Investment, Mtg origination, Bank loans

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Real final sales slowing, and business equipment growth negative:

From the NY Fed, reads like credit growth slowing:

Total Household Debt Rises for 19th Straight Quarter, Now Nearly $1 Trillion Above Previous Peak

The report includes a one-page summary of key takeaways and their supporting data points. Overarching trends from the Report’s summary include:

Housing Debt

  • Mortgage balances rose by $120 billion, to $9.2 trillion.
  • Mortgage originations declined to $344 billion from $401 billion, the lowest level seen since the third quarter of 2014.
  • Mortgage delinquencies improved slightly, with 1.0% of mortgage balances 90 or more days delinquent, down from 1.1% in the fourth quarter of 2018.

    • Non-Housing Debt

  • Outstanding student loan debt increased by $29 billion, to $1.49 trillion.
  • Newly originated auto loans totaled $139 billion, continuing a long-running growth trend.
  • Credit card balances fell slightly, to $848 billion from $870 billion.

    • Through year end- credit growth low and slowing:


    Only through q3 available:


    As of year end:


    Rolled over?

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    Retail sales, Industrial production, Interest payments, Japan profits, Euro area fiscal balance

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    Weak and weaker than expected:

    Highlights

    The second quarter gets off to a stumbling start pulled down by a 0.2 percent headline decline in an April retail sales report where the core details show unexpected weakness. Excluding autos, in which sales were already expected to fall sharply, April sales managed only a 0.1 percent gain to fall underneath Econoday’s consensus range. Excluding autos and also gasoline sales, which were already expected to rise sharply, sales fell 0.2 percent in April to also fall below the consensus range. Just making the consensus range is a no change result for the control group, a component used in the calculation of GDP and pointing squarely to early second-quarter deceleration in consumer spending which had already decelerated sharply in the first quarter.

    A 1.1 percent decline in auto sales (signaled by the prior release of unit sales at manufacturers) is no surprise and neither is a 1.8 percent jump at gasoline stations, signaled here by the price of gas. The big surprise is a 1.3 percent drop at electronics & appliance stores that follows a 4.3 percent tumble in March. Weakness here hints at lower prices for consumer electronics and also lower spending on home improvements. Furniture sales also hint at trouble for residential investment, coming in unchanged following March’s 3.1 percent decline, as do sales of building materials which fell 1.9 percent in April following, however, a 1.2 percent rise in March.

    The best news in the report comes from its weakest sub-component, department stores where April sales jumped 0.7 percent. This was enough, however, to give only a small 0.2 percent lift to the overall general merchandise component. Another positive is restaurants where sales rose 0.2 percent on top of a great monthly surge of 5.7 percent in March.

    Another negative surprise:

    Highlights

    Like retail sales earlier this morning, the headline 0.5 percent decline for April industrial production is not masking strength underneath. Also falling 0.5 percent was production at manufacturers which is even more unexpected than the headline decline.

    Motor vehicles and parts, where consumer sales have been mostly soft this year, fell 2.6 percent in April for a second monthly decline and year-over-year contraction of 4.4 percent. Business equipment fell 2.1 percent in the month for yearly growth of only 0.1 percent which doesn’t point to acceleration for business investment. Consumer goods also fell, down 1.2 percent in the month with construction supplies up only 0.1 percent that follows March’s 1.7 percent dip in readings that don’t point to strength for construction in general. Selected hi tech is a positive for April, up 0.6 percent with annual growth here at 3.2 percent.

    Also positive is a 1.6 percent jump in mining volumes which rose 1.6 percent in April that follows, however, three straight months of declines. Output at utilities fell 3.5 percent in April with the yearly rate of minus 4.7 percent also pointing to general industrial weakness.

    However tight the US labor market may be, capacity does not appear to be tight in the industrial sector as capacity utilization fell 6 tenths in April to a much lower-than-expected 77.9 percent. Utilization in the manufacturing sector is down 5 tenths to 75.7 percent.

