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271 matches for " Redbook":
We have been puzzled in recent months by the sudden and substantial divergence between the Redbook chainstore sales numbers and the official data.
We can be reasonably sure that the headline May retail sales number will look quite strong, thanks to the surge in auto sales reported by the manufacturers last week. Sales of cars and light trucks soared past industry analysts' expectations to a nine-year high, rising 7.5% from their April level.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
If the Redbook chain store sales survey moved consistently in line with the official core retail sales numbers, it would attract a good deal more attention in the markets. We appreciate that brick-and-mortar retailers are losing market share to online sellers, but the rate at which sales are moving to the web is quite steady and easy to accommodate when comparing the Redbook with the official data.
The delay in the processing of personal income tax refunds this year appears not to have had any adverse impact on retail sales, so far. Indeed, the Redbook chainstore sales survey suggests that sales have accelerated over the past few weeks.
The gap between the official measure of the rate of growth of core retail sales and the Redbook chainstore sales numbers remains bafflingly huge, but we have no specific reason to expect it to narrow substantially with the release of the April report today.
The first estimate of retail sales growth in August was weaker than implied by the Redbook chainstore sales survey, but our first chart shows that the difference between the numbers was well within the usual margin of error.
The Redbook chain store sales survey used to be our favorite indicator of the monthly core retail sales numbers, but over the past year it has parted company from the official data. Year-over-year growth in Redbook sales has slowed to just 0.7% in February, from a recent peak of 4.6% in the year to December 2014
The Redbook chainstore sales survey today is likely to give the superficial impression that the peak holiday shopping season got off to a robust start last week.
The release yesterday of the weekly Redbook chainstore sales report for the week ended Saturday August 4 means that we now have a complete picture of July sales.
So far, the surge in retail spending promised by the plunge in gasoline prices has not materialized. The latest Redbook chain store sales numbers dipped below the gently rising trend last week, perhaps because of severe weather, but the point is that the holiday season burst of spending has not been maintained.
We have been pleasantly surprised by the recent Redbook chainstore sales numbers.
The downshift in the rate of growth of retail sales, which has caused a degree of consternation among investors, likely has further to run. The Redbook chain store sales survey clearly warned at the turn of the year that a slowdown was coming, but forecasters didn't want hear the warning: Five of the seven non-auto retail sales numbers released this year have undershot consensus.
The rate of growth of chain store sales has levelled off in recent months, after slowing dramatically in the first four months of this year, almost certainly in response to falling prices for dollar-sensitive goods like household electronics. In the fourth quarter of last year, the Redbook recorded same-store sales growth averaging 4.3%, but that has slowed to a 1-to-2% range since April.
Back in the olden days, we argued that shifts in the global manufacturing cycle often originated in China, and then fed into the U.S. and European data with a lag of one-to-three months.
We were terrified by the plunge in the ISM manufacturing export orders index in August and September, which appeared to point to a 2008-style meltdown in trade flows.
Today's September international trade report will be the third to be distorted by hugely elevated soybean exports. The surge began in July, when soybean exports jumped by $3.6B--that's a 220% month-to-month increase--to $5.2B.
The rate of growth of Covid-19 cases outside China appears to have peaked, for now, but we can't yet have any confidence that this represents a definitive shift in the progress of the epidemic.
Forecasting the health insurance component of the CPI is a mug's game, so you'll look in vain for hard projections in this note.
The flat trend in core capital goods orders continued through May, according to yesterday's durable goods orders report. We are not surprised.
New York Fed president Dudley toed the Yellen line yesterday, arguing that the effects of "...a number of temporary, idiosyncratic factors" will fade, so "...inflation will rise and stabilize around the FOMC's 2 percent objective over the medium term.
The weaker is the economy over the next few months, the more likely it is that Mr. Trump blinks and removes some--perhaps even all--the tariffs on Chinese imports.
Today's wave of data will bring new information on the industrial sector, consumers, the labor market, and housing, as well as revisions to the third quarter GDP numbers.
The commentariat was very excited Friday by the inversion of the curve, with three-year yields dipping to 2.24% while three-month bills yield 2.45%.
The gaps in the third quarter GDP data are still quite large, with no numbers yet for September international trade or the public sector, but we're now thinking that growth likely was less than 11⁄2%.
Recent consumer confidence numbers have been strong enough that we don't need to see any further increase. The expectations components of both the Michigan and Conference Board surveys are consistent with real spending growth of 21⁄2-to- 3%, which is about the best we can expect when real income growth, after tax, is trending at about 21⁄2%.
The spread of the Covid-19 virus remains the key issue for markets, which were deeply unhappy yesterday at reports of new cases in Austria, Spain and Switzerland, all of which appear to be connected to the cluster in northern Italy.
After two hefty month-to-month increases, durable goods orders ex-transportation now stand only 3.9% below their January pre-Covid peak.
