Category Archives: Trade

Lumber Prices, Small Business Index, Import Export Prices, Redbook Retail Sales, Wholesale Trade

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Along with most indicators, this one turned south as oil capex collapsed:

Update: Framing Lumber Prices down Sharply Year-over-year

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn’t increase as much early in 2014 (more supply, smaller “surge” in demand).

In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year. Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.
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There were hopes that the last tic up was the beginning of a reversal but now seems the downtrend since the oil capex collapse may still be in progress:
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The deflationary forces continue:

Import and Export Prices
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No sign of consumer strength here:
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Inventories remain high going into Q4:

Wholesale Trade
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Highlights
Wholesale inventories rose 0.5 percent in September following an upward revised 0.3 percent gain in August. The September build appears to be intentional based on a 0.5 percent rise in September sales that keeps the stock-to-sales ratio for wholesalers unchanged at 1.31.

Inventories of autos rose 2.3 percent as wholesalers try to keep up with what is very strong retail demand for autos. Excluding autos, the stock-to-sales wholesale ratio is unchanged at 1.27.

Inventory draws reflecting gains in sales include computer equipment, electrical goods, and apparel. Wholesale inventories of furniture rose on a swing lower for sales.

Inventories in general are heavy and businesses, waiting for a pick up in sales, are being careful to keep them in check. Today’s results are in line with Commerce Department assumptions and should have little bearing on third-quarter GDP revisions. Watch Friday for the business inventories report which will include data from the retail sector.

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Sales looking like recession:
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Autos are just holding their own:
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Saudi Output, Mtg Purchase Apps, NY ISM, ADP, International Trade, PMI services, ISM Non-manufacturing, Motor Vehicle Sales

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If the Saudis are looking to pump more seems they have to continue to lower prices:
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Sure looks like housing still can’t get out of its own way:

MBA Mortgage Applications
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Highlights
Mortgage applications are settling down after spiking and dipping sharply in volatility tied to new disclosure rules put in place last month. Both the purchase and refinance indexes fell an incremental 1.0 percent in the October 30 week with the purchase index up a very solid 20 percent year-on-year. Rates were mixed in the week with the average 30-year fixed mortgage for conforming loans ($417,000 or lower) up 3 basis points to 4.01 percent.

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NY ISM company specific business report:
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Still working it’s way lower. This is a forecast for Friday’s BLS payroll number:
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This is a September report. I expect a drop in exports for October and an increase in imports as oil imports increase in line with domestic production declines:

International Trade
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Highlights
September’s trade deficit came in very near expectations, at $40.8 billion vs the Econoday estimate for $41.1 billion. August’s unusually large deficit is revised slightly lower to $48.0 billion. September’s goods gap came in at $60.3 billion vs last week’s advance estimate of $58.6 billion. This is offset in part by a $19.5 billion trade surplus in services that is slightly smaller than the August surplus.

Exports were solid in the month, up 1.6 percent and led by consumer goods that include artwork and jewelry. Exports of capital goods were also higher, all helping to offset a decline in exports of industrial supplies. Imports fell 1.8 percent with wide declines led by industrial supplies including crude oil followed by capital goods then autos.

The gain in exports is a positive of course and comes despite soft foreign demand which, for U.S. goods and services, is made softer by strength in the dollar. The dip in imports is good for the GDP calculation but isn’t a positive indication for domestic demand, especially given what is a favorable effect from the strong dollar.
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PMI Services Index
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Highlights
Growth in Markit’s U.S. service sector sample is slowing slightly, coming in at a final 54.8 vs the flash reading of 54.4 and vs September’s final reading of 55.1. Details are soft with growth in new business at its slowest pace since January and with backlogs down for a third straight month.

Weakness in orders in turn is pulling down 12-month expectations which are near July’s three-year low. Employment is described as modest with hiring at its slowest pace since February. Price readings are mute.

Despite the soft details, the service sector is still humming along solidly and helping to offset weakness in manufacturing.

The overall weakness in the economy began with the oil price and oil capex collapse about a year ago, and while this indicator is off it’s July highs, it seems to be holding firm, at least for now:

ISM Non-Mfg Index
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Highlights
ISM’s non-manufacturing index continues its searing pace, rising nearly 2-1/2 points to a much higher-than-expected 59.1 which exceeds Econoday’s high-end forecast by more than 1-1/2 points. Orders are robust with new orders up more than 5 points to 62.0 and backlogs unchanged at 54.5 which is very strong for this reading. Export orders are also strong, up 2 points to 54.5 and underscoring the strength of the nation’s services surplus as seen in this morning international trade report. But the highlight of the report, ahead of Friday’s employment data, is a nearly 1 point rise in the employment index to 59.2 which is one of the very strongest readings in the history of the report.

Strength is distributed broadly across industries led by transportation & warehousing, health care & social assistance, and professional, scientific & technical services, the latter a center of strength for foreign demand. The two non-service industries covered in this report are mixed with construction rising but mining, hit by low commodity prices, the only industry to report contraction in the month.