    This report doesn’t breakdown production of goods aimed for the domestic market and those for the foreign market but it will nevertheless offer a baseline for the overall effects of increased US-China tariffs. Going into those tariffs, the manufacturing sector, which first began to slow late last year, appeared to be flat at best.


    Rolling over:

    Corporate Japan logs first profit dip in 3 years as China slows

    Fiscal has tightened in the euro area, and now with the global trade collapse prospects are looking grim:

    Euro Area recorded a Government Budget deficit equal to 0.50 percent of the country’s Gross Domestic Product in 2018. Government Budget in the Euro Area averaged -2.84 percent of GDP from 1995 until 2018, reaching an all time high of -0.50 percent of GDP in 2000 and a record low of -7.40 percent of GDP in 1995.

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    Employment, US PMI’s, Factory orders, Japan sales tax, HK, MMT comments

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    Headline number looks promising. The question is whether employment will lag the other indicators that are decelerating, or provide the support that turns them around. And note the .1 drop in the work week is equivalent to maybe to something over 100,000 jobs:

    Highlights

    That sound you hear is the economy revving up. Nonfarm payroll growth easily beat expectations at 263,000 in April as did the unemployment rate with an outsized 2 tenths decline to a 49-year low of 3.6 percent. Wages didn’t show any immediate jolt from the strength, coming in as expected for the monthly rate, at 0.2 percent, and 1 tenth under expectations for the year-on-year rate at 3.2 percent.

    Tightening conditions are the signal from the pool of available workers which continues to be drained, down nearly 500,000 in the month to 10.9 million. The participation rate, reflecting the decline, fell 2 tenths to a lower-than-expected 62.8 percent.

    Payrolls are headed by a second sharp gain for construction, up 33,000 in April after 20,000 in March, for a sector where scarcity of labor especially skilled labor has been an ongoing theme. Perhaps topping construction for April’s payroll highlight is a 76,000 surge in professional & business services that includes an 18,000 jump in temporary help. The strength here, which adds to prior gains, indicates that businesses, in an effort to get the people they need immediately, are turning to contractors to fill slots. Government payrolls are also very strong, up 27,000 in April.

    The latest unemployment drop was for the wrong reason

    The nation’s unemployment rate sank in April to the lowest rate since December 1969, but the milestone comes with a big caveat: The decline stemmed from more people quitting their search for work.

    The jobless rate slipped to 3.6% last month from 3.8% in March, continuing a long downward arc from a 27-year high of 10% in 2009. Yet that doesn’t mean there aren’t some potential trouble spots.

    Take the size of the labor force. It contracted in April by nearly half a million people and fell for the fourth straight month.

    The last time the labor force fell four months in a row was during the waning stages of the 2007-2009 Great Recession. And before that one has to go back to 1950.

    As a result, the so-called labor-force participation rate slipped to 62.8% from a six-year high of 63.2% in January. That is, every 63 of 100 able-bodied Americans 16 or older either have a job or are seeking one.

    The shrinking labor force “is the primary factor behind the unexpected decline in the unemployment rate,” noted chief economist Richard Moody of Regions Financial.

    This is from the household survey. The two surveys tend to converge over time, and the payroll survey is much larger and less subjective:

    The household survey shows employment is down for the year:


    Up nicely for the month, but year over year growth still heading south, as per the chart:

    Highlights

    Factory orders rose 1.9 percent in a March report that is widely mixed yet fundamentally favorable. The least favorable reading in the report is a modest 0.3 percent rise when excluding transportation durables where however gains for aircraft, especially during the 737 Max grounding, are very welcome as was a strong gain in car and truck orders. The best news in the report is a 1.4 percent surge in orders of core capital goods (nondefense ex-aircraft) that hints strongly at second-quarter acceleration for business investment.

    Inventories rose 0.4 percent in the month and though shipments jumped 0.7 percent, the inventory-to-sale ratio held unchanged at 1.36. Unfilled orders rose 0.2 percent and though a modest rate, is nevertheless welcome given what has been a long flat trend for this reading.