When Fed Chair Powell said last week that the "surprise" weakness in the official retail sales numbers is "inconsistent with a significant amount of other data", we're guessing that he had in mind a couple of reports which will be updated today.
The April international trade numbers were startlingly, and surprisingly, horrible. The deficit in trade in goods leaped by $6.2B -- the biggest one-month jump in two years -- to $67.1B, though the headline damage was limited by a sharp narrowing in the oil deficit, thanks to lower prices, and a rebound in the aircraft surplus.
Recent export performance has been poor, but the export orders index in the ISM manufacturing survey-- the most reliable short-term leading indicator--strongly suggests that it will be terrible in the fourth quarter.
Media reports suggest that the underlying trends in retailing--rising online sales, declining store sales and mall visits--continued unabated over the Thanksgiving weekend.
The best way to answer the perennially vexed question of what's happening to home prices is to take a deep breath and cite a range, given that the four main measures of prices don't measure the same thing in the same way, never agree with each other, and often contradict themselves from month-to-month.
The Fed will do nothing to the funds rate or its balance sheet expansion program today.
It doesn'tt matter if third quarter GDP growth is revised up a couple of tenths in today's third estimate of the data, in line with the consensus forecast.
The advance international trade data for December were due for publication today, but the report probably won't appear.
We argued in the Monitor yesterday that the very low and declining level of jobless claims is a good indicator that businesses were not much bothered by the slowdown in the pace of economic growth in the first quarter. The numbers also help illustrate another key point when thinking about the current state of the economy and, in particular, the rollover in the oil business.
The huge drop in the March Markit services PMI, reported yesterday, and the modest dip in the manufacturing index, are the first national business survey data to capture the impact of the Covid-19 outbreak.
Fed Chair Yellen's speech in Cleveland yesterday elaborated on the key themes from last week's FOMC meeting.
Japan and Korea dealt with their second waves of Covid-19 in the third quarter in completely different ways.
The expectations components of both the Michigan and Conference Board measures of consumers' confidence have risen sharply since gasoline prices rolled over.
The Fed will soon have to step in to try to put a firebreak in the stock market.
Core durable goods orders in recent months have been much less terrible than implied by both the ISM and Markit manufacturing surveys.
We expect to learn today that the economy expanded at a 2.1% annualized rate in the fourth quarter, slowing from 3.4% in the third.
We're expecting to learn today that shipments of core capital goods jumped at a 33% annualized rate in the third quarter, a record increase, and more than reversing the 19.7% second quarter plunge.
The minutes of the May 2/3 FOMC meeting today should add some color to policymakers' blunt assertion that "The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term."
We remain very bullish on the housing market, given sustained 11-year highs in applications for new mortgages to finance house purchase.
The weather-driven surge in December housing starts, reported last week, is unlikely to be replicated in today's existing home sales numbers for the same month.
Back-to-back elevated weekly jobless claims numbers prove nothing, but they have grabbed our attention.
After the strong Philly Fed survey was released last week, we argued that the regional economy likely was outperforming because of its relatively low dependence on exports, making it less vulnerable to the trade war.
We remain bullish on the near-term outlook for the housing market, but momentum in the mortgage applications numbers has faded a bit in recent weeks.
The headline payroll number each month is the difference between the flow of gross hirings and the flow of gross firings. The JOLTS report provides both numbers, with a lag, but we can track the firing side of the equation via the jobless claims numbers. Claims are volatile week-to-week, thanks to the impossibility of ironing out every seasonal fluctuation in such short-term data, but the underlying trend is an accurate measure. The claims data are based on an actual count of all the people making claims, not a sample survey like most other data. That means you'll never be blindsided by outrageous revisions, turning the story upside-down.
The re-opening of businesses in Georgia, South Carolina and Tennessee, starting this week and expanding next week, comes as the rate of increase of confirmed Covid-19 infections in these states remains much faster than in European countries where lockdowns have started to ease.
One of the possible explanations for the slowdown in payroll in growth in recent months is that the pool of labor has shrunk to the point where employers can't find the people they want to hire. That's certainly one interpretation of our first chart, which shows that the NFIB survey's measure of jobs-hard-to-fill has risen to near-record levels even as payroll growth has slowed.
Back in the dim and increasingly distant past the semi-annual Monetary Policy Testimony--previously known as the Humphrey-Hawkins--used to be something of an event. Today's Testimony, however, is most unlikely to change anyone's opinion of the likely pace and timing of Fed action.
Fed Chair Yellen said something which sounded odd, at first, in her Q&A at the Senate Banking Committee last Tuesday. It is "not clear" she argued, that the rate of growth of wages has a "direct impact on inflation".
We have been asked recently why we rarely talk about the signal from the U.S. money supply numbers, in contrast to the emphasis we give to real M1 growth in our forecasts for economic growth in both the Eurozone and China.
If the only manufacturing survey you track is the Philadelphia Fed report, you could be forgiven for thinking that the sector is booming.
