7-month low) all but stagnated and remains a real problem for Eurozone economic growth.
The final PMI figures suggest that the Eurozone economy is on course for something close to a 0.4 percent quarterly growth rate in the current period, a slight improvement on the second quarter’s 0.3 percent rate. While this would be good news, faster rates of expansion will likely be needed if inflation is to meet the ECB’s near-2 percent target over the central bank’s 2-year policy horizon.
European Union : Retail Sales
Highlights
Retail sales were slightly weaker than expected in August but with July’s decline more than halved, annual growth of purchases still comfortably exceeded the market consensus. Volumes were 0.4 percent firmer on the month after a 0.2 percent drop in June for a workday adjusted yearly rise of 2.7 percent, up from 1.7 percent last time.
July’s monthly rebound was led by a 0.8 percent jump in purchases of auto fuel and without this, non-food sales were just 0.1 percent higher having only stagnated in June. Food recorded a 0.2 percent advance. As a result, overall sales in July were 0.3 percent above their average level in the second quarter when they also increased 0.3 percent.
Regionally the advance was dominated by a 1.4 percent monthly jump in Germany. Spain (0.6 percent) also made a positive contribution but France (minus 0.2 percent) saw its first decline since March. Elsewhere, there were solid gains in Estonia (2.5 percent), Malta and Portugal (both 1.1 percent) but Slovakia (minus 0.2 percent) struggled.
Growth of retail sales has slowed in recent months, in keeping with signs that consumer confidence may have peaked, at least for now. According to the latest EU Commission survey, household morale improved slightly in August but still registered its second weakest reading since January. Consumption may continue to rise over coming months but the signs are that its contribution to real GDP growth will be only limited.
I’ve been suggesting exports would slow more than what’s been reported so far, though year over year numbers are in decline. It may show up in revisions down the road:
International Trade
Highlights
The nation’s trade gap narrowed to a nearly as expected $41.9 billion in July following an upward revised gap of $45.2 billion in June (initially $43.8 billion). The improvement reflects a monthly rise of 0.4 percent in exports, which were led by autos, and a 1.1 percent contraction in imports that reflected a decline in pharmaceutical preparations and cell phones which helped offset a monthly rise in imports of oil where prices were higher in July.
Aside from autos, exports of industrial supplies, specifically nonmonetary gold, were strong in July while exports of capital goods also expanded. This helped offset a monthly decline in exports of civilian aircraft and consumer goods. Turning again to imports, other details include a rise in capital goods in what is the latest sign of life for business investment.
By nation, the gap with China widened slightly, to an unadjusted $31.6 billion in the month, while the gap with the EU widened more substantially to $15.2 billion, again unadjusted which makes month-to-month conclusions difficult. Gaps with Mexico and Canada both narrowed.
This report is another positive start to the quarter and will lift early third-quarter GDP estimates. But these will be cautious estimates as recent market turbulence pushes back conclusions and will make August’s trade data especially revealing.
Lower but still indicating ok expansion:
Saudi price setting adjustment:
Aramco Cuts All October Crude Pricing to U.S., Northwest Europe
By Anthony DiPaola
Sept 3 (Bloomberg) — Saudi Arabia, the world’s largest crude exporter, cut pricing for all October oil sales to the U.S. and Northwest Europe and reduced the premium on its main Light grade to Asia by 30 cents a barrel.
State-owned Saudi Arabian Oil Co. cut its official selling price for October sales to Asia of Arab Light crude to 10 cents a barrel more than the regional benchmark, the company said in an e-mailed statement. The discount for Medium grade crude for buyers in Asia widened 50 cents to $1.30 a barrel less than the benchmark.
Brent, a global oil benchmark, fell almost 50 percent last year as Saudi Arabia and other OPEC members chose to protect market share over cutting output to boost prices. Brent fell from over $100 a barrel in July 2014 to less than half that six months later. It traded at about $50 on Thursday.
