Economic Roundup 1-21-14

Economic Roundup 1-21-14

 

General News:

This week it is back to the employment picture and catching up on indicator activity.

+ According to the ADP National Employment Report, December saw the economy add 238,000 jobs on a seasonally-adjusted basis.

This was up from November’s revised 229,000 (up from 215,000), and up from October’s 206,000 (revised up from 184,000).

Small businesses (1-49 employees) led the way again this month by adding 108,000 new jobs. Large businesses were second, adding 71,000 jobs.

Professional and Business services showed the largest gain (53,000) this month, while construction gained 48,000, and trade/transportation/utilities gained 47,000.

Manufacturing employment gained by only 19,000 jobs.

Goods-producing employment rose only by 69,000 jobs, while service industries added 170,000 jobs.

[ADP’s job-creation numbers for December are the strongest for all of 2013. However, goods producing employment did not grow all that much. While I have no problem with the service sector, manufacturing is what produces the goods we buy and trade. I have a feeling that the services growth was because of Obamacare, from growth both in implementation by the government and in legal and professional services designed to understand it. It is considered that job growth needs to be on the order of 180,000 to 215,000 jobs per month just to cover population expansion, so these numbers show that we are growing faster than the population rate, but not by much.]

>< According to the US Department of Labor, The U.S. economy added only a paltry 74,000 jobs in December.

The headline unemployment rate declined to 6.7%, from 7.0% in November.

November’s gains were revised up from 203,000 to 241,000 jobs.

October’s job gains were kept even at 200,000 jobs

The labor force participation rate fell by 0.2 point to 62.8% over the month, almost the lowest rate since March 1978, and the employment-population ratio stayed even at 58.6%.

The U-6 unemployment rate, considered a broader measure of actual unemployment in the U.S., rose to 13.0% from 12.7%.

The seasonally-adjusts SGS Alternate Unemployment rate, which utilizes the methodology used before 1994, lists the current unemployment rate as slightly up from November, and at approximately 23%

[The BLS stats came in significantly different than the ADP report. There was a tremendous drop off in job creation. I expect this number to be revised significantly up in the coming months. But is still is disconcerting to see such a huge drop in the official numbers. One has got to assume that these numbers were checked and double-checked, especially after it was seen how significantly different they were to the other months. And so job creation could, quite possibly, be slowing down significantly. We need a lot more than that just to adjust for population. Further, with participation rates falling, the headline 6.7% unemployment number seems less and less valuable as a true indicator of the health of the US job market. It makes the government look good, but people are utilizing it less and less for real input as to the state of the economy.] 

+ Challenger, Gray, & Christmas, Inc. (an outplacement company) reports that planned job cuts were down significantly in December from November.

Planned job cuts for December were 30,623, down 32% from last month’s 45,314, and were 6% lower than a year ago.

This marks the third consecutive month that the job-cut total was lower than the year prior, and was the fewest layoff announcements since 1997.

After slipping in November, December’s holiday hiring returned to the high levels seen prior. Retailers added 176,500 workers in December, which is a 63% increase from the 108,000 workers hired in December 2012. It was the largest December employment gain for the retail sector since 2005.

Overall, the three-month hiring total was up 6.6% from the previous year, when retail employment expanded by 751,800 from October through December.

[Job cutting tapered off for the end of the year, and total layoffs were down for the third consecutive year in 2013. While this doesn’t necessarily spell recovery, it bodes well for showing a trend of bottoming out. With job losses declining, job growth can overcome and healthy employment growth can ensue.]

+ The US Census Bureau Full Report on Manufacturer’s Shipments, Inventories and Orders for November 2013 is in:

New Orders for manufactured goods increased by 1.8% from the previous month, and are at the highest level since the series was first published in 1992.

Excluding transportation, new orders increased only 0.6%

Durable goods new orders increased 3.4%. Transportation led the increase, being up 8.3% month-on-month.

Non-durable goods new orders increased 0.3% from last month.

Shipments increased 1.0% from the previous month, which also is the highest level (in dollars) that has been recorded.

Shipments of manufactured durable goods were up 1.8%, which makes it 4 consecutive increases. Machinery led the increase, up 4.2%.

Shipments of manufactured non-durable goods, was up by 0.3%, following three consecutive monthly decreases. Petroleum and coal products led the increase.