In recent client meetings the first and last topic of conversation has been the market implications of the possible departure of President Trump from office.
It's much too soon to have a very firm view on fourth quarter GDP growth, not least because almost half the quarter hasn't happened yet.
The level of new home sales is likely to hit new cycle highs over the next few months, with a decent chance that today's July report will show sales at their highest level since late 2007.
The Conference Board's index of leading economic indicators appears to signal that the U.S. economy is plunging headlong into recession.
A startlingly wide gap has emerged over the past nine months between the ISM manufacturing index and Markit's manufacturing PMI.
Core durable goods orders have not weakened as much as implied by the ISM manufacturing survey, as our first chart shows, but it is risky to assume this situation persists.
The path of new home sales over the past couple of years has followed the mortgage applications numbers quite closely.
The rational thing to do when the price of a consumer good you are considering buying is thought likely to rise sharply in the near future is to buy it now, provided that the opportunity cost of the purchase--the interest income foregone on the cash, or the interest charged if you finance the purchase with credit--is less than the expected increase in the price.
We have been bullish about the housing market for some time now--since Google searches for "new homes" and mortgage demand began to pick up, in late April--but we might not have been bullish enough.
A shutdown of the federal government, which could happen as early as this weekend, is a political event rather than a macroeconomic shock. But if it happens--if Congress cannot agree on even a shortterm stop-gap spending measure in order to keep the lights on after the 28th--it would demonstrate yet again that the splits in the House mean that the prospects of a substantial near-term loosening of fiscal policy are now very slim.
We aren't convinced by the idea that consumers' confidence will be depressed as a direct result of the rollover in most of the regular surveys of business sentiment and activity.
Chainstores are continuing to struggle, even as the reopening of the economy continues.
As we reach our deadline--4pm eastern time--media reports indicate that a debt ceiling agreement is close.
In April last year, something odd happened in the FX market.
The 17-point leap in the Richmond Fed index for October, reported yesterday, was startlingly large.
You could be forgiven for being alarmed at the 1.5% decline in the stock of outstanding bank commercial and industrial lending in the fourth quarter, the first dip since the second quarter of 2017.
In November, existing home sales substantially overshot the pace implied by the pending home sales index.
Now that the holidays are just a distant memory, the distortions they cause in an array of economic data are fading. The problems are particularly acute in the weekly data -- mortgage applications, chainstore sales and jobless claims -- because Christmas Day falls on a different day of the week each year.
Yesterday's stock market bloodbath stands in contrast to the U.S. economic data, most of which so far show no impact from the Covid-19 outbreak.
Something of a debate appears to be underway in markets over the "correct" way to look at the coronavirus data.
We think today's February payroll number will be reported at about 140K, undershooting the 175K consensus.
The 6.4-point rebound in the May ISM non-manufacturing employment index, to a very high 57.8, supports our view that summer payroll growth will be strong. On the face of it, the survey is consistent with job gains in excess of 300K, as our first chart shows, but that's very unlikely to happen.
It's hard to overstate the geopolitical importance of Friday's assassination of Qassim Soleimani, architect of Iran's external military activity for more than 20 years and perhaps the most powerful man in the country, after the Supreme Leader.
The rebound in the ISM non-manufacturing index in February was in line with our forecast, but behind the strong headline, the employment index dropped to an eight-month low.
Today's April ADP employment report likely will understate the scale of the net payroll losses which will be reported Friday by the BLS.
The final Monitor before our summer break is characterized by great uncertainty.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
Productivity likely rose by 1.7% last year, the best performance since 2010.
The ADP measure of private employment hugely overstated the official measure of payrolls in September, in the wake of Hurricane Irma, but then slightly understated the October number.
The simultaneous weakening of the ISM manufacturing and non-manufacturing surveys in recent months is one of the more disconcerting shifts in the recent macro data.
The comforting 183K increase in February private payrolls reported by ADP yesterday likely overstates tomorrow's official number.
We're very comfortable with the idea that the coronavirus is a broad deflationary shock to the U.S. economy.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
October payrolls were stronger than we expected, rising 128K, despite a 46K hit from the GM strike.
Our hopes of another solid increase in payrolls in July were severely dented by yesterday's ADP report, showing that private payrolls rose only 167K in July.
We raised our forecast for today's January payroll number after the ADP report, to 200K from 160K.
The jump in oil prices over the past two trading days eventually will lift retail gasoline prices by about 35 cents per gallon, or 131⁄2%.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
The headline NFIB index of small business activity and sentiment in July likely will be little changed from June--we expect a half-point dip, while the consensus forecast is for a repeat of June's 94.5--but what we really care about is the capex intentions componen
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
The only way to read the December NFIB survey and not be alarmed is to look at the headline, which fell by less than expected, and ignore the details.