The Organization of Petroleum Exporting Countries led by Saudi Arabia decided on June 5 to keep its production target unchanged to force higher-cost producers such as U.S. shale companies to cut back. The producer group has exceeded its target of 30 million barrels a day since May 2014.
Saudi Arabia reduced production in August to 10.5 million barrels a day, the first decline this year, according to data compiled by Bloomberg.
While still historically very low, purchase apps are now way up over last year’s particularly depressed levels. Some are replacing all cash buyers, but the increase is also in line with increased existing home sales.
While new home sales were soft, turnover of existing homes has been increasing, and while not directly increasing GDP, existing home sales are generally associated with purchases of furniture, appliances, and other home improvements, and of course real estate commissions.
MBA Mortgage Applications
Highlights
A drop in rates helped boost mortgage activity in the July 31 week both for home purchases, up 3.0 percent in the week, and for refinancing which rose 6.0 percent. The strength in purchase applications, which are up 23 percent vs this time last year, is a positive indication for home sales. The average 30-year fixed mortgage for conforming loans ($417,000 or less) fell 4 basis points in the week to 4.13 percent.
EU retail sales
European Union : Retail Sales
Highlights
Retail sales were surprisingly weak in June. A 0.6 percent monthly fall was the first decline since March and followed a slightly smaller revised 0.1 percent rise in May. Annual workday adjusted growth of purchases was 1.2 percent, down from 2.6 percent in both mid-quarter and April.
June’s setback was primarily attributable to a 0.8 percent monthly drop in sales of food, drink and tobacco. Non-food products, excluding auto fuel, were off only 0.2 percent, although even this was enough to wipe out May’s entire rise. Fuel purchases were flat on the month after a 0.2 percent dip last time.
Regionally, headline weakness was dominated by a 2.3 percent monthly slump in Germany although Spain (minus 0.4 percent) also struggled. More promisingly, France (0.1 percent) saw sales increase for a third consecutive period and there were decent gains in Austria (1.3 percent), Belgium, Latvia and Lithuania (all 0.8 percent) and Estonia (0.7 percent).
The June data make for a second quarter increase in Eurozone retail sales of only 0.3 percent, less than a third of the rate achieved in the previous period and just half of the fourth quarter pace. This does not bode well for real GDP growth. Moreover, the EU Commission’s economic sentiment survey found consumer sentiment falling in July so it may be that the third quarter got off to a less than robust start too. That said, Greek developments are clearly having some impact and a more concrete resolution of the crisis there might be enough to get households happy to spend again.
Big drop in Federal withholding:
Lower than expected, and June revised down a bit as well, all in line with many recent surveys:
ADP Employment Report
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but it has moderated since the beginning of the year. Layoffs in the energy industry and weaker job gains in manufacturing are behind the slowdown. Nonetheless, even at this slower pace of growth, the labor market is fast approaching full employment.”
Read more at Calculated Risk Blog
About as expected with last month’s revision:
United States : International Trade
Seems the drop in oil prices has been offset by non oil imports, as the trade deficit is looking somewhat wider:
Both exports and imports are down which indicates a weakening global economy:
The chart shows the trend of the non petroleum deficit has resumed it’s increase:
The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products (wild swings earlier this year were due to West Coast port slowdown).
Read more at Calculated Risk Blog
Didn’t know we exported any consumer goods!
;)
Exports (Exhibits 3, 6, and 7) Exports of goods decreased $0.2 billion to $127.6 billion in June. Exports of goods on a Census basis decreased $0.5 billion. • Capital goods decreased $0.8 billion. o Telecommunications equipment decreased $0.3 billion. • Industrial supplies and materials decreased $0.6 billion. o Finished metal shapes decreased $0.3 billion. Consumer goods increased $0.8 billion.
Stocks up because jobs were weak and a fed spokesman thought the economy was too weak for a rate hike. ;)
Futures jump on ADP miss, Powell comments
By Jenny Cosgrave
August 5 (CNBC)