    The strength of this report was signaled last week by advance data on the durables side of the manufacturing sector, where March orders growth is revised down 1 tenth to a nevertheless very sharp 2.6 percent gain. Nondurables are the fresh information in the report and they rose a strong 1.1 percent in March in a gain tied in part to higher prices for petroleum and related products.

    The President’s tariff war initiated to enhance manufacturing seems to instead be undermining it:

    Here we go again. The exporters remain firmly in control, looking to depress domestic consumption and keep wages in check by fear mongering about the public debt has not abated:

    Japan sales tax to rise as planned

    (Nikkei) Japan will raise the 8% consumption tax to 10% as scheduled in October, barring a major financial crisis, a top official in the ruling party told Nikkei. “I haven’t heard anyone say that we could see something on the scale of the Lehman shock,” Katsunobu Kato, head of the Liberal Democratic Party’s General Council, said Wednesday. “It’s appropriate for us to proceed as planned.” Prime Minister Shinzo Abe decided to delay planned increases in 2014 and 2016. This time, he has said the government will go through with the increase, barring a disruption on par with the 2008 crisis.

    Global trade deceleration:

    Hong Kong’s Q1 growth slips to slowest in a decade

    (Nikkei) Hong Kong’s real gross domestic product rose 0.5% on the year in the January-March quarter. The economy expanded at the slowest rate since July-September 2009, and decelerated markedly from a 1.2% increase reported for the fourth quarter of 2018. Consumption edged up 0.1% on the year last quarter, compared with a 2.7% gain in October-December. Exports of goods fell 4.2%, while imports dropped 4.6%. Rapid growth in January-March 2018, which came to 4.6%, also left less room for improvement, according to the spokesperson.

    How about this!!!

    https://www.perdue.senate.gov/imo/media/doc/MMT%20Resolution.pdf

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    Car sales, Euro area PMI’s

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    Continues to decelerate:

    Highlights

    Jerome Powell may have cited March auto sales as an economic plus in yesterday’s FOMC press conference, but April sales couldn’t keep up the pace. Unit vehicle sales managed only a 16.4 million annual rate in April which was far below March’s 17.5 million rate and well below Econoday’s consensus range. The setback returns the sales pace to the disappointing mid-16 million range of January and February that was a ratcheting down from the fourth-quarter pace in the mid-17 million range.

    Sales of domestic-made vehicles came in at a 12.7 million rate in April, also below the consensus range. Today’s results point to trouble for the motor vehicle component of the April retail sales report and, though unit sales data are a clouded mix of business and consumer sales, nevertheless hint strongly at an inauspicious second-quarter opening for consumer spending in general.


    Deep in negative territory as trade wars continue:

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    Mtg purchase apps, Construction, SF home prices, ISM manufacturing, PMI chart, Trade agreement, Econ indicators

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    Dismal:

    Highlights

    The purchase index is down a sharp 4.0 percent for a second straight week, this time for the April 26 week. Year-on-year, the index is up only 1.0 percent which is not a favorable signal for the Spring housing push. Refinancing is also coming down, 11.0 percent lower for the fourth straight weekly decline after having spiked dramatically on a break lower in mortgage rates. And rates are still very low, down 4 basis points in the week for 30-year conventional loans to an average 4.42 percent.

    March was a very strong month for the housing market, evidenced not only by prior data on the month’s new and existing home sales but also yesterday’s surprisingly strong jump in the month’s pending home sales index. Yet April, based at least on this report’s purchase index, looks to have slowed significantly.

    Dismal:

    Highlights

    Construction spending came in much weaker than expected in March, down 0.9 percent on the month and well under Econoday’s consensus range. Weakness is centered in the most sensitive spot of all: single-family homes where spending fell 1.5 percent in what may point to a downward revision to what was already a weak residential component in the first-quarter GDP report.

    Private nonresidential spending did better, rising a solid 0.5 percent led by gains for manufacturing and transportation which may lift the GDP revision for first-quarter business investment. Yet spending on commercial projects remains weak, down 2.6 percent in the month with this year-on-year rate well into contraction at minus 8.6 percent.