The run of soft core CPI numbers is over. The average 0.18% increase over the past two months probably is a good indication of the underlying trend -- the prints would have been close to this pace in both months had it not been for wild swings in the lodging component -- and the other one-time oddities of recent months' have faded.
Resistance is futile.
The impending retirement of New York Fed president Dudley creates yet another vacancy on the FOMC.
Markets clearly love the idea that the "Phase One" trade deal with China will be signed soon, at a location apparently still subject to haggling between the parties.
One bad month proves nothing, but our first chart shows that October's auto sales numbers were awful, dropping unexpectedly to a six-month low.
The short answer to the question posed by our title is: We don't know. But that's the point, because we shouldn't be needing to ask the question at all.
The NFIB survey of small businesses today will show that July hiring intentions jumped by four points to +19, the highest level since November 2006. The NFIB survey has been running since 1973, and the hiring intentions index has never been sustained above 20.
The release of the NFIB survey at 6.00AM eastern time this morning--really, they need a new PR advisor--doubtless will bring a flurry of headlines about rising wage pressures, with the expected compensation index rising by a startling three points to a new post-crash high. But this is not news, nor is the high, stable level of hiring intentions; these key labor market numbers were released last week in the NFIB Jobs Report, which appears the day before the official employment report. The data are simply extracted from the main NFIB survey.
The stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
The contrast between November's very modest 67K ADP private payroll number and the surprising 254K official reading was startling, even when the 46K boost to the latter from returning GM strikers is stripped out.
The June ISM manufacturing index signalled clearly that the industrial recovery continues, with the headline number rising to its highest level since August 2014, propelled by rising orders and production. But the industrial economy is not booming and the upturn likely will lose a bit of momentum in the second half as the rebound in oil sector capex slows.
We very much doubt that Fed Chair Powell dramatically changed his position last week because President Trump repeatedly, and publicly, berated him and the idea of further increases in interest rates.
It's possible that first hints of better news ahead in the Covid surge in the South and West are beginning to emerge in the data.
Yesterday's FOMC , announcing a unanimous vote for no change in the funds rate, is almost identical to December's.
The seasonal adjustment problems which tend to drive up the national ISM manufacturing survey in late spring and summer are more or less absent from the Chicago PMI, which will be released today. As far as we can tell, the biggest short-term influence on the Chicago number is variations in the order flow for Boeing aircraft; the company moved its headquarters to the city from Seattle in 2001.
Markets expect the Fed will fail to follow through on its current intention to raise rates twice more this year and three times next year. Part of this skepticism reflects recent experience.
Before the Covid pandemic struck, the mix-adjusted measure of wages and salaries in the employment costs index was trending up by about 3.0% year-over-year.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
ADP's report that September private payrolls rose by 135K was slightly better than we expected, but not by enough to change our 150K forecast for tomorrow's official report.
We see no compelling reason to expect a significant revision to the third quarter GDP numbers today, so our base case is that the second estimate, 3.3%, will still stand.
Since its October 2012 revamp, the ADP measure of private employment--the November survey will be released this morning--has tended to be little more than a lagging indicator of the official number.That's because ADP incorporates official data, lagged by one month, into the regression which generates its employment measure.
We see no reason to think that the recent volatility in payrolls--the 311K leap in January, followed by the 20K February gain--will continue.
The number of coronavirus cases continues to increase, but we're expecting to see signs that the number of new cases is peaking within the next two to three weeks.
We are not bothered by either the drop in real December consumption, all of which was due to a weather-induced plunge in utility spending, or the drop in the ISM manufacturing index, which is mostly a story about hopeless seasonal adjustments.
We're expecting ADP today to report a 10M drop in private payrolls in May, but investors should be braced for surprises, in either direction, because ADP's methodology is not clear.
The substantial gap between the key manufacturing surveys for the U.S. and China, relative to their long-term relationship, likely narrowed a bit in December.
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
The most important number, potentially, in today's wave of economic reports is the Employment Costs Index for second quarter.
The advance indicators of July payrolls are wildly contradictory, so you should be prepared for anything from a consensus-busting jump to a renewed outright drop, in both Friday's official numbers and today's ADP report.
We have argued for some time that much of the early phase of the downturn in global manufacturing was due to the weakening of China's economic cycle, rather than the trade war.
We were worried about downside risk to yesterday's ADP employment measure, but the 67K increase in November private payrolls was at the very bottom of our expected range.
Last week's strong ISM manufacturing survey for November likely will be followed by robust data for the non-manufacturing sector today, but the headline index, like its industrial counterpart, likely will dip a bit.
Our composite index of employment indicators, based on survey data and the official JOLTS report, looks ahead about three months.
The key data originally scheduled for today--ADP employment and the ISM non-manufacturing survey, and the revised Q3 productivity and unit labor costs-- have been pushed to Thursday because the federal government will be closed for the National Day of Mourning for president George H. W. Bush.
