General US news:
+ New Home sales rose 5.7% in September. The average price of a new home fell to $242,200. The supply of unsold new houses fell to 4.5 months worth, the smallest inventory since 2005.
– Existing Home sales fell 1.7% in September. The average price of a used home rose a whopping 11.3% which might explain the slower sales rate.
+ The supply of unsold used homes on the market is down to 5.9 months. Traditionally, the normal supply would be 3 months worth. The good news is used houses are spending an average 70 days on the market instead of 101 days a year ago.
+ Durable Goods Orders rose a whopping 9.9% in September driven by a huge surge in civilian aircraft orders. Other components were mixed. If you took the aircraft component out of the Durable Goods index, it still would have been a nice 2% increase.
+ Check out the AAA fuel gauge! Looks like there is a good chance for retail gasoline prices to fall soon:
+ The Petroleum Status report shows a huge inventory build of 5.9 million barrels. Gasoline inventory rose 1.4 million barrels and distillates (think diesel) fell 0.6 million barrels as refineries operated at a casual 87.2% of capacity. Oil futures fell to $84 per barrel on the news.
– Johnson Controls (JCI) is cutting jobs in Q4 as their business in Europe slows and higher lead costs and weaker battery demand has pressured the company to review it’s cost structure. JCI says they will spend the next two years restructuring.
– Here is an interesting graph. Every picture tells a story doesn’t it? Here is a story of the last 12 years. The New Millennium has not been kind to us.
– A mounting number of companies, including many tech firms, have been announcing layoffs, prompting some to worry about the proliferation of pink slips amid third-quarter earnings reports showing nearly zero growth. Colgate-Palmolive was the most recent example Thursday, with plans to cut 2,300 jobs. But that announcement just piled on top of similar revelations from firms such as online game company Zynga, heavy equipment maker Caterpillar, computer chip maker Advanced Micro Devices and chemical firm DuPont in recent weeks.
– Johnson Controls (JCI) is cutting jobs in Q4 as their business in Europe slows and higher lead costs and weaker battery demand has pressured the company to review it’s cost structure. JCI says they will spend the next two years restructuring.
— Companies in North America announced plans to cut more than 62,000 jobs since Sept. 1, says Bloomberg News. That’s the biggest two-month slashing of jobs since the beginning of 2010.
— There have been 40,671, 33,063 and 7,714 job cuts announced by the computer, transportation and insurance industries collectively this year through September, says Challenger Gray & Christmas. These are increases of 240%, 184% and 180% from the same periods last year.
Much of the recent layoff activity is connected to what’s been the slowest period of earnings growth since the third quarter of 2009. Analysts are expecting companies in the Standard and Poor’s 500 to report 0.4% higher earnings. Meanwhile, five of 10 industries are expected to post lower earnings, including materials and energy.
The job cuts are just part of companies’ snap decision to hold down expenses, given questions about the looming fiscal cliff and taxation after the November election. Lagging revenue growth, too, has forced companies to resort to cost-cutting to reach profit goals.
Meanwhile, with China’s economic growth slowing, many business leaders are less confident that demand from Asia can make up slack in weak domestic markets.
– The first version of the Q3 GDP was reported to be 2%. Even though this is a higher reading than expected, it is still not good. Personal consumption and increased demand for durable goods propped this number up.
General Asia news:
– Property sales in China’s 54 major cities dropped 6.4 percent month-on-month in October, the third consecutive drop, data from real estate consultancy firm Centaline Group showed on Tuesday.
– The Small and Medium-sized Enterprises Development Index, an indicator that shows the SME’s operational situation in eight industries, hit 87.5 in the third quarter, its lowest level since July 2010, showing that the downward trend of small-scale businesses has not yet been reversed. The index shows an improved business climate when it is more than 100, and a worsening climate when the reading is less. Among eight sectors in the survey, industrial business declined the most, to 86.6, during the July-September period, compared with 92 in the second quarter.
– Major Chinese lenders’ third quarter reports show that they are still under pressure from narrowing profit margins, disappointing non-interest income, and bad loans. All of the four largest State-owned lenders, which had released third-quarter reports by tuesday, said they secured net profit growth in the quarter. But some are facing growing pressure from bad debts amid slowing economic growth.
– Chinese businesses’ views about various economic issues became significantly more pessimistic in the third quarter, according to a survey from the international accounting firm Grant Thornton LLP on Thursday. The gloomier outlook was the result of the current sluggish global economy and a slowdown in economic growth in China, the Grant Thornton International Business Report suggested.
