Credit check, Rig count, Consumer sentiment, Romney comment, Pollak comment

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More of same:

More evidence this has stabilized and maybe reversed:


Expectations up, current conditions down:

Highlights

Consumer sentiment unexpectedly burst higher in the August flash but the results, warns the report, do not fully reflect the impact of the weekend’s violence in Virginia. The index rose to 97.6 which is well over Econoday’s high estimate and the strongest reading since the post-election surge in January. But the report said “too few” interviews were conducted after the violence and that related fallout may reverse expectations especially for Republicans.

Details of the August flash show an 8.5 point jump in the expectations component to 89.0 with, however, the current conditions component lagging with a 3.4 point decline to 111.0. The step back for current conditions is not a favorable indication for consumer activity in the month of August. And in a negative for Federal Reserve policy makers, inflation expectations are very subdued, unchanged at 2.6 percent for the 1-year outlook and down 1 tenth for the 5-year outlook at 2.5 percent.

Recent History Of This Indicator

Unlike the consumer confidence index which is holding steady near 20-year highs, the consumer sentiment index has been falling back, down more than 5 points from its highs early in the year to 93.4 in July. Econoday’s consensus for the preliminary August report is calling for a moderate rebound to 94.0. July showed continued strength in current conditions but a noticeable slowing in expectations in a divergence that hints at year-end erosion for the headline index.

Mitt Romney urges Trump to apologize for Charlottesville reaction

“I think there’s a fear among conservatives that with Steve Bannon gone, essentially the Trump administration could become in all but name a Democratic administration,” Pollak said.

Steve Bannon plans to go ‘thermonuclear’ on White House officials: Axios

Carl Icahn drops out of presidential advisory role

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Industrial production, Trump comments

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Worse than expected, but modest growth from depressed levels.

Highlights

The Federal Reserve inadvertently released what is a weak July industrial production report about a 1/2 hour early this morning. Headline production rose 0.2 percent vs expectations for 0.3 percent with manufacturing output showing outright contraction, at minus 0.1 percent vs Econoday’s consensus for a 0.2 percent gain. Capacity utilization hit expectations at 76.7 percent.

A 3rd straight decline in motor vehicles, down 3.6 percent in July, held down the month’s production. Excluding vehicles, manufacturing rose 0.2 percent. But also not helping were business equipment, down 0.5 percent in the month, and construction supplies, down 0.4 percent. On the plus side with small gains are consumer goods, materials, and non-industrial supplies.

Outside of manufacturing, mining posted a 4th straight solid gain, at 0.4 percent, with utilities swinging higher with a 1.6 percent July increase.

This report, which is the first definitive look at July’s factory sector, is unexpectedly flat and puts an end to the run of recently strong economic data. Strength in sentiment surveys like this morning’s Philly Fed do not always match the real world. Vehicle sales were up in July but it has been a tough year for the sector. And given the decline in this report’s manufacturing component, the upward momentum that the factory sector was showing looks less certain now.

As previously discussed, it’s only going to get worse:

Blackstone co-founder Steve Schwarzman and other CEOs on the now-defunct White House policy forum were perplexed by President Donald Trump’s efforts to take responsibility for disbanding the group, sources told The New York Times.

Schwarzman, who chaired the group, thought he had an agreement with the White House to announce that the idea of ending the Strategic and Policy Forum was a joint decision, the Times reported.

The CEOs decided during a Wednesday morning conference call to dissolve the forum in the uproar that followed Trump’s news conference in which he made comments that were deemed supportive of white supremacists.


Trumped up expectations taking a hit:

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Housing starts, Alt right study

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Lower than expected, and, as always starts are ultimately determined by permits, which have been slowing as per the chart, which also reflects the deceleration in mortgage lending over the last 6 months:

Highlights

Housing starts couldn’t hold the 1.200 million annualized line in July, falling to a lower-than-expected 1.155 million. The rate is now back to the weakness of March and April in what may be emerging as a declining trend this year. Permits also fell but are holding over 1.200 million, at 1.223 million which is down from June’s 1.275 million but with this trend holding up better.