The underlying trend in payroll growth ought to be running at 250K-plus, based on an array of indicators of the pace of both hiring and firing. The past few months' numbers have fallen far short of this pace, though, for reasons which are not yet clear. We are inclined to blame a shortage of suitably qualified staff, not least because that appears to be the message from the NFIB survey, which shows that the proportion of small businesses with unfilled positions is now close to the highs seen in previous cycles. If we're right, payroll growth won't return to the 254K average recorded in 2014 until the next cyclical upturn, but quite what to expect instead is anyone's guess.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
In the wake of April's 0.2% increase in real consumers' spending, and the upward revisions to the first quarter numbers, we now think that second quarter spending is on course to rise at an annualized rate of about 3.5%.
A pair of closely-watched reports today will confirm that business and consumer confidence is tanking in the face of the coronavirus outbreak.
We can think of at least three reasons for the apparent softness of ADP's March private sector employment reading.
Under normal circumstances, sustained ISM manufacturing readings around the July level, 54.2, would be consistent with GDP growth of about 2% year-over-year.
We aren't in the business of trying to divine the explanation for every twist and turn in the stock market at the best of times, and these are not the best of times.
The ADP employment report was on the money in October at the headline level--it undershot the official private payroll number by a trivial 6K--but the BLS's measure was hit by the absence of 46K striking GM workers from the data.
In order fully to reverse the fall in GDP in the first and second quarters, the third quarter needs to grow at a 45.7% annualized rate.
Under normal circumstances, the 0.23% increase in the core CPI, reported earlier this month, would be enough to ensure a 0.2% print in today's core PCE deflator.
Three separate stories will come together to generate today's September core CPI number. First, we wonder if the hurricanes will lift the core CPI.
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
The third straight 0.3% increase in the core CPI-- that hasn't happened since 1995--was ignored by the Treasury market yesterday, which appeared to be focusing its attention on the ECB.
The key labor market numbers from today's August NFIB survey of small businesses have already been released--they appear a day or two before the employment report--but they will be reported as though they are news. The headline hiring intentions reading dipped to nine from 12, leaving it near the bottom of the range of the past couple of years.
The run of soft-looking headline retail sales numbers in recent months--the initial estimates for February, January and December were -0.6%, -0.8% and -0.9% respectively--will end today; the March number will look solid.
We argued a couple of weeks ago that the stock market could suffer a relapse, on the grounds that valuations hadn't fallen far enough from their peak to reflect the extent of the hit to the economy; that hopes for an early re-opening were likely to prove forlorn; and that investors were likely to be spooked by the incoming coronavirus data.
The record 0.4% drop in the core CPI in April would have looked even worse had it not been for favorable rounding; it was just 0.002% away from printing at -0.5%.
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
The 0.1% dip in the core CPI in March was the first outright decline in three years, but we expect another-- and bigger--decline in today's April numbers.
The April CPI report today will be watched even more closely than usual, after the surprise 0.12% month-to-month fall in the March core index. The biggest single driver of the dip was a record 7.0% plunge in cellphone service plan prices, reflecting Verizon's decision to offer an unlimited data option.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
Turkey has all the problems you don't want to see in an emerging market when the U.S. is raising interest rates.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
So, what should we make of the fourth straight disappointment in the retail sales numbers? First, we should note that all is probably not how it seems. The 0.2% upward revision to March sales was exactly equal to the difference between the consensus forecast and the initial estimate, neatly illustrating the danger of over-interpreting the first estimates of the data.
A significant minority of investors were betting on a repeat of January's outsized 0.349% increase in the core, judging from the immediate market reaction to the release of the February CPI report.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
After last week's relatively light flow of data, today brings a wave of information on both the pace of economic growth and inflation. The markets' attention likely will fall first on the September retail sales numbers, which will be subject to at least three separate forces. First, the jump in auto sales reported by the manufacturers a couple of weeks ago ought to keep the headline sales numbers above water.
We were right about the below-consensus inflation numbers for June, but wrong about the explanation. We thought the core would be constrained by a drop in used car prices, while apparel and medical costs would rebound after their July declines.
Retail sales have lost steam over the past couple of months, even if you look through the headline gyrations triggered by swings in auto sales and gasoline prices.
April's impressive-looking retail sales numbers--the headline jumped 1.3%, with non-auto sales up 0.8%--were boosted by two entirely separate factors, one of which will play no p art in May and one which will offer very modest support. The key lift in April came from the very early Easter, which confounded the seasonal adjustments, as it usually does.
The wave of May data due for release today likely will go some way to countering the market narrative of a seriously slowing economy, a story which gained further momentum last week after the release of the May employment report.
Our base case is that the core CPI rose 0.2% in December, but the net risk probably is to the upside. We see scope for significant increases in sectors as diverse as used autos, apparel, healthcare, and rent, but nothing is guaranteed.
We have no real argument with the consensus forecasts for the January CPI, with the headline likely to rise by 0.3%, with the core up 0.2%.