    Public spending has been holding up this report but showed sharp give backs in March, down a monthly 1.5 percent for educational projects and down 1.9 percent for highways & streets. Federal spending fell 2.7 percent in the month with state & local down 1.1 percent, though year-on-year gains are still strong at 5.7 percent for Federal and 8.9 percent for state & local.

    Overall construction was down 0.8 percent on the year in March in a measure that is not pointing to improvement yet for 2019. Housing sales did show solid signs of pick-up in February and March as mortgage rates came down, but today’s results for single-family spending aren’t promising much new supply for the new home market. And in an unfavorable indication on discretionary spending and demand for building materials, spending on home improvements fell 3.1 percent in the month with this yearly rate deep in contraction at minus 14.1 percent.

    San Francisco Bay Area home prices fall for the first time in 7 years

    The global deceleration from the trade war includes the US:

    Highlights

    In the weakest report in nearly two years, the April ISM manufacturing index came in far below expectations at 52.8 for a 2.5 point decline from March. New orders, at 51.7, are down 5.7 points in April with related export orders down 2.2 points and in technical contraction at 49.5. Employment fell 5.3 points to 52.4 in what is an unfavorable indication for Friday’s factory payroll data where a solid gain was expected. The significant slowing in demand is reflected in the prices paid index which fell 4.3 points to 50.0 even to indicate no change from the prior month.

    But there are pluses in the report including a 3.5 point rise in total backlog orders to 53.9 which is solid for this reading and which will help the sample keep up their production despite the slowing in new orders. Of the 18 industries tracked in the report, 13 reported monthly growth in composite activity with five, which is a large number for the breakdown, reporting contraction led by apparel makers and also including primary metals and, in an unfavorable indication for April durable goods orders, transportation equipment as well.

    This report is focused on strongly by not only forecasters and policy makers but also by the financial markets. Though one month is only one month, the results are likely to raise talk that the performance of the nation’s factory sector, which has been uneven since late last year, may begin holding back the 2019 economy.


    The red line, as above, is down further in April:

    Some were saying this was what the US was trying to achieve and was willing to drop most of the rest to get it:

    Trump drops cyber theft demands in bid for swift trade deal with China

    (FT) President Trump has dropped a central demand from trade negotiations with China that it halt alleged instances of commercial cyber theft, in order to end a long-running tariff dispute. The US is instead likely to accept a watered-down commitment from Beijing as an alternative.

    Tariffs That Started the U.S.-China Trade Conflict Now Dog Its Finish

    (WSJ) As U.S. and Chinese officials try to close a trade deal, the punitive tariffs the governments slapped on each country’s goods in the conflict stand as a major obstacle, according to officials and others briefed on the talks.

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    GDP detail, Business optimism, Personal Income, Chicago PMI, US pending home sales, China news

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    Personal income not doing so well, as growth keeps ratcheting down:

    China April factory growth unexpectedly slows as economy struggles for traction

    (Reuters) The official Purchasing Managers’ Index (PMI) for manufacturing fell to 50.1 in April from March’s reading of 50.5, which was the first expansion in four months, data from the statistics bureau showed. Output expanded at a slower but still moderate pace, while growth in new orders eased only slightly. The official index for export orders continued to contract, but hit its highest level in eight months. The official PMI survey showed small and mid-sized manufacturers continued to fare worse than larger companies. But small manufacturers’ activity improved to a six-month high.

    Chinese freight volumes hit as business softens

    (FT) The headline FTCR China Freight Index, a composite reading of the results of a monthly survey of 200 logistics companies, fell to a nine-month low of 48.8 in April. April’s reading indicates that freight activity is shrinking, if at a relatively slow rate. Just 16.6 per cent of respondents said their volumes increased on the previous month compared with 26.8 per cent in March. Year-on-year readings were even weaker, with almost a third of companies reporting that volumes were down, while our index comparing rates this month with April 2018 pointed to a marginal drop.

