Category Archives: Uncategorized

Philly Fed, Norway, Current account, JOLTS, Euro

Posted on by

A nice positive print that hopefully signals a turn around, but I need to see at least one more before taking it seriously, as volatility is common with this series:
er-3-17-1
More negative than expected means a downward adjustment for GDP, as do downward revisions of prior prints:

Current Account
er-3-17-2
Highlights
The nation’s current account deficit narrowed in the fourth quarter to $125.3 billion from a revised third-quarter deficit of $129.9 billion. The improvement reflects a smaller trade deficit for goods and a larger trade surplus for services. Balances on income were neutral.

The current account as a percentage of GDP slipped 1 tenth from the third quarter to a very respectable 2.8 percent. For 2015 as a whole, the current account deficit totaled $484.1 billion, equal to 2.7 percent of GDP and up from $389.5 billion and an even lower 2.2 percent of GDP in full-year 2014.

Big downward revision to last month makes current month prints suspect at least until the first revision.

And the chart looks like it may have crested:

JOLTS
er-3-17-3
Highlights
In a mixed report, job openings surged in January to 5.541 million from, however, a sharply downward revised 5.281 million in December (5.607 million initially reported). The quits rate, which jumped in December, fell back a sharp 2 tenths to 2.0 percent and points to less confidence among workers to shift jobs. Despite the downward revision and despite the drop in the quits rate, the reading for January job openings, which in percentage terms is at 3.7 percent for a 1 tenth gain, is a positive for the jobs outlook.

er-3-17-4

Norway’s central bank on Thursday cut its key interest rate to an all-time low of 0.5 percent from 0.75 percent, and raised the prospect of a move into negative territory.

The bank warned that should the Norwegian economy be exposed to further shocks, the possibility of negative rates could not be excluded.

“We have experience from other countries that it’s possible to go beyond the zero lower bound…if necessary, we have extended room for maneuver,” central bank governor Øystein Olsen told CNBC.

So if the euro area current account surplus trade flows have finally overtaken CB and other portfolio selling and the euro keeps going up and cuts into net exports, things could get highly problematic very quickly:
er-3-17-5

Share

Rail traffic, Restaurant index, Import and export prices

Posted on by

Rail Week Ending 06 March 2016: Worse Than Last Week

Week 9 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic continued to improve year-over-year, which accounts for approximately half of movements but the weekly railcar counts remained in contraction. Relatively speaking, this week was worse than last week, and the improvement seen last week is fading.
er-3-11-1
er-3-11-2
er-3-11-3

Up a bit in January:
er-3-11-4
Deflationary forces continue:
er-3-11-5

Share

Commercial real estate, Restaurant index

Posted on by

U.S. Commercial Property Prices Drop for First Time in Six Years

By Kara Wetzel

March 7 (Bloomberg)

Values fell 0.3% in January from prior month, Moody’s says.

Decline is `significant milestone’ showing shift in sentiment

U.S. commercial real estate prices dropped in January for the first time since 2010, a sign of weakening demand by investors after a six-year rally that pushed values to records.

The Moody/RCA Commercial Property Price Index slipped 0.3 percent from December, Moody’s Investors Service said in a statement Monday. The decline was led by office and industrial buildings, which each had a price drop of more than 1 percent.

“This is a significant milestone that signals that a shift in sentiment among commercial-property investors is under way,” Moody’s said in the statement.

Now Coming to the Commercial-Property Market: Defaults

March 8 (WSJ) — New signs of weakness are surfacing in the commercial-property market, ending a half-decade run of improvement with steadily climbing values. Broader market volatility has caused lenders who sell off their loans via bonds known as commercial mortgage-backed securities to grow wary. While the segment made about $100 billion in loans last year, it has come to a virtual halt today, lending executives said. If that continues, it will become more difficult for landlords who took out 10-year loans in 2006 to refinance today.

er-3-9-3

Share

NFIB index, Redbook retail sales

Posted on by

Tough to give this a positive spin…

And note the downward slope of the chart, as weakness continues to spread from oil capex to the rest of the economy:

NFIB Small Business Optimism Index
er-3-8-1
Highlights
The small business optimism index slipped 1 point in February to 92.9, a 2-year low that reflects incremental declines across six of 10 components. The report’s two employment components both inched 1 point lower with plans to increase employment still at a positive reading of 10 and job openings hard to fill still at a very strong 28 which leads all components. Earnings trends, however, are very weak, down 3 points to minus 21 and reflecting what the report cites as higher labor costs that are not being passed through to selling prices. Sales expectations also fell 3 points but are doing better than earnings which are at the zero level. Weak earnings and sales are negatives for business investment with plans for capital outlays and expansion intentions both down 2 points but with both readings still strongly positive at 23 and 8 respectively. Underlying strength for business investment and employment, however, is not likely to hold up for very long given weakness in earnings and sales.