Many readings in this report are near records and follow similar readings in July and August which were also unusually strong. This report has been a consistent upside outlier but it undeniably hints at strength for employment and at a December FOMC rate hike.
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Good sales month but check out the import numbers, which don’t count for GDP:

Motor Vehicle Sales
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Highlights
Consumers really showed up in October, at least when it came to dealerships as vehicle sales held unchanged at an 18.2 million annual rate, a 12-year high and outside the Econoday top-end estimate. Import sales, specifically sales of imported light trucks, were the key to October, rising to a 3.7 million rate from 3.5 million and making up for a downtick in sales of North American-made vehicles which slipped to 14.5 from 14.7 million. Still, the 14.5 million rate is also outside the top-end estimate.

These data offer convincing evidence of consumer strength and pull forward, at least to a degree, the Fed’s rate liftoff. But the results, because they do no better than match September, do not quite point to a third straight gain for the motor vehicle component of the October retail sales report.

Domestic sales fell some:
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Crude Oil, Euro, Opec Spending Cuts

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So when the Saudis widened their discounts on October 5 it looked to me like they were inducing a downward price spiral that would continue until either they altered pricing or their output increased to full capacity so they couldn’t sell any more at those discounts. So far neither has happened:
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Fundamentally the euro also looks very strong to me, with a large and rising trade surplus vs a rising trade deficit for the US, and negative rates and QE ultimately further remove euro income from the economy likewise fundamentally making it stronger, while higher rates ultimately do the reverse. And deflation *is* a stronger currency, and inflation *is* a weaker currency. Yet the euro has most recently been moving lower on threats from Draghi of lower rates and more QE. So portfolio type selling, until exhausted, continues to dominate even as the fundamentals continue to improve. And there is only one portfolio that can sell indefinitely, and that’s the ECB. And I’ve been assured by all I’ve spoken to that the ECB is not selling euro:
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It’s not just OPEC, but most entities with oil related income seem to have only partially cut back on spending as prices collapsed, perhaps ‘betting’ on a price recovery. This includes US states with oil and gas revenues, oil companies, and individuals collecting royalty checks. So seems there’s lots more to go:

OPEC Moves to Rein in Costs Amid Oil Price Slump

By Benoit Faucon

Nov 3 (WSJ) — The Organization of the Petroleum Exporting Countries is moving to rein in costs as its members struggle to pay their dues amid a protracted period of low oil prices, OPEC officials said. The producers’ group has delayed new hires, reduced training sessions for staff and scaled back travel. Staff-level OPEC officials are meeting this week in Vienna to discuss adjusting spending at the secretariat, the organization’s central body, officials said. Other topics over three days of talks ending Wednesday include the group’s long-term strategy report, they said.

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Draghi Comments, Global Comments

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ECB will do what is needed to keep inflation target on track: Draghi

By Stephen Jewkes

Oct 31 (Reuters) — “If we are convinced that our medium-term inflation target is at risk, we will take the necessary actions,” ECB president Draghi told Il Sole 24 Ore. “We will see whether a further stimulus is necessary. This is an open question,” he said, adding it would take longer than was foreseen in March to return to price stability. Draghi said inflation in the euro zone was expected to remain close to zero, if not negative, at least until the beginning of next year. “From mid-2016 to the end of 2017, also due to the delayed effect of the depreciation in the exchange rate, we expect inflation to increase gradually,” he said.

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Operating conditions deteriorate at a slower pace in October

Nov 2 (Markit) — The China PMI posted 48.3 in October, up from 47.2 in September. Total new business placed at Chinese goods producers declined for the fourth month in a row in October. That said, the rate contraction eased since September’s recent record and was only modest. Softer domestic demand appeared to be a key factor weighing on overall new work as new export business increased for the first time since June, albeit marginally. Nonetheless, a further decline in overall new orders led firms to cut their production schedules again in October.

Weakest deterioration in business conditions since May

Nov 2 (Markit) — The headline Taiwan Manufacturing PMI rose from 46.9 in September to 47.8 in October. Production at manufacturing companies in Taiwan continued to decline in October, as has been the case in each month since April. However, the rate of contraction eased further from August’s 35- month record to the slowest since May. Companies that cut output generally attributed this to poor economic conditions and fewer new orders. The latter was highlighted by a further fall in total new work in October. As was the case with output, however, the rate of reduction was the weakest seen in five months.

Manufacturing conditions deteriorate at weak pace

Nov 2 (Markit) — The South Korean manufacturing PMI posted at 49.1, down slightly from 49.2 in September. Production at South Korean manufacturers declined for the eighth successive month in October. According to anecdotal evidence, global economic uncertainty and poor demand conditions contributed to the latest fall in output. Supporting the fall in output was a decline in total new orders during the month. A number of panellists mentioned unstable economic conditions and a decline in sales from both domestic and international clients as factors behind the latest contraction.

