Economic Roundup 2-25-14General US News:
>< Bureau of Labor Statistics data on the CPI are in for January:
The All Items index percent change was a seasonally-adjusted increase of 0.1% from last month, and an unadjusted increase of 1.6% 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 0.6% from last month, and a increase of 2.1% year-on-year.
[Officially, at least, prices are still maintaining slow growth, with prices rising only about 1.5% 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 0.2%. Unadjusted, prices rose 1.2% year-on-year.
Crude Goods Prices rose by 0.9%, led by food, up 3.5%
Intermediate Goods Prices rose by 0.6%, led by energy goods, up 1.4%
[Producer prices increase only slightly, with most of the increases because of increases infold 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 taken into perspective when looking at non-price adjusted growth numbers posted in various industries.]
– Consumer debt in the U.S. rose last quarter by the most in more than six years as Americans borrowed to buy homes and cars and to pay for education.
Household debt increased 2.1%, or $241 billion, to $11.52 trillion, the biggest gain since the third quarter of 2007. The level of debt last quarter was $180 billion higher than a year earlier.
Auto debt expanded $18 billion to $863 billion during the fourth quarter. Credit-card borrowing climbed $11 billion to $683 billion.
Energy News:
[Production capacity held course this week, although lower than normal, and crude supplies continue to be very high. Some of the increase in fuel pricing and decline in used refinery capacity is being attributed to the beginnings of summer-blend production, which go into effect in California in February. There continue to be heavy drawdowns because of the cold that has been plaguing the country, although pricing pressures are moderating. Crude is trending slightly up from last year, and natural gas and propane are still experiencing shortages and price spikes.
Gasoline stocks rose, but with production decreasing. Diesel production decreased, and inventories fell.
Gasoline prices rose this week, and are still down year-on-year. Diesel prices are still down year-on-year, but rose and are nearing last year’s numbers.
Natural Gas and Propane prices moderated this week, with sustained high drawdowns for heating and electricity taking place. However, the winter heating season is closing in on its end, and I think that is having some influence on futures prices.]
Crude:
Crude oil inventories increased 1.0 million barrels from last week, and are in the upper half of the average range for this time of year at 362.3 million barrels.
Refineries operated at 86.8% capacity (87.1% last week)
Oil (WTI) was up this week ($0.33 /bbl) from last week and is at $100.31 /bbl, and $4.36 above a year ago.
Transportation Fuel:
Gasoline inventories increased 0.3 million barrels and are well above the average range, with gasoline production decreasing (8.8 million bpd from 8.9 million bpd) compared to the previous week.
Gasoline prices rose again this week, to $3.419 /gal ($3.358 last week; $3.777 a year ago) – AAA National average retail
Distillate (diesel and home heating oil) inventories decreased by 0.3 million barrels, and are well below the lower limit of the average range. Distillate production was down slightly last week (4.5 million bpd from 4.6 million bpd last week).
Diesel fuel prices rose this week, to $3.992 /gal ($3.961 last week; $4.145 a year ago) – AAA National average retail
Heating Fuel:
Propane inventories fell 1.2 million barrels from last week, and are well below the lower limit of the average range.
Propane spot pricing fell this week, to $1.554 /gal ($1.670 last week; $0.866 a year ago) – Mount Belvieu, TX as of 2-14-14
Natural gas in storage saw yet another larger-than-average net withdrawal, with a drawdown of 230 Bcf, to 1,443 billion cubic feet, with storage volumes 975 Bcf (40.3%) below year ago levels, and 741 Bcf (33.9%) below the 5-year average.
Total natural gas consumption for the week fell 24% relative to last week, reflecting an 29.6% fall in residential and commercial (heating) consumption. Warmer temperatures contributed to decreased heating consumption and decreased power burn.
Total supply fell this week. U.S. dry gas production rose 1.4% from last week. However, imports from Canada fell and offset production increases this week.
Natural Gas spot pricing fell back from highs last week, to $5.54 per million BTUs ($5.92 last week, $3.30 a year ago) – Henry Hub as of 2-14-14
Heating Oil was down from last week, at $3.066 /gal ($3.067 a week ago, $3.231 a year ago) – No. 2, NY Harbor as of 2-14-14
+ + Last week, the Federal Energy Regulatory Commission approved three projects to increase natural gas takeaway capacity from the Marcellus Shale formation. The TEAM 2014 project would provide Texas Eastern Transmission Co. with capacity to move an additional 0.59 billion cubic feet per day (Bcf/d) out of the Marcellus from interconnects in southwestern Pennsylvania and West Virginia.
