Retail

 

ICSC-Goldman Store Sales

 

Chain Store Sales - Week/Week +0.1%. Previous was -1.4%
Chain  Store Sales - Year/Year 3.9%. Previous was 2.8%.

 

Redbook

 

Store Sales Year/Year change +2.0%. Previous was +2.5%.

This is a measure or retail sales at chain stores, discounters and department stores.

These two reports are further indications that conmsumer spending remains restrained.

 

Consumer Confidence (January 2012)

 

Consumer Confidence 61.1 - Previous was 64.5  The weakness was felt most in the jobs market where 43.5% say jobs are hard to get.  Again - this is a survey of people's opinions.  Confidence always gets slapped down when gas prices rise.

 

This data comes from a survey of consumers by the Conference Board. It is supposd to measure predisposition to spend.

 

Graph here:  http://mam.econoday.com/showimage.asp?imageid=21999

 

Housing

 

Case-Shiller Home Price Index

 

20-city, Seasonally Adjusted  - Month/Month -0.7 %
20-city, Not Seasonally Adjusted - Month/Month -1.3 %
20-city, Not Seasonally Adjusted - Year/Year -3.7 %

 

Home prices in the cities surveyed are still falling. 17 of the 20 cities showed lower prices.

 

Graph here:  http://mam.econoday.com/showimage.asp?imageid=21995

 

Employment Cost Index

 

ECI - Quarter/Quarter change +0.4%
ECI - Year/Year change +2.0%

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=21993

 

Chicago PMI

 

Business Barometer Index - 60.2.  Previous was 62.5.

 

This still shows expansion.  We continue to have manufacturing show health while retail wanes.  The disconnect between wholesale and retail will be fixed either bt retail picking up or wholesale slowing to allow inventory to be sold.  This was the same picture we saw in last week's GDP where the wholesale component of GDP was +2.35% Q/Q while the retail (consumer goods) portion was +1.34%.  In the GDP report Consumer Services were even worse at +0.1%. 

 

Graph here: http://mam.econoday.com/showimage.asp?imageid=21997

 

 

 

Personal Income & Expenses (December 2011)

 

- Personal Income - Month/Month change +0.5 %.  Previous was +0.1%.  Consensus was +0.4%.
- Personal Income - Year/Year +3.8%
- Consumer Spending - Month/Month 0.0%
- Consumer Spending - Year/Year +3.9%

 

This is another indication of a flattening of GDP. 

 

Dallas Federal Reserve Manufacturing Survey

 

General Business Index 15.3.  Previous was -1.3.  Consensus was 1.0.
Production Index 5.8.  Previous was 0.2.

 

The report is here.

 

We may be seeing another case of business getting ahead of the consumer.

 

Treasuries are rallying (higher prices, lower yields) as the Greek debt crisis continues to go unresolved.

 

 

GDP

 

This is the first look at 4thQ2011 GDP. This advance estimate has the disadvantage of having only 2 of 3 months data for many of the components.  BEA estimates the third month.

 

Headline is +2.8% growth.  Being this far into what is supposed to be recovery, +2.8% is weak.  Much of the increase was in private inventories.  This is business getting in front of the consumer and if the consumer does not keep place inventory levels will shrink.  Consumer spending was +2.0% in 4thQ2011.

 

We must also note that the leading indicator produced by Consumer Metrics Institute spiked up in June and July and with that leading GDP by three months we saw growth in consumer spending at the start of the 4thQ2011 but that growth subsided.  Consumer Spending in October was +0.7% and in December it had tapered to +0.1%.  The data says that during this 4thQ2011 the consumer slowed spending month-to-month. With the Consumer Metrics Institute index remaining low at present we are likely to see very flat GDP in the present quarter.

 

GDP is not simply about the consumer.  For 2011 all government spending (Federal, state and local) dropped 2.1%.  This is the largest drop in the past 40 years.  The collapse of the housing bubbles and subsequent reduction in real estate taxes have been tough on local governments.  Increasing local real estate tax rates is a sure formula for driving away businesses and sending real estate into disrepair.  Good examples are much of upstate New York and the City of Baltimore.

 

When I first stated writing this, WSJ painted a rosy picture of 4thQ2011 GDP in its online headline.  That is now scaled back to "U.S. Expands, but Concerns Persist." 

 

The sad fact is that current fiscal policy cannot be sustained unless we have GDP growth of about 4.5% and that appears to not be happening any time soon.