Unfilled orders increased 1.0%, which follows a 0.6% increase last month, with Transportation equipment leading the increase. Unfilled orders have been up 8 of the last 9 months, and also are at the highest level since they were first documented back in 1992.

Inventories registered a “slight” increase, and have been up 11 of the last 12 months. They are also at their highest level since they were first published.

[These numbers are corrected for seasonality, but not for inflation, official or otherwise. Since inflation is progressing along at a rate a bit higher than officially reported, which means that the increases in the above numbers are progressing more because of inflation than necessarily because of increases in demand, I would take the “record breaking” nature of the numbers with a grain of salt. Further, transportation is driving much of the increase that is being seen. But auto dealers are reporting above normal inventories of cars (which implies that sales might be less robust than reported) and the airline industry had a banner year for new aircraft orders, much of which won’t be seen as finished product for many years. So I see that much of the great increases are mostly fictitious or could change dramatically over the next years as economic conditions change.]

>< The US Census Bureau released its report on International Trade in Goods and Services for November 2013.

Total November exports of $194.9 billion and imports of $229.1 billion resulted in a goods and services deficit of $34.3 billion, down from $39.3 billion in September, revised.

Total October exports of $191.3 billion and imports of $232.5 billion resulted in a goods and services deficit of $39.3 billion.

The change was driven by a larger increase in exports and a decrease in imports when compared to October (as opposed to, say, imports increasing slower than exports were increasing).

Exports increased in industrial supplies and materials, “other” goods, and capital goods. The decrease in imports was driven by industrial supplies and materials as well as “other” goods.

[Overall trade between the US and other countries decreased in November. While we are likely exporting more of our inflation through the balance of trade deficit, the magnitude of the imbalance is growing, significantly because of the increase in energy exports and the decrease in energy imports due to the increased production of natural gas from shale energy reserves.]

– The Conference Board Consumer Confidence Index, which had decreased in November, increased in December. The Index now stands at 78.1 (1985=100), up from 72.0 in November.

The Present Situation Index improved to 76.2 from 73.5.
The Expectations Index rose to 79.4 from 71.1 last month.

Those saying business conditions are “good” declined to 19.6%, while those stating business conditions are “bad” decreased to 22.6% from 24.6%.

Consumers’ assessment of the labor market was improved. Those claiming jobs are “plentiful” increased to 12.2% from 12.0%, while those claiming jobs are “hard to get” fell to 32.5% from 34.1%. Those expecting more jobs in the months ahead increased to 17.1% from 13.1%, while those expecting fewer jobs decreased to 19.0% from 21.4%.

Those expecting business conditions to improve over the next six months increased to 17.2% from 16.7%, while those anticipating business conditions to worsen declined to 14.0% from 16.1%.

[Sentiment has increased, but is still significantly low, far below that seen in 1985, and only approaching previous conditions back in 2008 just after the housing bubble popped. only 1 in 5 people feel business conditions are good, with more feeling business conditions are bad. 1 in 10 feel that jobs are plentiful, while 1 in 3 feel jobs are hard to get. The numbers have technically improved, but are nowhere near being “good”]

>< Bureau of Labor Statistics data on the CPI are in for December:  The All Items index percent change was a seasonally-adjusted increase of 0.3% from last month, and an unadjusted increase of 1.5% year-on-year.

“Core” inflation (less food and energy) increased 0.1% from last month and 1.7% year-on-year.

The Food index percent change was an increase of 0.1% from last month, and an increase of 1.1% year-on-year.

The Energy index percent change was an increase of 2.1% from last month, and a increase of 0.5% year-on-year.

[Officially, at least, prices are still maintaining slow growth, with prices rising only about 2% year-on-year.

Alternatively, using the “1990-based” method (calculating CPI based on the method used pre 1990) indicates that inflation is at approximately 5%, and using the “1980-based” method (calculating CPI based on the method used, essentially, from 1980 back to the beginning of the use of the statistic) indicates that inflation is at just below 10%. ]

>< Bureau of Labor Statistics data on the PPI (Producers Price Index) are in (percentages are changes in prices year-on-year):

The seasonally adjusted PPI (finished goods) was a seasonally-adjusted increase of 0.4%. Unadjusted, prices rose 1.2% year-on-year.

Crude Goods Prices rose by 2.4%

Intermediate Goods Prices rose by 0.6%

Most of the increase in the finished goods index is attributed to a 1.6% rise in prices for energy goods. Increased intermediate goods costs also were influenced significantly by rising energy costs, especially in gasoline.