The swing factor is multi-family units, the smallest of the report’s two components but, after a run of heavy building earlier this year, are now in retreat. Multi-family starts fell to a 299,000 rate in July from June’s 353,000 and are down 34 percent year-on-year. Multi-family permits, at 412,000, are down nearly 10 percent.

Single-family data are holding steady with starts at 856,000 for an 11 percent yearly gain and permits at 811,000 and a 13 percent gain.

Putting all the pieces together: starts are down 5.6 year-on-year in weakness offset by permits which are up 4.1 percent. Permits are the forward looking indication in this report and today’s news, despite July weakness and general volatility in the data, is good. The housing sector, even with starts being soft, looks to be a contributor to the second-half economy.

Psychologists surveyed hundreds of alt-right supporters. The results are unsettling.

Aug 16 (CNBC) — Kteily, the co-author on this paper, pioneered this new and disturbing way to measure dehumanization — the tendency to see others as being less than human. He simply shows study participants the following (scientifically inaccurate) image of a human ancestor slowly learning how to stand on two legs and become fully human.

Participants are asked to rate where certain groups fall on this scale from 0 to 100. Zero is not human at all; 100 is fully human.

On average, alt-righters saw other groups as hunched-over proto-humans.

On average, they rated Muslims at a 55.4 (again, out of 100), Democrats at 60.4, black people at 64.7, Mexicans at 67.7, journalists at 58.6, Jews at 73, and feminists at 57. These groups appear as subhumans to those taking the survey. And what about white people? They were scored at a noble 91.8.

The comparison group, on the other hand, scored all these groups in the 80s or 90s on average. (In science terms, the alt-righters were nearly a full standard deviation more extreme in their responses than the comparison group.)

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Retail sales, Import and export prices, Business inventories, Housing index

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The chart still looks weak to me. Shale boom in 2014 pumped it up, and then reversing with the shale bust, and still looking suspect after January when consumer credit further decelerated:

Highlights

The consumer was back in the stores last month in a July retail sales report, headlined by a 0.6 percent monthly gain, that not only exceeds top expectations but also includes sizable upward revisions. Nonstore retailers, vehicle dealers, building materials stores lead the report — all major categories. Secondary readings are all strong: up 0.5 percent ex-autos, up 0.5 percent ex-autos ex-gas, and up 0.6 percent for the control group.

Revisions are prominent in this report with June revised 5 tenths overall to plus 0.3 percent from an initial minus 0.2 percent. And May gets an upward revision too, now unchanged vs minus 0.1 percent.

One the weakest of all the consumer readings, retail sales are now back into the fold with other indications on consumer spending, which are positive and in line with full employment. Note that the upward revisions to June and May will be positives for second-quarter GDP revisions.

This measure has flattened recently:


This looks to me like it’s again working its way lower:


Looking like the weak $US is translating into deflation abroad rather than inflation at home:

Highlights

A boost in petroleum gave a lift to import prices while a boost from agricultural gave a boost to export prices. Import prices in July posted an as-expected 0.1 percent increase as petroleum was up 0.7 percent in the month. Outside of petroleum, however, July import prices limped in at no change. Prices of finished exports remain dead flat, at or near zero whether month-on-month or year-on-year. The yearly rate for overall imports is steady at a modest 1.5 percent.

Export prices rose a stronger-than-expected 0.4 percent with agricultural products up 2.1 percent to more than shave in half sharp declines in the two prior months. Prices for finished exports, like finished imports, are flat with consumer goods, at minus 1.7 percent year-on-year, especially weak. Total export prices are up only 0.8 percent year-on-year which is not good news for the nation’s exporters.

But what is good news for exporters is the tangible decline underway in the dollar. This points to increasing pressure for import prices which, though making them less affordable to U.S. buyers, will help the Federal Reserve in its efforts to stimulate inflation.

Inventories remain excessive and just grew a bit more than sales:

Highlights

After a flat start to the second quarter, businesses built up their inventories by a sharp 0.5 percent in June which beats Econoday’s consensus by 1 tenth. The build is centered in wholesale which rose 0.7 percent with inventories among retailers up 0.6 percent in June which, based on this morning’s retail sales report, is a plus going into what proved to be a very strong July for the sector. Factory inventories in June rose 0.2 percent.