Coal:
US coal production totaled 19.2 million short tons (mmst), which is 6.7% higher than last week (17.9 mmst) and 2.8% lower than last year (19.7 mmst).
Year to date coal production totaled 123.0 mmst, which is 3.0% lower than last year.
Steel news:
[Steel prices were mixed last week, with Indian prices moderating but Chinese prices falling. Raw materials prices also held even this week, while alloying and specialty metals prices continue to recover some of their losses.]
– US steel exports totaled 871,384 tons in December, down 7.2% from November and 10.1% lower on the year before, according to the latest figures from the American Institute for International Steel (AIIS). For 2013, exports declined by 7.7% to 12.7M tons. The AIIS blamed the year’s disappointing figures mainly on the Nafta market, which represents around 75% of total exports, as it never recovered from a slow start to 2013.
+ Steel inventories at US service centers rose 2.2% to 8.55 million tons in January which is 2.3 months supply. They shipped 3.65 million tons in January, up 23.7%. Canadian service centers inventory rose 3.3% to 1.41 million tons which is 2.8 months supply. Canadian service centers shipped 495,300 tons in January, up 42%. Looking forward, inventory levels will likely remain lean amid concerns over steel costs declining.
+ A huge coal deposit has been found in western Canada. The field covers 150 square kilometers and is buried 1,000 meters under the surface. It is estimated that 7 billion metric tons of coal is waiting to be mined and half of it could be high grade coking coal which would make it the largest known deposit of coking coal in the world. This is good news for integrated steel mills.
US Steel Production:
This week was 1,831,000 tons and 76.3% of capacity (week ending February 22), down 0.8% from last week and down 2.3% from last year.
Last week was 1,845,000 tons and 77.0% of capacity
One Year Ago was 1,875,000 tons and 78.3% of capacity
[American Iron and Steel Institute]
Year to date US production was 13,850,000 tons and 76.3% capacity utilization, which is down 1.1% from last year.
Inputs:
+ #1 Heavy melt scrap fell to $347 per ton and #1 busheling scrap fell to $418 per ton.
– Iron Fines FOB Chinese ports rose slightly, and are around $124 per dry metric ton
[Steel production is down, but there is a rush to bring iron ore into China right now. There is also a record 101 million tons of iron ore sitting at docks in China waiting for someone to buy it.]
>< Metals were all gainers this week. Aluminum, Copper, Nickel, Tin, and Zinc all gained with none losing. Aluminum was up 1.4%, Copper was up 0.5%, Nickel was up 1.3%, Tin was up 0.9%, and Zinc was up 0.6% (London Metal Exchange, cash buyer, 2-21-14).
Pricing:
– Chinese steel prices fell this week, with the Chinese Long Product Index at 5899 (down 26 points, 0.4%) and the Chinese Flat Products Index at 5542 (up 3 points, 0.1%) (2-21-14 Steelguru.com).
>< Indian steel prices were up a bit in the last week, with the Indian Long Products Pricing at 8924 (down 4 points, flat%) and the Indian Flat Products at 8909 (up 22 points, 0.2%) (2-21-14 Steelguru.com).
Transportation News:
[Railroad traffic is following a weekly pattern of generally down demand. Air news was slow, other than for earnings reports. Trucking traffic was generally down in January, following a revised-to-a-decline in traffic in December.]
Rail:
U.S. railroads originated 270,632 carloads, up from last week, and down 2.9% from last year.
Intermodals totaled 236,625 trailers and containers, down from last week, and down 5.7% from last year.
(Week ending February 15, 2014 – Association of American Railroads)
Total cumulative 2014 US traffic is down 0.4% from last year.
Two of the 10 carload commodity groups posted increases compared with the same week in 2013, led by petroleum and petroleum products, up 7.9%.
Canadian railroads reported 71,456 carloads and 55,317 intermodal loads, down 9.5% and up 2.8% year-on-year.
Mexican railroads reported 15,571 carloads and 11,249 intermodal loads, down 1.1% and up 4.1% from the same period last year.