 

This GDP report and what is happening in the EU are prefigurations of a very long period of economic stagnation.

 

The only good news is the likelihood of lower rates.

Jobs

 

- Initial Jobless Claims 377,000
- Previous was 352,000.  Consensus was 370,000
- 4-week moving Average is 377,500

 

The bouncy week-to-week is an effect created in part by the 4-day week for Christmas, New Year's Day and the MLK holiday.  That said a 4-week average of 377,500 does not indicate a healthy labor market.  Keep in mind that a large percent of Jobless Claims are laid off temps.

 

Durable Goods Orders (December 2011)

 

New Orders - Month/Month  3.0%
Ex-transportation - Month/Month +2.1%

 

This is indicative of continued growth in manufacturing.

 

New Home Sales (December 2011)

 

New Home Sales 307,000.  Previous was 315,000 consensus was 320,000.  This data is the seasonally adjusted annualized rate.  No surprise here - this is still weak.

 

Leading Economic Indicators

 

Leading Indicators - Month/Month change +0.4%.

 

Forget the data here.  What is notable is that money supply has been removed from LEI.  This goes hand-in-hand with yesterday's FOMC announcement that short-term rates would stay where they are for at least 2 more years.  This is an admission that monetary policy has been ineffective as a stimulation force on the economy.  That is, to me, an astonishing admission.

 

Chicago Fed Index of National Activity

 

Index level was +0.17 for December

 

Kansas City Fed Regional Manufacturing Index

 

Level was +7 for December

 

GDP

 

I want to correct what I wrote yesterday about the forecast for GDP.  The Consumer Metrics index spiked in June-July.  Since this seems to lead GDP by three month this indicates a fairly strong (3.5% or more) increase in 4thQ2011 GDP.  The subsequent slide down in the Consumer Metrics Index indicates a weak 1stQ2012.

 

Mortgage Applications

 

 
Purchase Index - Week/Week -5.4%
Refinance Index - Week/Week -5.2%
Composite Index - Week/Week -5.0%

 

This week-to-week data is clouded at the start of the year by the Christmas, New Year, and MLK holidays.  It can also be affected by winter storms.  "Believe me Mr. & Mrs. Smith, I assure you that under that snow is a beautiful 3 bed, 3 bath home."

 

Pending Home Sales (for December 2011)

 

Pending Home Sales Index - Month/Month -3.5%
Pending Home Sales Index - Year/Year +5.6%

 

Pending Home Sales should be a leading indicator for Existing Home Sales.

 

FHFA House Price Index (November 2011)

 

Price Index Month/Month +1.0%
Price Index Year/Year -1.8%

 

The previous index was -0.7% month/month.

 

The housing market is is the "just barely recovering" mode.  It is still cursed by a real oversupply and a substantial shadow inventory of home on which the owners are not making payments.

 

The SOTU speech seemed to indicate that the President was suggesting expanding HARP 2.0 to include refinancing of loans not already owned by FNMA or FHLMC.  The problem with HARP 2.0 is that lenders are still reticent to take on loans with LTV > 105%.  There are at least two reasons 1) even if the lender is shielded from losses there are significant costs associated with foreclosures.  Foreclosures tie up cash.  2) the bad publicity is still implicitly there.  Foreclosures have generated enormous losses of cash and enormous negative PR for banks.

 

The stronger underwriting rules (the "runaround" referred to) have been created not by the banks but by FHFA.  The head of FHFA sees as his charter minimizing losses to Treasury on the FNMA/FHLMC portfolio.  Those stricter rules are a large part of the runaround.  Blaming the situation on banks may function as an election strategy but those rules are not helping homeowners or the housing market.

FOMC

 

The FOMC meeting starts today.  What is interesting is that "regular" monetary policy - the setting of short-term rates and money supply has been  ineffective over the past few years.  Post-Lehman it was only the massive liquidity interventions of the Fed which kept the recession from becoming much worse.  Increased money supply and low rates have done little to help GDP since then. 

 

Retail

 

ICSC-Goldman

 

Chain Store Sales - Week/Week change-1.4 %
Chain Store Sales - Year/Year +2.8 %.  Previous was +3.0%

 

Redbook

 

Chain Store Sales Year/Year +2.5%.  Previous was +2.8%

 

This year is not starting well.  The Consumer Metrics Absolute Demand Index (this measures online discretionary spending) remains soft.  It moved upward nicely last June-July giving hope that the consumer would lead the way to GDP growth but the index has waned since then. The question is just how well this index forecasts GDP.  If the Consumer Metrics Index is an accurate forecast of GDP then 4thQ2011 will report worse than anticipated.