In an uncertain result in the report, the rise in inventories exceeded the 0.3 percent rise in underlying sales to lift the inventory-to-sales ratio 1 tick to a less lean 1.38. This could mean that supply is exceeding demand, or however that businesses are stocking up ahead of what see as better business ahead. Note that the slightly higher-than-expected headline may give a lift to second-quarter revision estimates which are likely to get a more definitive lift from the upward revisions in today’s retail sales report.

Highlights

The housing market index joins retail sales and Empire State as major upside surprises this morning, up 4 points to 68 in August which tops Econoday’s high forecast by 2 points. This puts the index back at levels earlier this year and points to building confidence among the nation’s home builders.

Builders see gains for both present sales, up 4 points to 74, and 6-month sales, up 5 points to 78. Trailing far behind, however, and not showing much pace is traffic still under 50 at 49. Lack of traffic hints at lack of first-time buyers who appear to be getting locked out of the new home market by high prices and lack of supply on the market.

Regional composite scores show the West, a key region for builders, out in front followed by the South and Midwest which are also both very strong followed in the distance by the Northeast which is flat. This report offers an advance indication for August but won’t be hurting expectations any for tomorrow’s July housing starts and permits report where strength is the call.

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Credit check

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This kind of deceleration has always been associated with recession:


Bending the curve:


Actual lending continues to decelerate:

So for the last 6 months the Fed is seeing a steep decline in credit growth and a softening in price pressures, wage growth, employment growth, auto sales, home sales and permits, retail sales, and personal income. Apart from that things are looking up!
;)

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CPI, Oil and gas production, Hotels

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So the Fed is failing to meet its inflation target, wage growth remains weak, and all measures of credit expansion have been decelerating for more than 6 months:

Highlights

Consumer prices remain very soft, failing to match what were modest Econoday expectations for July. Total prices edged 1 tenth higher in July as did the core (less food & energy) which are both no better than the low estimates. Year-on-year rates are also at the low estimates, at 1.7 percent each. Moderation in housing costs remains a major disinflationary force, inching only 0.1 percent higher for a yearly 2.8 percent which is down 2 tenths from June. And wireless services, in keeping with the telecom revolution, continue to move lower, falling 0.3 percent on the month for a yearly decline of 13.3 percent.

Vehicle sales have been weak this year and it’s being reflected in prices which fell 0.5 percent in the month. Lodging away from home is another major negative in the July report, falling a record 4.2 percent as motels and hotels cut prices. On the plus side, apparel prices, which had been on a long negative streak, rose 0.3 percent though the year-on-year rate remains in the negative camp at minus 0.4 percent. Medical care is a plus in the report, rising 0.4 percent for the second straight month with the year-on-year rate, however, edging lower to 2.6 percent. Energy prices are a negative in the report, at minus 0.1 percent, offset by a 0.2 percent rise for food.

Is the dip in inflation the result of one-time effects that will soon pass? Or is it the result of weak wages and general global disinflation? Lack of inflation remains the central trouble in the Federal Reserve’s policy efforts. Today’s results will not be improving expectations for the beginning of balance-sheet unwinding at the September FOMC.

Interesting how both core and headline CPI growth reversed and began deceleration just over 6 months ago as well:


Crude production has leveled off? Gas as well?

Competition from Air B%B?

From HotelNewsNow.com: STR: US hotel results for week ending 5 August

The U.S. hotel industry reported mostly negative year-over-year results in the three key performance metrics during the week of 30 July through 5 August 2017, according to data from STR.

In comparison with the week of 31 July through 6 August 2016, the industry recorded the following:

  • Occupancy: -1.5% to 74.5%

  • Average daily rate (ADR): +0.7% to US$129.00
  • Revenue per available room (RevPAR): -0.8% to US$96.08

    • Read more at http://www.calculatedriskblog.com/#Abl5O3RLz78wWYJb.99

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    PMC 2017

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    Thanks to all for your support for this year’s PMC!

    Looking like $48 million will be donated to Dana Farber for cancer research this year!