[Producer prices increase only slightly, with most of the increases because of increases in energy costs. However, much like the CPI, calculations are likely not accounting for many different factors, and the “real” PPI is likely higher than the official numbers would indicate. Either way, prices are rising about 1% year-on-year, which needs to be taking into perspective when looking at non-price adjusted growth numbers posted in various industries.]

 Energy News:

[Production capacity used continues to be high this week, and crude supplies continue to be very high, although there are in heavy drawdowns because of the cold that has been plaguing the country. Crude is still trading higher than a year ago, but only by a small margin as prices have recently pulled back a little.

Gasoline stocks have experienced some increases, but with production decreasing. Diesel production was down slightly, and stocks decreased commensurately this week, and are still at historic lows.

Gasoline prices fell this week, and are back to being fractionally down year-on-year (last year had significant declines all year, so slight increases this year mean that prices are fluctuating around last year’s lows). Diesel prices, are still down year-on-year and decreasing.

Natural Gas prices fell, and are up year-on-year, but increasing drawdowns for heating and electricity are taking place. Record cold has also influenced supply which has led to some price pressures.]

+ Production:

Crude oil inventories decreased 7.7 million barrels from last week, and are near the upper limit for this time of year at 350.2 million barrels.

Gasoline inventories increased 6.2 million barrels but are in the middle of the average range, with gasoline production decreasing (8.3 million bpd from 9.1 million bpd) compared to the previous week.

Distillate (diesel and home heating oil) inventories decreased by 1.0 million barrels, and are below the lower limit of the average range. Distillate production was down slightly last week (4.7 million bpd from 5.1 million bpd).

Refineries operated at 90.0% capacity.

Oil (WTI) was down again ($1.27) from last week and is at $92.39 per bbl, but $1.21 above a year ago.

+ Gasoline & Diesel

The AAA national average retail regular gasoline fell this week, dropping to $3.284 per gallon ($3.312 per gallon last week; $3.304 a year ago).

Diesel prices fell slightly this week to $3.853 per gallon ($3.864 per gallon last week; $3.895 a year ago).

>< Propane

Propane inventories fell 3.8 million barrels from last week, and are below the lower limit of the average range.

Mount Belvieu, TX propane spot pricing as of 1-10-14 was up this week at $1.279 per gallon from last week’s $1.225 per gallon. It was $0.808 per gallon a year ago. (EIA Wholesale Propane average prices are generally $0.10 to $0.15 higher than the Mount Belvieu, TX spot price)

>< Natural Gas

Working natural gas in storage saw a large net withdrawal, with a drawdown of 287 Bcf, to 2,530 billion cubic feet, with storage volumes 659 Bcf (20.7%) below year ago levels, and 443 Bcf (14.9%) below the 5-year average.

Total natural gas consumption for the week declined 30.6% relative to last week. Recovery from the bitter cold has led to lower heating needs.

Total supply decreased 2.5% over the week. U.S. dry gas production increased following well freeze-offs, but was offset by reduced imports from Canada.

Natural Gas Henry Hub spot price (1-10-14) fell this week to $3.95 per million BTUs ($4.39 per MMBtu last week, $3.08 per MMBtu a year ago).

>< Heating Oil

No. 2 Heating Oil, New York Harbor (1-10-14) was even from last week, at $2.967 per gallon ($2.967 a week ago, $3.018 per gallon a year ago). (EIA Wholesale Heating Oil Prices are typically 20 cents higher)

>< Coal

US coal production totaled 18.3 million short tons (mmst), which is 2.3% lower than last week (18.8 mmst) and 5.6% lower than last year (19.4 mmst).

Year to date coal production totaled 28.9 mmst, which is 8.7% lower than last year.

Steel news:

[Steel prices were mixed last week, with Indian prices rising but Chinese prices falling. Raw materials prices were down this week, while alloying and specialty metals prices recovered significantly.  Steel production in the US was up from from last week, and is down from last year.]

>< American Iron and Steel Institute reports that US raw steel production was 1,836,000 tons and 76.6% of capacity (week ending January 18), up 0.3% from the 1,830,000 tons 74.0% the previous week. This represents a 0.2% increase from the same period last year, when production was 1,832,000 tons and 76.4% capacity.

>< Year to date US production was 4,707,000 tons and 76.4% capacity utilization, which is up 0.1% from last year.