Today brings a huge wave of data, but most market attention will be on the June CPI, following the run of unexpectedly soft core readings over the past three months.
We are a bit uneasy about today's data on economic activity. The NFIB index of activity in the small business sector is likely to undershoot consensus expectations, while retail sales are something of a black hole, at least at the core level, where we have no reliable month-to-month advance indicators. Our bullish view on the underlying state of the economy, and its likely second-half performance, hasn't changed, but perceptions count in the short-term and these reports will help set the market mood just ahead of Chair Yellen's Testimony tomorrow.
The Fed was more hawkish than we expected yesterday.
The Fed will hike by 25 basis points today, but what really matters is what they say about the future, both in the language of the statement and in the dotplot for this year and next.
The reported rebound in January retail sales was welcome, but the overshoot to consensus was matched, more or less, by the unexpected downward revisions to the December numbers.
Sooner or later, the surge in consumers' spending power triggered by the drop in gas prices and the acceleration in payrolls will appear in the retail sales data.
The collapse in oil prices was the immediate trigger for the 7.6% plunge in the S&P 500 yesterday, but the underlying reason is the Covid-19 epidemic.
For some time now, we have puzzled over the softness of small firms' capital spending intentions, as measured by the monthly NFIB survey.
The key labor market numbers from today's February NFIB report on small businesses--hiring intentions and the proportion of firms with unfilled job openings--were released last week, as usual, ahead of the official jobs report.
Investors and market observers of a relatively bearish persuasion argued over the weekend that the details of the October employment report were less encouraging than the headline, principally because the household survey showed that all the job growth, net, was among older workers, defined as people aged 55-plus. This, they argue, suggests that most of the increased demand for labor was concentrated in low-paid service sector jobs, where older workers are concentrated, perhaps reflecting retail hiring ahead of the holidays. Such a wave of hiring is unlikely to be repeated over the next few months, so payroll growth won't be sustained at its October pace.
The likely dip in the headline NFIB index of small business sentiment and activity today will tell us that business owners are unhappy and nervous about the potential impact of the latest China tariffs on their sales and profits.
Our hopes of a hefty rebound in payrolls in October, following the hurricane-hit September number, have been dashed by the imminent landfall of Hurricane Michael in Florida panhandle.
For some time now we have argued that collapse in capital spending in the oil sector was the source of most of the softening of activity in the manufacturing and wholesaling sectors last year.
Our forecast of a solid 190K increase in headline December payrolls ignores our composite employment indicator, which usually leads by about three months and points to a print of just 50K or so.
The underlying U.S. consumer story, hidden behind a good deal of recent noise, is that the rate of growth of spending is reverting to the trend in place before last year's tax cuts temporarily boosted people's cashflow.
The first major data release of 2016 showed manufacturing activity slipping a bit further at the end of last year, but we doubt the underlying trend in the ISM manufacturing index will decline much more. Anything can happen in any given month, especially in data where the seasonal adjustments are so wayward, but the key new orders and production indexes both rose in January; almost all the decline in the headline index was due to a drop in the lagging employment index.
We expect to see a 70K increase in October payrolls today.
The pressures on U.S. manufacturers are changing. For most of this year to date, the problem has been the collapse in capital spending in the oil business, which has depressed overall investment spending, manufacturing output and employment. Oil exploration is extremely capital-intensive, so the only way for companies in the sector to save themselves when the oil prices collapsed was to slash capex very quickly.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
Retail sales ex-autos have undershot consensus forecasts in eight of the 11 reports released so far this year, prompting interest rate doves to argue that consumers have not spent their windfall from falling gas prices. But this ignores the impact of falling prices--for gasoline, electronics, furniture, and clothing--on the sales numbers, which are presented in nominal terms.
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
Today's JOLTS survey covers August, which seems like a long time ago. But the report is worth your attention nonetheless.
The overshoot in the November core PPI does not change the key story, which is that PPI inflation, headline and core, is set to fall sharply through the first half of next year, at least.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
We're very interested in the detail of today's January NFIB survey; the headline index, not so much.
You might remember that the December retail sales report surprised significantly to the downside, thanks to the impact of falling gasoline prices. The data are reported in nominal dollars, not volumes, so falling prices depress the numbers.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
The 20K increase in February payrolls is not remotely indicative of the underlying trend, and we see no reason to expect similar numbers over the next few months.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
The next few months, perhaps the whole of the first quarter, are likely to see a clear split in the U.S. economic data, with numbers from the consumer side of the economy looking much better than the industrial numbers.
Before last November's election, movements in the headline NFIB index of activity and sentiment among small businesses could be predicted quite reliably from shifts in the key labor market components, which are released in advance of the main survey.
Core PPI inflation has risen relentlessly, though not rapidly, over the past two-and-a-half years.
