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Archive for the ‘Data Release’ Category

Retail Sales Just Ain’t What They Used To Be:

May 14th, 2010 Michael McDonough Comments off
On the surface the investors should be celebrating April’s higher than estimated retail sales growth, but a look behind the curtain reveals a slightly different picture.  The retail sales control group, which the government uses to calculate GDP, actually fell -0.2% during the month, its first decline since July 2009 (see chart).  The control group factors out sales for autos, gas, and building materials. 

Source: Bloomberg

Additionally, overall gains were not nearly as broad-based as many had hoped.  Building materials (+6.9% m/m), was the only component to show significant growth, followed by health and personal care sales that rose by a meager +0.9%.  Sales of furniture, electronics, clothing, and general merchandise all fell during the month.  Some good news did come from upward revisions to the first quarter sales data that will provide some tailwinds for the second estimate of first quarter GDP growth originally estimated at 3.2%.  Nevertheless, the weakness behind this report will likely do little to help significantly bolster business confidence; keeping companies hesitant about hiring additional full-time employees.

Source: Bloomberg
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One Month’s Not a Trend, But January’s Trade Data Could Point To A Slowdown in Global Trade

March 11th, 2010 Michael McDonough Comments off

Trade, the life blood of the global economy, has begun rebounding nicely since the trough of the global economic crisis.  But, January’s US trade data unexpectedly displayed a decline in both exports–the first decline in nine months–and imports, leading to a smaller US trade deficit, but also implying a potential slowdown in global trade.  As I said, one month does not indicate the start of a trend, but this is something that should be monitored moving forward.  The chart below illustrates the relationship between the U.S. trade deficit and the Baltic Exchange’s Baltic Dry Index (BDI).  As you can see the sharp decline in the US trade deficit during the economic crisis–indicative of a slowdown in global trade–coincided with a collapse in shipping rates as measured by the BDI.

US Trade Deficit (White Line) vs. the BDI (orange Line):

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Temp Employment Pointing Toward Robust Payrolls

March 5th, 2010 Michael McDonough Comments off

Non-farm payrolls fell -36K, handily beating the latest consensus forecast of -68K. The unemployment rate was steady at 9.7%.  The market can expect some volatility from government census worker hirings over the months ahead.  The effect should be positive for the next couple months, but eventually turn negative as these workers are let go.

One of the bigger surprises in the report was a +1,000 increment in manufacturing payrolls, versus and expected decline of -15,000. Manufacturing’s is a much smaller portion of the U.S. economy compared to years past, but still holds much of the economy’s cyclicality.

Looking at temp employment, one of my favorite leading indicators toward payrolls, we can see a strong upward trend beginning in September 2008.  As the chart below illustrates, temp employment, the white line, began falling well before total payrolls, the white line,  during the recent economic crisis.  But, since September temp employment has begun to surge.  Temp employment growth could eventually lead to a jump in total payrolls, as companies who are optimistic, yet uncertain, about the future tend to hire temps before actually filling full time positions.  Temps are also the first employees to be let go as companies become pessimistic, yet uncertain, about the future.  284K temps have been hired since September’s low.

Total Payrolls (orange line) vs. Temp Employment (white line)

Source: Bloomberg

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ISM Disappoints, While Market Maintains its Gains

March 1st, 2010 Michael McDonough Comments off

The February’s manufacturing ISM slipped to 56.5, versus a 58.4 a month prior.  Disappointing the latest Bloomberg consensus forecast of 58.0.  Any level over 50 signifies expansion in the sector.  I continue to believe that as inventory restocking begins to slow the ISM manufacturing index will suffer as 2010 progresses.  That is without a new source of demand for manufactured goods, which does not appear to be on the short-term horizon.

Looking at the ISM’s components, prices paid fell to 67.0 from 70.0, the employment index climbed to 56.1 from 53.3, and the new orders index declined to 59.5 from 65.9. A jump in the employment index could bode well for this Friday’s employment report, which could be battered by weather related effects.

Manufacturing ISM & ISM Employment Index

Source: Bloomberg

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Bumpy Road Ahead For Housing

February 26th, 2010 Michael McDonough Comments off

This morning’s disappointing new home sales release for January reiterates the trend I outlined in my piece published on Real Money this morning titled ‘Housing Recovery Starts to Buckle’. I continue to believe housing will face a number of hurdles this year, and is unlikely to enjoy anything more than a modest, though bumpy, recovery.