Below levels of the prior recession:
er-3-8-2
er-3-8-3

Share

Consumer Credit, Lumber prices, Inventories

Posted on by

Another weak number, and the series was revised as well. And for GDP to grow the same as last year, all the ‘pieces’ have to grow the same, and this one isn’t keeping up:

Consumer Credit
er-3-7-2
Highlights
Breaks in the consumer credit series, due to changes in source data or methodology, are not uncommon, leading to sudden swings such as in mid-2011. Such a break is responsible for a big revision to December, now at a revised increase of $6.4 billion from an initial $21.3 billion. The revision is centered in the non-revolving component, which tracks vehicle financing and student loans and is now at a very slight increase of $0.9 billion vs an initial gain of $15.4 billion. January’s increase in total outstanding consumer credit is an initial $10.5 billion vs Econoday’s consensus for $16.5 billion. Revolving credit, the component that tracks credit cards, fell $1.1 billion in January following December’s nearly unrevised $5.5 billion increase. Even with January’s dip, revolving credit has been showing strength and has been, in a positive for consumer spending, hinting at greater willingness, if not the necessity, of the consumer to take on credit-card debt.

er-3-7-3
Sometimes this says something about housing:
er-3-7-4
Here’s something up from last year…
er-3-7-5
er-3-7-6

Share

Oil price, Radio interview, Fed Atlanta, Canada

Posted on by

Some commentary on the latest Saudi price changes:

Saudi raises crude price to Europe, Asia, cuts it for US

Saudi Arabia, the world’s largest crude exporter, Wednesday raised the April prices of its oil to Asia and Europe but cut it slightly for shipments to the United States.

My quick WRKO radio interview

Down some more, as previously discussed:
er-3-3-10
He’s going the right way, but it’s relatively small and he’s unfortunately still out of paradigm which puts it all at risk of ‘losing the debate’ with critics:

Trudeau’s Message to World: Let Government Spending Do the Work

By Josh Wingrove

March 3 (Bloomberg) — Canadian Prime Minister Justin Trudeau is urging global leaders to rely more on government spending and less on monetary policy to spur growth as he prepares a budget that will push his country into deficit.

In a wide-ranging interview Wednesday in Vancouver, Trudeau highlighted the importance of infrastructure spending and measures to bolster incomes of middle classes he says are critical to driving growth. He also defended his plan to go willingly into the red.

“My message to other government leaders is don’t fall into the trap that thinking that balancing the books” is an end in itself, he said. “It’s a means to an end.”

Trudeau’s arrival on the global scene and his endorsement of deficits marks a sharp about face from his predecessor, Stephen Harper. Along with German Chancellor Angela Merkel and U.K. Prime Minister David Cameron, Harper championed the budget austerity alliance within the Group of Seven that often clashed with the U.S. on fiscal policy.

President Barack Obama will hear a new message next week when he hosts a state dinner for Trudeau at the White House. The Canadian leader’s debut also coincides with an increasing sense in global circles that monetary policy is reaching its limit, fueled in part by Japan’s surprise move to adopt negative interest rates that caused turmoil in currency markets.

“Making sure monetary policy and fiscal policy are aligned and complementary is obviously a benefit to any economy. But at the same time I don’t want to be overly preachy,” Trudeau said. Other countries should consider balanced budgets when feasible “but don’t make it the be-all and end-all because you may be missing out on opportunities to grow your economy — to help citizens prosper — that too much rigidity would actually interfere with.”

G-20 Consensus

At a Group of 20 meeting in Shanghai last week attended by Trudeau’s finance minister, Bill Morneau, officials from the world’s top economies committed their governments to doing more to boost growth amid mounting concerns over the potency of monetary policy.

Trudeau, 44, hinted he is considering expanding on pledges that have his country on pace for a deficit of nearly C$30 billion ($22.3 billion) in the fiscal year that begins April 1. Having promised C$10.5 billion in new spending during the campaign, Morneau delivered a fiscal update last month showing the government is starting from a deficit of C$18.4 billion as Canada grapples with the oil-price shock.

“It’s to me even more of a reason why we need to be investing intelligently in infrastructure, in money in the pockets of the middle class, to grow the economy,” Trudeau said of the fiscal situation he inherited after his majority win in the Oct. 19 election.

Debut Budget

He offered no detail on what new spending may be included in the budget, due March 22, but ruled out big-ticket surprises. “I don’t think we need massive stimulus,” he said. “There’s a limit on how much you can flow infrastructure dollars in a short time frame from a standing start.”