In three of the past four months, new home sales have been reported above the 460K top of the range in place since early 2013. Sales dipped below this mark in November, when the weather across the country as a whole was exceptionally cold, relative to normal.
It's just not possible to forecast the reaction of businesses and consumers to the coronavirus outbreak.
Today brings a wave of data which will help analysts narrow their estimates for first quarter GDP growth, and will offer some clues, albeit limited, about the early part of the second quarter.
The 0.8% jump in nominal November retail sales is consistent with a 0.4% rise in real total consumption, which in turn suggests that the fourth quarter as a whole is likely to see a near-3% annualized gain.
The next couple of rounds of business surveys will capture firms' responses to the Phase One trade deal agreed last week, though the news came too late to make much, if any, difference to the December Philly Fed report, which will be released today.
Today brings the September housing construction report, which likely will show that activity was depressed by the hurricanes.
In the short-term, all the housing data are volatile. But you can be sure that if the recent pace of new home sales is sustained, housing construction will rise.
Following our note yesterday about upside risks to wage growth and the question of how the Fed will respond, given their sensitivity to labor cost-push inflation risk in the past, we want to address a question raised by readers.
As the impeachment hearings gather momentum, we have been asked to provide a cut-out-and-keep guide to the possible outcomes.
Fed Chair Powell's comment on Sunday's "60 Minutes", that a recovery in the economy "may take a while... it could stretch through the end of next year" did not prevent a 3% jump in the S&P 500 yesterday.
The declines in headline housing starts and building permits in September don't matter; both were driven by corrections in the volatile multi-family sector.
The establishment of the Fed's commercial paper funding facility, announced yesterday, replicates the first wave of asset purchases undertaken after the crash of 2008.
As we reach our deadline on Sunday afternoon, eastern time, Tropical Storm Florence continues to dump vast quantities of rain on the Carolinas, and is forecast to head through Kentucky and Tennessee, before heading north.
The first October survey evidence from the industrial economy, in the form of the Empire State report, is remarkably strong.
Boeing's announcement that it will temporarily cut production of 737MAX aircraft to zero in January, from the current 42 per month pace, will depress first quarter economic growth, though not by much.
Hot on the heels of yesterday's news that the NAHB index of homebuilders' sentiment and activity dropped by two points this month -- albeit from December's 18-year high -- we expect to learn today that housing starts fell last month.
The chainstore sales numbers have been hard to read over the past year.
The monthly industrial production numbers are collected and released by the Fed, rather than the BEA, so today's December report will not be delayed by the government shutdown.
The September NAHB survey, released yesterday, shows, that the housing market took a knock from the hurricanes but the damage, so far at least, appears to be contained.
We were happy to see the small increase in the March ISM manufacturing index yesterday, following better news from China's PMIs, but none of these reports constitute definitive evidence that the manufacturing slowdown is over.
The initial pace of the Fed's balance sheet run-off, which we expect to start in October, will be very low. At first, the balance sheet will shrink by only $10B per month, split between $6B Treasuries and $4B mortgages.
The single most important number in the housing construction report is single-family permits, because they lead starts by a month or two but are much less volatile.
We would be astonished if the FOMC meeting starting today does not end with a 25bp rate hike.
Fed Chair Powell broke no new ground in his Senate Testimony alongside--virtually--Treasury Secretary Mnuchin yesterday, maintaining the cautious tone of his recent public statements.
Under normal circumstances, the boost to consumption from the astonishing collapse in oil prices would act as a substantial--though not complete--offset to the hit to capital spending in the shale business.
The recent increases in single-family housing construction are consistent with the rise in new home sales, triggered by the substantial fall in mortgage rates over the past year.
Halfway through the third quarter, we have no objection to the idea that GDP growth likely will exceed 2% for the third straight quarter.
The inevitable--more or less--correction from August's 14-year high is no big deal.
While were out over the holidays, the single biggest surprise in the data was yet another drop in imports, reported in the advance trade numbers for November.
We're reasonably happy with the idea that business sentiment is stabilizing, albeit at a low level, but that does not mean that all the downside risk to economic growth is over.
The May auto sales numbers probably will be released just after our deadline at 4pm eastern time today, but all the signs are that a hefty rebound will be reported after April's plunge to just 8.6M, not much more than half the pre-Covid level.
Markets weren't impressed by the sub-consensus consumption numbers for April, reported yesterday, but the undershoot was all in the we ather-related utility component, where spending plunged 5.1% month-to-month. The process of post-winter mean reversion is now complete.
March auto sales were much weaker than expected, falling by 5.5% month-to-month to a 25-month low, 16.5M. The average for the previous six months was 17.8M. The sudden drop in March likely was driven in large part by the huge snowstorm which tracked across the Northeast in the middle week of the month, so we think a decent rebound in April is a good bet.
The number of Covid-19 cases is increasing at a faster rate, though 89% of the new cases reported Saturday were in China, South Korea, Italy and Iran.
