Sunday, October 12, 2014

U.S. Economic Update...

With just a handful of soft (or softening) readings---consumer credit, wholesale inventories (one to keep a close eye on) and maybe oil and gas inventories ("maybe" meaning it depends on whether you're more concerned with the energy exposure in your portfolio or the gas in your tank), and I'll throw in WoW (week over week) retail sales [although YoY (year over year) they fall in the expansionary range]---last week's data shows the U.S. economy continuing to improve against the headwinds of a weak Euro Zone and a China that looks not to achieve its growth goal for 2014.

As I've suggested here over the past few weeks, I see much of the present stock market angst resulting from concerns over how the forward outlooks, by company, will shape up during the third quarter earnings reporting season, which is just underway. I.e., U.S. exporters are likely to ratchet down expectations, citing a hampering of international sales due to the stronger dollar.

The effect of the strong dollar is definitely containing import price inflation (see last entry below), which was cited in the September Fed minutes (released last Wednesday) as a concern with regard to meeting their 2 percent inflation target. One could legitimately add that last entry to my list of softening indicators, or one could couch it as ultimately a domestic economy stimulator. I'll leave that one up to you...

During the past few weeks analysts had been bringing down their Q3 earnings estimates---i.e., lowering the bar---which makes it all the more likely that we'll see yet another earnings season where two-thirds or so beat the estimates. Whether or not earnings themselves will suffice to jolt the market back to its positive trend remains to be seen. A stock market commentary is forthcoming...

Here are the highlights from last week's log:

 OCTOBER 6, 2014

THE CONFERENCE BOARD EMPLOYMENT TRENDS INDEX. up 6.1% YoY, offers yet another indication that the U.S. jobs picture is improving. From the press release: 

September’s increase in the ETI was driven by positive contributions from six of its eight components. In order from the largest positive contributor to the smallest, these were: Industrial Production, Real Manufacturing and Trade Sales, Initial Claims for Unemployment Insurance, Ratio of Involuntarily Part-time to All Part-time Workers, Number of Temporary Employees, and Job Openings.

OCTOBER 7, 2014

ICSC RETAIL SAILS (CHAIN STORE) WoW were up .1% and up 3.9%. From Econoday's commentary:

Store sales edged higher in the October 4 week, up 0.1 percent for a plus 3.9 percent year-on-year same-store pace vs plus 3.6 percent in the prior week. Cool weather helped sales of fall apparel in the week. Looking back at September as a whole, ICSC-Goldman is calling for a very strong year-on-year gain of 5 to 6 percent. Redbook will post its results later this morning at 8:55 a.m. ET.

THE JOHNSON REDBOOK retail sales number came in down .3% MoM. They remain up an expansionary 5.4% YoY...

THE JOLTS (job openings and labor turnover) REPORT showed yet another increase in job openings. Job openings are now at their highest level since January 2001. That speaks hugely about the improving employment picture...

To the disappointment of many, not necessarily moi (although I understand the sentiment), CONSUMER CREDIT OUTSTANDING declined slightly. Here's Econoday's commentary:

Revolving credit outstanding had been edging higher in what had been a good indication for consumer spending but not in August, slipping $0.2 billion to end five straight months of gains. Non-revolving credit outstanding, boosted by strong vehicle sales and the government's continued acquisition of student loans from private lenders, rose yet again, up $13.7 billion for the 36th straight month of increase. But the gain for the non-revolving component is the smallest since January and, combined with the slippage in revolving credit, made for a lower-than-expected total increase of $13.5 billion. This compares with Econoday expectations for $20 billion and is the lowest total increase since November. The consumer sector, the largest sector of the economy, has not been a stand-out contributor which has held back the recovery in general, and part of this drag is a reluctance among consumers to borrow.

OCTOBER 8, 2014

MORTGAGE APPS increased last week to the best level since July. Speaks positively to home sales in the near-term.

THE EIA OIL STATUS REPORT shows a weekly increase in crude oil inventories. Which of course puts more downward pressure on the price. However, refinery maintenance season (now) reduces refinery demand and can lead to a short-term inventory buildup.

OCTOBER 9, 2014

WEEKLY JOBLESS CLAIMS continues to show a marked improvement in the labor market. From Econoday's commentary:

Improvement is convincing in jobless claims where lower levels spell lower levels for unemployment readings. Initial claims edged 1,000 lower to a lower-than-expected 287,000 in the October 4 week while the 4-week average fell a very sharp 7,250 in the week to 287,750. From a month ago, the average is down 7,500 which is a comparison that offers an early hint of strength for the October employment report. The average is also at a new recovery low, its lowest level since February 2006.

Continuing claims, which are reported with a 1-week lag, tell the same story. Continuing claims in the September 27 week fell 21,000 to 2.381 million for a new recovery low while the 4-week average fell 28,000 to a new recovery low of 2.414 million. The unemployment rate for insured workers is unchanged for a 4th straight week at a recovery low of 1.8 percent.

WHOLESALE INVENTORIES rose noticeably in August. That's not a good sign of go-forward economic growth, as higher inventories can be a negative for future production.

NATURAL GAS INVENTORIES rose 105 billion cubic feet in the October 3 week to 3,205 bcf. Rising inventories is conducive to lower prices.

THE BLOOMBERG CONSUMER COMFORT INDEX climbed last week by the most since mid-November. This one, which, albeit, is a very volatile indicator, is the brightest bit of data coming out today.

OCTOBER 10, 2014

Falling IMPORT AND EXPORT PRICES confirm the view that there is literally no inflation on the near-term horizon. 

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