    Quarterly Growth:

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    GDP, Retail sales, Oil prices

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    Headline number looks strong, but details show weakness, particularly personal consumption expenditures which continue to decelerate:

    Highlights

    The consumer isn’t on fire but still contributed to a very solid 3.2 percent growth rate for first-quarter GDP. Net exports are the driving force of the headline rate, still deeply negative at minus $899.3 billion but nevertheless contributing 1.03 percentage points to the quarter’s calculation though trade data for March, which have yet to be released, were imputed. Inventories rose sharply and added 0.65 points but whether the build was desired may be in question, that is given what was less than robust strength in consumer demand.

    Consumer spending (personal consumption expenditures) rose at a modest-to-moderate and largely as expected 1.2 percent pace but nevertheless contributed 0.82 points to the quarter though spending on durables, a discretionary component, fell very steeply and pulled the quarter 0.38 points lower. But spending on nondurables and especially services was strong, contributing 0.24 and 0.96 points respectively. Not strong at all was residential investment which contracted at a 2.8 percent annual pace — the fifth straight quarterly contraction — and subtracted 0.11 points from the quarter.

    In contrast once again was business investment which rose at a very favorable 2.7 percent pace and added to the quarter 0.38 points. Government purchases were also very strong, at a 2.4 percent growth rate for a 0.41 point contribution.

    A clearer look on underlying domestic demand comes from final sales to domestic purchases, a reading that excludes both net exports and inventories and where the growth rate was only 1.4 percent. Lack of consumer punch is a bit of a puzzle at least based on the strength of the labor market. Price readings in today’s report are very subdued at 0.9 percent for the overall index and only 1.3 percent for the core. The pace of the nation’s economy isn’t as strong today’s headline suggests with questions over the consumer, first raised by the 1.6 percent plunge in December retail sales, still persisting.

    Trump says he called OPEC and told producer group to bring fuel prices down

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    Durable goods, Chem activity, South Korea

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    As per the chart still not looking so good:

    Highlights

    Good news on US manufacturing is now much less scarce following a much better-than-expected 2.7 percent jump in durable goods orders for March. The gain is skewed higher by a very welcome 60 percent monthly gain in commercial aircraft orders and also by an equally welcome 2.1 percent rise in motor vehicle orders. Excluding these orders as well as orders for all other transportation equipment, March orders rose a respectable 0.4 percent.

    Now the really good news! Orders for core capital goods (nondefense ex-aircraft) surged 1.3 percent to easily exceed expectations. This reading had been flat until today’s data for March which now point to a sizable pickup in business investment. Yet the pickup as tracked in GDP will have to wait for the second quarter as shipments of core capital goods actually slipped 0.2 percent in the month. The dip in shipments, however, provided a lift for unfilled orders of core capital goods which rose 0.2 percent to end an unwanted run of declines.

    Total shipments rose 0.3 percent for a second straight month and are right in line with total inventories which also rose 0.3 percent. Together they keep the inventory-to-shipments ratio unchanged at a constructive and lean 1.62.

    Today’s report won’t be raising expectations for business investment in tomorrow’s first-quarter GDP report but will be raising general expectations for manufacturing which, until this report, had been stumbling along. And strength in commercial aircraft, which also includes a 0.2 percent rise in related unfilled orders, should cool worries over 737 Max cancellations. Still, cross-border trade has been depressed and remains a key obstacle that looks to contain this year’s manufacturing growth.

    This has gone flat:

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    Export growth, Miles driven, Ship orders

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    Ship Orders Fall to Lowest Level in 15 Years

    Ship orders world-wide have shrunk to the lowest level in 15 years as vessel owners struggle with excess capacity that has kept freight rates well below break-even levels.

    There were 3,200 vessels of a combined 81 million gross tons ordered globally in the first quarter, the lowest figure since 2004, marine data provider Clarksons PLC said in a report released Friday.

    Headline export and import news still negative:

    Taiwan Export Orders Fall for 5th Straight Month

    Thai Imports Fall Sharply in March

    Thai Exports Drop More than Expected

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