– #1 Heavy melt scrap was up at $383 per ton and #1 busheling scrap was even at $447 per ton.

– Iron Fines FOB Chinese ports fell this week by $6 to around $129 per dry metric ton. this is the first time in 6 months below $130

– Chinese steel prices continued trending down again last week, with the Chinese Long Product Index at 6050 (down 62 points, 1.0%) and the Chinese Flat Products Index at 5585 (down 23 points, 0.4%) (1-10-14 Steelguru.com).

>< Indian steel prices, however, were up in the last week, with the Indian Long Products Pricing at 8814 (up 59 points, 0.7%) and the Indian Flat Products at 8807 (up 13 points, 0.1%) (1-10-14 Steelguru.com).

>< Metals made a big recovery over last week. Aluminum, Nickel, Copper, Tin, and Zinc all gained with none losing. Aluminum was up 2.9%, Copper was up 1.3%, Nickel was up 6.7%, Tin was up 2.5%, and Zinc was up 2.4% (London Metal Exchange, cash buyer, 1-17-14).

Automotive News:

+ When the Corvette Z06 was introduced at the Detroit Auto Show, GM announced that the Z06 was their fastest car ever, backed by a 625 hp supercharged V8 mated to an 8-speed automatic transmission.

+ Ford has marked a huge milestone with its new, 2015 F-150, by managing to shed an impressive 700 pounds from the vehicle weight by switching to aluminum for a major amount of its construction.

Transportation News:

>< The Association of American Railroads reported decreased traffic for the week ending January 11, 2014, after several weeks of mixed or growing traffic.

U.S. railroads originated 256,849 carloads, up from last week, and down 8.2% from last year. Intermodal volume for the week totaled 235,987 trailers and containers, up from last week, but down 7.5% from last year.

Total cumulative 2014 US traffic is down 2.8% from last year.

Two of the 10 carload commodity groups posted increases compared with the same week in 2013, led by grain, up 10.1%.

Canadian railroads reported 66,872 carloads and 48,377 intermodal loads, down 11.8% and down 5.5% from the same period last year.

Mexican railroads reported 14,563 carloads and 9,728 intermodal loads, up 5.0% and up 5.0% from the same period last year.

 Asia News:

– China stepped up its purchases of U.S. government debt late last year, increasing its holdings of Treasurys to an all-time record of $1.317 trillion.

The $1.317 trillion figure exceeds China’s previous record high in July 2011 of $1.315 trillion.

The next closest foreign holder of U.S. debt is Japan, which increased its holdings to $1.186 trillion from $1.174 trillion.

– China bought a record amount of iron ore, crude oil and coal last year, indicating that demand from the world’s biggest buyer of raw materials remained resilient amid slowing economic growth.

Inbound shipments of iron ore, a key ingredient for steel-making, rose 10% from a year earlier to 820 million metric tons.

Crude oil and coal imports climbed to 282 million tons and 330 million tons, respectively.

Soybean and natural rubber shipments jumped to all-time highs in December.

[China continues to feed its machine, even when there is evidence that the machine is tiring out. Production keeps increasing year-on-year even as the government tries to slow everything down because everything is in overdrive. Feedstocks for this production, (the imports), therefore, remain terribly high, which means that when the machine stumbles, the tremors will be felt worldwide.]

– China’s producer prices, a measure of the cost of goods as they leave the factory, extended the longest slide since the 1990s in December, adding to evidence that the world’s second-largest economy weakened last month.

The producer-price index fell 1.4% from a year before, the 22nd straight drop, and consumer price gains trailed estimates at 2.5%, government.

These releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers.

[Overproduction is having a depressive effect on input prices, even as consumer prices rise. Too much is being produced. And the lack of sufficient takeaway demand is causing pricing to drop, which is causing dropping profitability and declines in values for higher-order inputs, including labor. Eventually what profits are remaining will become unsustainable losses and massive closings will ensue]

– China’s economic growth slowed in the fourth quarter as gains in factory output and investment spending eased last month, sapping momentum as a credit clampdown adds pressure on the outlook for this year.

Gross domestic product rose 7.7% in the October-December period from a year earlier, and is compared with 7.8% year-on-year growth in the third quarter.

– China’s new home sales last year exceeded $1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.

The value of new homes sold in 2013 rose 27% from 2012 to 6.8 trillion yuan ($1.1 trillion). New-home prices in December climbed 20% in Guangzhou and Shenzhen from a year earlier, and jumped 18% in Shanghai and 16% in Beijing.