The GM strike will make itself felt in the September industrial production data, due today.
Evidence in support of our view that the U.S. industrial slowdown is ending continues to mount, though nothing is yet definitive and the re-escalation of the trade war is a threat of uncertain magnitude to the incipient upturn.
Momentum in the rebound in economic activity has faded over the past couple months, housing and auto sales aside.
The New York Times called the China trade agreement reached Friday "half a deal", but that's absurdly generous.
Today's wave of data will be mixed, but most of the headlines are likely to be on the soft side, so the reports are very unlikely to trigger a wave of last minute defections to the hawkish side of the FOMC. As always, though, the headlines don't necessarily capture the underlying story, and that's certainly been the case with the retail sales data this year. Plunging prices for gas and imported goods, especially audio-video items, have driven down the rate of growth of nominal retail sales, but real sales have performed much better.
We are not concerned by the slowdown in retail sales over the past few months.
The "Phase One" China trade deal announced late last week is a step in the right direction, but a small one. With no official text available as we reach our deadline, we're relying on media reporting, but the outline of the agreement is clear.
July's retail sales report signalled a good start to the third quarter but also implied that second quarter spending was stronger than previously thought. The upward revisions--totalling 0.5% for total sales and 0.4% for non-auto sales--were the biggest for some time, but we were not unduly surprised.
Consumption accounts for almost 70% of GDP, and retail sales account for about 45% of consumption.
A modest dip in gasoline prices will hold down the October CPI, due today, but investors' attention will be on the core, after five undershoots to consensus in the past six months.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
We can't remember the last time a single economic report was as surprising as the December retail sales numbers, released yesterday.
After a very light week for economic data so far, everything changes today, with an array of reports on both activity and inflation. We expect headline weakness across the board, with downside risks to consensus for the December retail sales and industrial production numbers, and the January Empire State survey and Michigan consumer sentiment. The damage will b e done by a combination of falling oil prices, very warm weather, relative to seasonal norms, and the stock market.
The story of U.S. retail sales since last summer is mostly a story about the impact of the hurricanes, Harvey in particular.
The rate of growth of nominal core retail sales substantially outstripped the rate of growth of nominal personal incomes, after tax, in both the second and third quarters.
Our current base-case forecast for the second quarter is a 30% annualized drop in GDP, based on our assessment of the hit to discretionary spending by both businesses and consumers.
Ahead of the release of the retail sales report for December 2018, markets expected to see unchanged non-auto sales.
The most important retail sales report of the year, for December, won't be published today, unless some overnight miracle means that the government has re-opened.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
The November industrial production numbers will be dominated by the rebound in auto production following the end of the GM strike.
On the face of it, the December core retail sales numbers were something of a damp squib. The headline numbers were lifted by an incentive-driven jump in auto sales and the rise in gas prices, but our measure of core sales--stripping out autos, gas and food--was dead flat. One soft month doesn't prove anything, and core sales rose at a 3.9% annualized rate in the fourth quarter as a whole.
We were not hugely surprised to see stocks tank again yesterday.
Last week, the MBA's measure of the volume of applications for new mortgages to finance house purchase rose 1.7%.
The February industrial production numbers were flattered by an enormous 7.3% jump in the output of electricity and gas utility companies, thanks to a surge in demand in the face of the extraordinarily cold weather. February this year was the coldest since at least 1997, when comparable data on population weighted heating degree days begin.
We have been quite bullish on U.S. economic growth this year.
The softness of the headline September retail sales numbers hid a decent 0.5% increase in the "control" measure, which is the best guide to consumers' spending on non-durable goods.
The weekly initial jobless claims numbers have been a useful proxy for the real-time performance of the economy since Covid-19 struck.
Today's brings the June retail sales and industrial production reports, after which we'll update our second quarter GDP forecast.
The two marquee economic reports today, covering May retail sales and industrial production, will capture the initial rebound after the economy hit bottom sometime in mid-April.
We are not worried about the reported drop in April manufacturing output, which probably will reverse in May.
All the key measures of retail sales have returned to the trends in place before the Covid pandemic, thanks to the enhanced unemployment benefits paid to people who lost their jobs during lockdowns, and the one-time stimulus payments under the CARES Act.
Tariffs are a tax on imported goods, and higher taxes depress growth, other things equal.
After two big monthly gains in existing home sales, culminating in October's nine-year high of 5.60M, we expect a dip in sales in today's November report. This wouldn't be such a big deal -- data correct after big movements all the time -- were it not for the downward trend in mortgage applications.
We are a bit troubled by the persistent weakness of the Redbook chain store sales numbers. We aren't ready to sound an alarm, but we are puzzled at the recent declines in the rate of growth of same-store sales to new post-crash lows. On the face of it, the recent performance of the Redbook, shown in our first chart, is terrible. Sales rose only 0.5% in the year to July, during which time we estimate nominal personal incomes rose nearly 3%.
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