S.Korea Oct exports post worst drop in over 6 yrs as global demand sags

Oct 31 (Reuters) — The trade ministry attributed the declines mainly to a sharp fall in ship contracts and low oil prices. Exports fell 15.8 percent on-year to $43.5 billion in October, their 10th straight month of declines and the sharpest fall since August 2009. Imports slumped 16.6 percent to $36.8 billion. The trade surplus fell to $6.7 billion in October from a revised $8.9 billion in September. The slump in exports was partially expected by economists as South Korea posted a record high in shipments last year.

Growth of manufacturing production wanes further

Nov 2 (Markit) — Posting a 22-month low of 50.7 in October (September: 51.2), the seasonally adjusted Nikkei India Manufacturing PMI waned. Output growth eased in October on the back of a slower increase in new orders. Rates of expansion in both production and order books were the weakest in their current 24-month sequences of growth, with panellists reporting challenging economic conditions and a reluctance among clients to commit to new projects. New business from abroad placed with Indian manufacturers rose for the twenty-fifth straight month in October.

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US Trade

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This is just for ‘goods’ but seems to be counter to all other releases reporting weak exports, but it has been zig zagging it’s way lower and August was particularly weak. And note the weakness in car imports:

International trade in goods
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Highlights
September reversed August’s outsized goods trade gap, coming in at $58.6 billion vs $67.2 billion. Exports jumped 3.1 percent following August’s 3.2 percent decline with wide gains in consumer goods, autos, industrial supplies and capital goods. Imports fell 2.5 percent following the prior month’s 2.2 percent gain. Decreases are wide including industrial supplies, capital goods, autos and consumer goods. The results do point to slowing demand but, because imports are counted as a subtraction in the national accounts, they should nevertheless give a boost to third-quarter GDP estimates.

And this typical commentary from today on why the Fed isn’t hiking:

The decision comes amid multiple data points that show a weakening in the economy, particularly in job gains and exports. Inflation measures the Fed follows also reflect little in the way of wage and price pressures, while economists are anticipating a muted holiday shopping season.

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Euro Trade Surplus, Euro Inflation

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Trade surplus still trending higher along with deflation both make the euro ‘harder to get’ and ‘more valuable’:

European Union : Merchandise Trade
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Highlights
The seasonally adjusted merchandise trade balance returned a E19.8 billion surplus in August after an unrevised E22.4 billion excess in July. This was the least black ink since March. The unadjusted surplus was E11.2 billion, up from E7.4 billion in August 2014.

The headline reduction reflected mainly a 1.3 percent monthly fall in exports to E169.5 billion, their second successive decline and their lowest level since February. Imports were up 0.2 percent at E149.7 billion, only partially reversing July’s fall. Compared with a year ago, exports now show an unadjusted gain of 6.0 percent and imports a rise of 3.0 percent.

The average surplus in July/August was E21.1B, a drop of only 1.4 percent from the second quarter average. This is probably indicative of, at best, a much smaller contribution from total net exports to third quarter real GDP growth than the 0.3 percentage point boost provided in April-June. Further reason for being cautious about the speed of the Eurozone’s economic recovery.
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Sea Container Counts, LA Port Traffic

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September 2015 Sea Container Counts Show Trade Recession Continues

By Steve Hansen

Oct 15 — The data for this series continues to be less than spectacular – and both imports and exports are in contraction. The year-to-date volumes are contracting for both exports and imports. We can safely say trade is in a recession.

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Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

Imports were down 6% year-over-year in September; exports were down 7% year-over-year.

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

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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.
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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

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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:
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China trade, WRKO interview

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Total trade is down, but the surplus is still high and holding, which ultimately supports the currency:

China : Merchandise Trade Balance
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Highlights
Every month China’s trade data are reported in both the renminbi and U.S. dollars by the National Bureau of Statistics. The renminbi report comes out first, followed about an hour later by the more closely-watched U.S. dollar report. Since the August 11 devaluation of the renminbi there is a wider discrepancy between the two sets of data and it has taken on added significance.

September imports, in renminbi terms, fell 17.7 percent from a year ago after dropping 14.3 percent in August. This is the 11th consecutive decline and the worst pace since May. But, exports fell just 1.1 percent, holding up much better than expected. This is third straight decline and points to some stabilization. As a result of weakening imports but improving exports, the trade surplus surged to a record high. The surplus was Rmb376 billion. That was almost 30 percent higher than the August surplus.

Low commodity prices, compounded by deteriorating domestic demand, are cutting the import bill. Exports have performed comparatively better but are also weak and are falling in year-on-year terms.

The trade surplus in U.S. dollar terms was $60.3 billion. On the year, exports were down a less than anticipated 3.7 percent while imports plunged 20.4 percent.
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Short interview on recession possibility:

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German Trade, Japan

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

Germany : Merchandise Trade
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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
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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.

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