[The “non-existent” Chinese housing bubble continues to inflate. When it blows, it will crush the system, much like it did in the US 5 years ago. Pricing is quickly outstripping “real” demand, and the purchasing is highly speculative in nature. And with the gains high, so much is being produced at an investment level that when risk becomes to high and the cooling effects kick in, there will be a huge race to the bottom.]

– Japan’s current-account deficit widened to a record in November as imports climbed.

The 592.8 billion yen ($5.7 billion) shortfall in the widest measure of trade was larger than the median forecast of 368.9 billion yen.

The deficit is the biggest in comparable data back to 1985.

Weakness in the yen and extra demand for energy because of nuclear-plant shutdowns are driving up Japan’s import bill, highlighting drags on the recovery that will also include a sales-tax increase in April.

[Abe’s devaluation program is beginning to play havoc with the Japanese economy. It used to be that the trade balance was significantly the opposite. Now, Japan is struggling to keep its balance-of-payments under control. As the currency devalues, import costs continue to rise, which will drive up costs, and, eventually, export prices as well.]

– Foreigners bought the most Japanese stocks ever last year while local individuals sold the largest amount on record amid the best equity rally in four decades.

Overseas investors bought a net 15.1 trillion yen ($146 billion) in Japanese shares in 2013. That was the fifth straight year of net purchases and the largest amount since the bourse began compiling the figures in 1982. Domestic investors offloaded a net 8.75 trillion yen, also a record, the data show.

[Domestic investors are fleeing Japan, while foreigners are pouring in. The Japanese see the devaluation happening and are looking for safe havens elsewhere. Foreigners see the market surges and pour in, forgetting of the currency issues and thinking they can make some quick gains. In particular, foreign governments are printing massive amounts of money and encouraging it to go outside of their borders so as to limit inflation issues. Japan is doing the same. So everyone is printing obey to support each other’s habits. Not good.]

European News:

+ U.K. inflation unexpectedly slowed in December, cooling to the Bank of England’s 2% target for the first time in more than four years.

Consumer-price growth eased from 2.1 percent in November. Downward pressure from food prices including fruit and meat offset an upward effect from electricity, gas and petrol costs.

Cooling inflation may allow BOE Governor Mark Carney to keep interest rates at a record low for longer to help the recovery build momentum.

[Interesting that they hit their targets, but aren’t going to change their policy like they said they would. There always will be a reason to continue such policies….]

+/- London house-price growth slowed in January after the best year since 2006 as values slid in the most expensive districts of Westminster and Kensington and Chelsea.

Asking prices in the U.K. capital increased 0.2% to 514,704 pounds ($846,000), after growing 10.6% last year. Values in Westminster slid 8.3%, while those in Kensington dropped 6.9%.

[This could be a good sign of moderation and stabilization, or it could be the nosing over of a bubble-burst. As prices start to moderate or even fall, like is happening here, those who were in it for the quick 10% year-on-year gains will exit, and the prices will really begin to drop fast.]

– French workers at Goodyear Tire & Rubber’s unit in Amiens took over a plant as part of an ongoing protest over the facility’s pending closure.

The latest move by the plant’s main union comes a day after police helped free two managers who were held hostage by workers for more than 24 hours.

Goodyear has been the target of violent protests over its plans to close its Amiens plant, which makes tires for farm equipment.

Early last year, Goodyear officially unveiled plans to shut down the factory after failing to come to terms with the union. Goodyear has been trying to exit the plant for years but is still stuck in a legal battle with the CGT union.

French law requires that companies come to an agreement with unions when pursuing restructuring plans.

The French government has urged for another company to buy the Amiens facility. U.S. tire maker Titan International was seen as a potential suitor, but chairman and CEO Maurice Taylor slammed the workforce there in a letter to France’s industry minister last year.

– Spanish Prime Minister Mariano Rajoy can count the social cost of the economy’s slump when data this week show how 2013 was probably the worst year for work in its democratic history.

Economists predict the unemployment rate in Spain, home to almost a third of the euro region’s jobless, stayed above 25% for the sixth quarter in a row.

—————

Disclaimer:  This report and a lot of its analyses have been created from a variety of source materials, some quoted directly.  This report is intended as a précis of world activity for informational purposes only. While I may not have managed to acknowledge every source here, no attempt at plagiarism is intended.