Air:
* Biman Bangladesh Airlines operated the last McDonnell Douglas DC-10 passenger flight in the world with DC-10-30 S2-ACR. The final flight flew from Dhaka to Birmingham, England via a refueling stop in Kuwait City. Current plans are reportedly to scrap the wide body airliner for its parts and residual metal value.
Trucking:
The American Trucking Associations’ For-Hire Truck Tonnage Index decreased 4.3% in January after falling a revised (down) 0.8% in December.
In January, the SA index equaled 124.4 (2000=100) versus 130.0 in December.
Year-on-year the SA index rose 1.2%.
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 122.3, which was 0.3% below the previous month (122.7).
(Trucking represents 68.5% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.4 billion tons of freight in 2012. Motor carriers collected $642.1 billion, or 80.7% of total revenue earned by all transport modes.)
[Trucking finished the year strong, but December was revised down from an increase and a record high to a decrease. Cold weather is what is attributed to the declines.]
Asia News:
– Chinese property shares fell to an eight-month low as Industrial Bank Co.’s suspension of mezzanine financing for developers fueled speculation lenders may pare real-estate funding.
The Shanghai Property Index lost 2.1% to close at 2,997.56, the lowest level since June 26 and extending its 5.4% slump yesterday. The Fuzhou city-based bank is delaying loans for property-related projects until the end of March as it prepares a new set of internal guidelines for credit allocation.
[Possible indicators of an oncoming property crash. Usually the stock indices for construction firms tick down ahead of a decline, as investors begin to pull out after perceiving weaknesses.]
– Chinese manufacturing slowdown is fueling speculation that President Xi Jinping’s officials will switch focus in coming months from taming credit growth and financial risks to supporting economic expansion.
The HSBC/Markit Economics factory gauge for February fell to a seven-month low, and Barclays said that the central bank had turned “more supportive” as the overnight loan rate sank to the lowest level in 10 months.
Investors are focused on financial stresses in the world’s second-biggest economy after the near-default last month of a high-yield trust product and as economists forecast the nation’s slowest expansion in 24 years. While the government has cooled credit growth, a record 2.58 trillion yuan ($425 billion) of new financing in January highlights the challenges that remain.
[This is why Quantitative Easing can never end. The powers-that-be cannot afford the chaos that will come about from stopping an easy-money policy. As soon as it stops, interest rates rise, loans are unable to be rolled over, capitalized values decline, housing prices decline, stock values drop, and everybody panics. However, the alternative is worse – eventual hyperinflation. Which is why the banks get more and more concerned about trying to put the brakes on the system.]
– Japan’s trade deficit widened to a record in January as surging import costs weigh on Abe’s campaign to drive a sustained recovery.
The 2.79 trillion yen ($27.3 billion) shortfall resulted as imports rose 25% from a year earlier and outbound shipments gained only 9.5%.
Declines in the yen are driving up import costs as the nation’s nuclear reactors remain shuttered, while exports have seen only limited gains from the currency’s slide of more than 20% against the dollar in the past two years. The trade deficit contributed to Japan’s economy growing a less-than-forecast 1% in the fourth quarter, underscoring the risk that Abenomics may falter after a sales-tax increase in April.
[This is the disaster that everyone who voted for Abe and his economic policy is going to get. There is no prosperity from money printing, only economic chaos and wealth destruction. If it were otherwise, we would already be in a paradise, considering the ideas of monetary expansion bringing paradise are over 300 years old. That import costs would exceed export values was predicted by many different circles, but disdained by the “mainstream” as old-fashioned. As were the ideas that explained how export boosts would only be temporary. Now, we can only hope that the “old-school” prophesy of high inflation won’t come true. (But it will)]
European News:
– The euro-region recovery showed signs of cooling this month, with weaker-than-forecast manufacturing and services keeping pressure on the European Central Bank to loosen policy.
The factory gauge for the euro region slipped to 53 from 54 in January, while the services measure rose less than estimated to 51.7 from 51.6. The composite gauge fell to 52.7 from 52.9.
While the euro-area economy is forecast to post full-year growth in 2014 for the first time in three years, the recovery remains at risk because of near-record unemployment and subdued price pressures. European Central Bank officials are debating whether they should ease policy further because inflation is less than half the 2% the ECB defines as price stability.
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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.
Shade Tree Economist 