+ Regulatory authorities in China are considering a policy to reduce tax on stock dividends for long-term investors in the government’s latest move to buoy the country’s depressed capital market. The policy would impose different tax rates on dividends paid to individual investors depending on their shareholding period, Shanghai Securities News reported on Monday. This should encourage saving and investing in Chinese Blue-chip firms.
+/- China’s central bank has released 395 billion yuan (US$63.3 billion) in the open market on Tuesday, setting a single-day record for the release of capital. The previous record was on September 25, when the central bank released 290 billion yuan (US$46.5 billion). This will likely be positive in the short run, as the new funds spawn investment in various projects and cause a boost in the stock market. However, there is a danger of the creation of assets bubbles both in China and abroad, and already authorities in Hong Kong, South Korea, and Thailand are taking measures to prevent speculative capital from causing asset bubble in their own countries.
— Panasonic has projected that it will make a loss in the current financial year because of falling sales and a jump in restructuring expenses. It has forecast a net loss of 765 billion yen ($9.6 billion). The firm has been trying to restructure its business and said costs relating to that were expected to be almost 11 times more than previously estimated, with sales having been hit by slowing demand for TVs and a strong yen. Panasonic also reported that it made a loss of 698 billion yen ($8.76 billion) in the July-to-September quarter.
Steel news:
+ #1 heavy melt scrap is down slightly to $304 per ton and #1 busheling scrap is down to $334 per ton. Cheaper scrap prices help to keep steel prices in line.
– Raw steel production fell to 69.7% of capacity. Not good. Decreased production implies a slackening of total demand causing mills to cut back on production.
+ Domestic mill lead times gained a little during the recent buying flurry. On average, it looks like lead times for galvanized sheet just broke into the 7 week range. I haven’t seen that in a long time. Non-automotive lines are running 6 weeks or less. Figure any new order placed to be shipped in late November or early December. Longer lead times imply that demand is good, and that the mills are having trouble keeping up. However, it might also be that the recent buying flurry to beat price increases, combined with a fall in production capacity has extended lead times, and not an increase in overall demand.
+ Galvanized imports are coming in strong for October (again). Look at every month in 2012. Every month was above average.
+ Tata Group of India became the first company in the history of the country to generate over $100 billion revenue in one year. Tata operates 31 entities including information technology, steel, automobile production, hospitality, power, telecom, chemicals, consumer goods, and more. Who buys Eight O Clock Coffee at Kroger’s? That’s Tata.
+ The New Millennium Iron Corp. in Canada is on track to produce 2 million tons annually of iron ore sinter in 2013, 4.2 million tons in 2014, and 6 million tons by 2015. This venture is majority owned by Tata Steel Minerals. More supply makes for lower prices and greater market diversity.
+ Nucor Steel started taking applications this week to fill 150 jobs at it’s direct reduced iron plant under construction in St. James Parish, Louisiana. The $750 million first phase project is scheduled to be producing DRI by the middle of 2013. There are five phases of construction planned and when Nucor gets done, will employ 1,250 people.
+ ArcelorMittal and Nucor are said to me joining the bidding for the ThyssenKrupp Americas facilities. They join US Steel, Posco, Nippon Steel, Ternium, and CSN in the bidding war. Who will win?
– The president of AIST Mexico said unfair trade practices from China and other Asian countries are the root of Mexico’s steel industry problems. Adding to the problems is steel thefts within Mexico. From 2010 to 2012 $46.8 million worth of steel was stolen on Mexico’s highway system and $50.5 million worth of steel was stolen from their railways.
– World steel production is almost flat compared to last year. This is another sign of global demand in decline.
Auto news:
– Ford plans to shut down their car assembly plant in Genk, Belgium by the end of 2014 and move production to it’s Valencia, Spain facility. The restructuring is Ford’s way of bracing for Europe’s worst sales decline in 19 years.
– More bad news about the European auto industry involves Ford in the U.K. as they plan to shutter an assembly plant and a stamping plant in Southern England. Ford plans to reduce it’s capacity to make vehicles in Europe by 18% (335,000 vehicles per year). This also means 6,200 jobs will disappear.
+ October car sales in the USA is expected to be pretty good with the SAAR forecast to be at a 14.8 million rate. The SAAR has not crossed the 15 million mark since February 2008 and is still well off of the 17 million plus rates of the 1990’s and early part of the New Millennium.
Shade Tree Economist 