There are no fundamentals today.

 

This week's big news is prelmninary 4thQ2011 GDP Friday.  Expectation is for just over 3%.  It is worth noting that 3rdQ2011 GDP has been revised dow to 1.8%. BEA estimates of inflation (use to convert nominal dollars to real dollars) have been suspect.

 

There is an FOMC meeting Tuesday and Wednesday.  This could produce housing related news.

 

Durable Goods Orders, New Home Sales and Leading Economics Indicators are Thursday in addition to the regular weekly numbers.

Housing

 

Existing Home Sales (December 2011)

 

- Existing Home Sales -  4,610,000  (seasonally adjusted annual rate)
- Previous was 4,420,000
- Month/Month  +5.0 %
- Year/Year +3.6 %

 

Graph here:  http://mam.econoday.com/showimage.asp?imageid=21951

 

All cash transactions were 31% of the market.  The issue may be that many foreclosures are in condition not up the FNMA lending standards.  Distressed sales were 32% of the market. 21% of the sales were to investors.

 

This trend is healthy because it is only investors buying homes they will fix and rent who can provide the buying capacity to absorb the present supply (which was down to 6.2 months from 7.2 months at the end of November) as well as the shadow inventory of distressed sales which will be created by foreclosures this year.  The folks who buy, repair and rent out these homes are helping stabilize values and also creating cash flow for themselves which will be a plus for the economy.

 

I do not see this as a story indicating that the housing market is in significant recovery.  It is, however, a necessary step to recovery.  It also shows that recovery is accomplished by letting the market work rather that by taxpayer funded incentives which add to an already massive national debt.

Inflation

 

CPI (December 2011)

 

- CPI Month/Month unchanged as was previous
- CPI core (less food & energy) Month/Month +0.1 %. Previous was +0.2%.  Consensus was +0.1%.

 

Jobs

 

Initial Jobless Claims (week ended 1/14/2012)

 

New Claims - 352,000.  Previous was 399,000.  Consensus was 383,000
4-week Moving Average - 379,000

 

The weekly number was a large drop from the previous 399,000 but the jobs market is still not indicating economic growth.

 

Housing

 

Housing Starts for December 2011 were at an annualized rate of 657,000.  This is below previous (685,000) and consensus (678,000).

 

There should be 1,500,000 annual Housing Starts to keep pace with population growth and scrappage.  Relaxed mortgage underwriting led to increased supply and the recession has created more supply (foreclosures) and lower demand leading to still decreasing home prices.  The housing market is not going to return to normal until the foreclosure inventory is cleared and values stop falling.

 

Philadelphia Federal Reserve Survey  (January 2012) 

General Business Conditions Index was 7.3. Previous was 10.3.

Inflation (December 2011)

 

PPI (wholesale inflation)

 

- PPI - Month/Month change  -0.1%
- PPI - Year/Year change +4.8%
- Core PPI (less food & energy) Month/Month change- +0.3 %
- Core PPI (less food & energy) - Year/Year change +3.0 %

 

The overall data shows that food and energy prices have been volatile.  From a macroeconomic point-of-view core is more important and core, while a bit too high for the present state of the economy, is fairly tame.

 

MBA Mortgage Applications (week ended 1/13/2012)

 

Purchase Index - Week/Week Change +10.3 %
Refinance Index - Week/Week Change +26.4 %
Composite Index - Week/Week Change +23.1 %

 

The gigantic gain is due to the fact that the previous week contained New Year's Day.

 

NAHB Housing Market Index (January 2012)

 

- Index value was 25.  Previous was 21.

 

 Industrial Production/Capacity Utilization (December 2011)

 

This is a measure of the strength of the manufacturing sector.

 

Industrial Production - Month/Month +0.4%
Manufacturing - Month/Month  +0.9%
Capacity Utilization Rate - 78. %

 

The manufacturing sector has been growing for about two years.  The gain in Industrial Production for December was after a November loss.

 

Retail Chain Store Reports (week ended 1/14/2012)

 

Redbook Year/Year +2.8%.  Previous was +3.3%.

 

ICSC-Goldman Store Sales

 

Week/Week +0.1%.  Previous was -5.4%
Year/Year +3.0%.  Previous was +2.8%

 

Post-Christmas retail sales have been slow.