A C$30 billion deficit would be 1.5 percent of gross domestic product. That’s a swing of 1.4 percentage points, from an expected deficit of 0.1 percent of GDP in the current year. Since the end of World War II, there have been only four one-year expansionary fiscal swings of more than 1.4 percentage points of GDP.

Even with C$30 billion in red ink, Canada’s debt-to-GDP ratio would remain among the lowest in the G-7. “That leaves us with more flexibility,” Trudeau said. “If we were sitting at 90 percent debt to GDP, we probably wouldn’t be contemplating the kinds of things we know we’re able to do. If interest rates were radically different — much higher, to take money to invest in our economy — we’d be looking at different kinds of investments.”

Share

Factory orders, ISM non manufacturing, Consumer comfort, PMI services index

Posted on by

As per the charts, a big dip last month was followed but a partial recover this month, but overall it’s going nowhere:

Factory Orders
er-3-3-9

er-3-3-8
er-3-3-7
er-3-3-6
er-3-3-5

Employment dropped from 52.1 to 49.7- not good:

ISM Non-Mfg Index
er-3-3-4
Highlights
The great bulk of the nation’s economy enjoyed a solid February based on ISM’s non-manufacturing report where the headline index held solidly over breakeven 50, at 53.4 vs January’s 53.5.

New orders came in at 55.5, down 1 point from January but still very solid. And backlog orders continue to expand, at 52.0 for a second month in a row. Strength in orders points to future strength in employment which, however, in the report’s only negative dipped 2.5 points to 49.7 for the first sub-50 reading since February 2014.

Other details include a nearly 4 point rise in output (defined as business activity in this report) which is a solid indication for first-quarter growth. Prices for inputs remain in contraction and inventories continue to expand modestly. Export sales are also up though exports for this sample, in contrast to manufacturing, are limited.

The dip in employment is one of the few hints of trouble for tomorrow’s employment report, but it may prove a one-month event. Otherwise, readings in this report are positive, a contrast to this morning’s PMI services report and an indication of extending strength for the domestic economy.

er-3-3-3

Bloomberg Consumer Comfort Index
er-3-3-2
Highlights
The consumer comfort index is now below 44 for the first time this year, at 43.6 in the February 28 week. Consumer confidence readings have held mostly steady this year though the decline in this report may hint at an uneasiness perhaps tied in part to uncertainty in the election campaign.

PMI Services Index
er-3-3-1
Highlights
Markit Economics’ U.S. service sample reported unusually flat activity in February with the final PMI at 49.7 vs 49.8 for the February flash and against 53.7 in January. This is the weakest reading since the government shutdown of 2013.

New orders are still growing but, after three months of slowing, are at their weakest pace since January last year. The 12-month outlook, though still positive, is the least positive in 5-1/2 years. Hiring, in an upbeat indication for tomorrow’s employment report, is still solid but how long it can sustain strength is in question. Price data are not favorable with inputs down and selling prices down at a 5-month low.

Slowing in the service sector would leave the economy without a central point of strength. The declines in this report, though possibly reflecting weather factors during the month, do raise the important question whether domestic demand is on the downswing and falling in line with sinking demand overseas.

Share

Saudi April pricing, Mtg purchase apps, ADP

Posted on by

Some up a bit, some down a bit, overall looks to me like downward price pressure continues:
er-3-2-1
Down this week and still moving largely sideways:
er-3-2-2

This is a forecast for Friday’s employment report. It was a little better than expected:

ADP Employment Report
er-3-2-3
Highlights
Friday’s employment report may be on the strong side based on ADP’s private payroll count for February which is a stronger-than-expected 214,000. ADP isn’t always an accurate barometer of the government’s data but it has been the last two reports, pointing to a surge in December followed by a retreat in January.

er-3-2-4

Share

Vehicle sales

Posted on by

Whoops, less than expected, and as the chart shows the seasonally adjusted rate of sales continues to decelerate from the prior peak months as weakness that began with the collapse of oil capex continues to spread to the rest of the economy:
er-3-1-10
From another source that spins flat to down sales as a positive for continued growth. Seems to me that if any of the ‘pieces’ grow at a lower rate than last year, some other ‘piece’ has to grow at a faster rate than it grew at last year to make up for it. This level of car sales will not be at all supportive of growth to the retail or factory sector:

Motor Vehicle Sales
er-3-1-11
Highlights
Vehicle sales held at strong levels in February, at a 17.5 million annualized pace for total sales and at a 14.1 million pace for North-American models. Both rates are only fractionally lower than January and offer a sign of continued strength, though not accelerating strength, for the motor vehicle component of the government’s retail sales report. All readings show only the smallest fractional change with light trucks at a 10.1 million rate and cars at a 7.4 rate. Vehicle sales remain a central strength for the economy, boosting both the retail sector and helping to support the factory sector as well.

Share