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Jobless Claims Hit a Roadblock

February 25th, 2010 Michael McDonough Comments off

What had been an improving trend in initial jobless claims has hit a roadblock with claims rising this morning to by 22K to 496K .  Recent volatility can be attributed to everything from weather to a backlog of claims in California, but in the end still points to further deterioration for the monthly employment report.  Typically, initial claims would need to fall to a level below the 400K to in order to support gains in non-farm payrolls.  Prior to December most believed this would be a reality in the near-future, but with claims now struggling to move below 450K the market will have to wait.

Unfortunately, the same bad weather that impacted claims in February will likely have a similar impact on the month’s payroll data.  In January payrolls declined by -20K, and I expect this decline will be even greater in February.  I expect the market will need to wait yet another month before receiving data supporting a nascent recovery for the labor sector.

Initial Claims vs. Unemployment Rate

Source: Bloomberg

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A Bad Day for New Home Sales

February 24th, 2010 Michael McDonough Comments off

January’s record low new home sales data has made it fairly obvious the government’s extended/expanded home buyer tax credit has yet to have a significant impact on the sector.  The pace of new home sales plummeted by 11.2% to a level of 309K in January.  The months supply of new homes rose sharply reaching 9.1 months, versus 8.0 months in December. The median new home price in January fell to $203,500 from $215,600 .  (See Charts)

New Home Sales vs. Months Supply

Source: Bloomberg

Median New Home Price vs. Unsold Homes

Source: Bloomberg

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Housing Market Faces Headwinds

February 23rd, 2010 Michael McDonough Comments off

This morning the Case-Shiller HPI dropped by -1.1% in Q4 on a non-seasonally adjusted basis. The index was down -2.51% on an annual basis. This compares to a 3.31% quarterly rise in the third quarter.  I continue to believe that housing prices will come under continued pressure throughout 2010 after the expiration of the government’s new extended/expanded home buyer tax credit and upward pressure on mortgage rates as the Fed cease buying agency MBS.

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A Mixed Payroll Picture

February 5th, 2010 Michael McDonough Comments off

January’s non-farm payrolls fell by -20K, compared to a Bloomberg consensus forecast of an increase of +15K. December’s release was revised down to -150K from -85K, while November’s number was revised up to +64K from its original release of +4K. January’s unemployment rate unexpectedly fell to 9.7%, from 10.0%–driven by a shrinking workforce.  Keep in mind that once the labor market begins to improve many of these discouraged workers will begin to move back into the labor force, having the opposite effect on the unemployment rate.

Looking at the details; manufacturing payrolls rose in January 11K, after 25 months of declines, this echoes improvements in the ISM, which I believe could come under some pressure during the first half of this year (for more on this please see my piece being published later today).  The service sector added 40K jobs.  The construction sector lost an additional 75K jobs, likely due to cold weather, which likely also show up in the month’s construction activity indices and housing starts.

Government jobs declined -8K, mostly due to losses on the state and local front, which was offset by a 33K increase on the federal front–a portion of which are temporary census workers.  There was some good news on the temporary job front–generally accepted as a good forward looking indicator–, which rose 52K during the month.

Finally, a longer average workweek (33.3 hours from 33.2) may indicate companies are moving some part-time employees back to full time, which could be an eventual prelude to hiring.  At the same time, average hourly earnings rose 0.3%  during the month.  Combined this should help bolster personal income during the month by around 0.5%.

I do not believe this report will have any major impact on the FOMC’s next meeting scheduled for March 16th.  While unemployment improved the Fed is still fully aware of the amount of slack in the system, and the relatively tepid growth outlook for the U.S. in 2010.

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Non-Manufacturing ISM Remains Subdued in January

February 3rd, 2010 Michael McDonough Comments off

Janurary’s non-manufacturing ISM release rose modestly to 50.5 versus 49.8 in December. This was just below the Bloomberg consensus forecast of 51.0. The employment index rose to 44.6 from 43.6, while the prices paid index climbed to 61.2 from 59.6.  The new orders index took a bit of a bounce in January moving to 54.7 versus 52.0 a month prior, which could help to bolster the index next month.  Growth in the service sector, unlike manufacturing, has been relatively subdued over the past six months with the index bobbing around the 50 break-even point since August.  This report is further evidence of uneven economic growth and the fragility of the current economic recovery.

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