    Not too late if you haven’t contributed… ;) http://www2.pmc.org/profile/WM0015

    I make my personal donation as a sponsor to insure every $ you donate goes to cancer research and not to expenses:


    ‘Mosler Economics/MMT’ was featured on the back pocket of the jersey. Hard to see in this picture so I circled it in red:


    The start in Wellesley:


    Our team taking a break one mile from the end of the first day:


    Quite the buffet after the first day’s ride:


    The tent at the Provincetown Inn after the second day’s ride:


    Monday morning at the Provincetown Inn after the ride:


    Cliff, Sada, and Warren maybe 1984:

    Thanks again!
    Warren

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    Dodge index, Euro area lending, China investment, Wholesale trade

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    This is reflected in the deceleration of commercial real estate lending:

    From Dodge Data Analytics: Dodge Momentum Index Stumbles in July

    The Dodge Momentum Index fell in July, dropping 3.3% to 135.0 (2000=100) from its revised June reading of 139.6. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move lower in July was due to a 6.6% decline in the institutional component of the Momentum Index, while the commercial component fell 1.1%.This month continues a recent trend of volatility in the Momentum Index where a string of gains is interrupted by a step backwards in planning intentions.

    Not just the US!


    This is slowing things down as well:

    China’s capital controls apply brakes on ‘go out’ drive

    Aug 9 (Nikkei) — China’s outbound direct investment plunged 46% on the year to $48.1 billion in the six months through June, trailing foreign direct investment of $65.6 billion. Foreign acquisitions, remittances, money exchanges and other outbound transactions of more than $5 million became subject to mandatory pre-screening by regulators starting last November. Regulators also said real estate, hotel, entertainment, film, sports club and other “irrational” overseas investments would be tightly monitored. In June it was learned Chinese bank regulators had told lenders to more strictly examine overseas investments by Dalian Wanda Group, HNA Group and three other major conglomerates.

    Good chance the inventories are ‘unwanted’ due to low sales as retail sales were a lot lower than expected:

    Highlights

    Wholesale inventories rose a sharp 0.7 percent in June in what was a wanted build given a likewise 0.7 percent rise in sales. The stock-to-sales ratio is unchanged at a lean 1.29. If there is an imbalance, it’s inventories of autos which rose 1.4 percent while sales fell 0.5 percent. Otherwise this a very positive report, pointing at the same time to sales growth and inventory growth.

    Inventories still look elevated to me:


    This is the sales chart they think is so good- still short of 2014 levels and this chart isn’t adjusted for inflation:

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    Small business survey, JOLTS

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    No sign of Trumped up expectations fading here:

    Hires fell, which most are saying indicates a lack of supply of workers. But the low wage growth and low participation rates tell me it’s more likely about low aggregate demand:

    Highlights

    Job openings rose sharply in June, to 6.163 million from 5.702 million in May. Hires, however, fell sharply, to 5.356 million from 5.459 million. This data set can be volatile but the underlying theme is a separation between openings and hiring which points to tightness in the labor market and the risk, at least theoretically, of wage inflation.

    Looks to me like ‘hires’ tend to lead openings:

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    Consumer credit

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    Less than expected as the deceleration continues. I read this as reflecting a drop in consumer spending.

    The savings rate has been down, and the personal income curve has been bent lower as well, and retail sales have also slowed.

    So it can all be read this way:
    The consumer has less real disposable income, has cut back on spending, and has been ‘forced’ to put some of that reduced spending on his credit card, though less than the prior month, which doesn’t bode well for future spending:

    Highlights

    Though growth in headline consumer credit, at $12.4 billion, came in lower than expected, the component for revolving credit posted another sizable increase, at $4.1 billion vs $6.9 billion in May. This component, which is where credit card debt is tracked, has been on the rise this year raising the question whether financial firms are beginning to lend to less qualified borrowers. Whether or not gains here are good for credit quality, they are a plus for short-term consumer spending. The soft headline in June is due to a lower-than-usual increase in non-revolving credit where growth, at $8.3 billion, is nevertheless substantial. Vehicle financing and student loans are tracked in non-revolving credit.


    Debt service looks historically low so seems this isn’t what’s holding back the consumer:

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