Note: I am still travelling on the U.S. West coast, hence the limited posting this week.
The index of consumer prices was unchanged in December after falling 0.3% the prior month, the Labor Department said Wednesday. The so-called core prices, which don’t take into account the volatile food and energy sectors, rose 0.1%.
(…) Gasoline prices dropped 2.3% in December, the third consecutive decline. Overall energy costs fell 1.2% for the month. (…)
Year over year, consumer prices were up 1.7% and core prices were 1.9% higher.
A separate Labor report Wednesday showed Americans’ real average weekly earnings rose 0.6% because both hourly pay and the average workweek increased. Still, since reaching a peak in June 2012, weekly earnings have edged down by 0.1%. The figure is before taxes.
U.S. industrial production rose to its highest level since mid-2008 in December as manufacturing and mining output climbed. Industrial output increased 0.3% last month, the Federal Reserve said, while capacity utilization inched ahead to 78.8% from a revised 78.7% the prior month. Mining output rose 0.6%, while utilities dropped 4.8% “as unseasonably warm weather held down the demand for heating,” the Fed said.
New registrations, a proxy for sales, shrank 8.2% in 2012 to a little over 12 million units and are set to drop further in 2013—perhaps by as much as 5% even after five years of steady contraction, according to the European automobile manufacturers’ association ACEA. (…)
As well as a declining population in many of Europe’s richer countries, car markets are close to saturation because of the relatively young age of Europe’s passenger-car fleet, a long-running tendency for European drivers to drive less, and the increasing durability of modern cars, which is squeezing demand for new vehicles. Add Europe’s economic malaise, where rising unemployment and increased taxes have hit demand for consumer goods in the region, and EU car demand may be on the same course as in Japan, where car demand has fallen since 1992. (…)
Europe’s car fleet is an average 8.4 years old compared with around 11 years in the U.S., where the average age of cars on the roads is rising, said Mr. Pearson. Every additional half-year that customers keep old cars on the road takes away 700,000 cars from potential demand, he estimates. (…)
Meanwhile, Europe’s economic woes are dragging not just on car ownership but how much people are prepared to drive, evidenced by traffic on Europe’s toll roads.
Analysts at Moody’s Investor Services, which tracks the credit worthiness of Europe’s listed toll-road operators, estimate traffic could fall by up to 5% in parts of Europe this year after declines of 8% in Italy, 10% in Spain and 15% in Portugal in the first nine months of 2012.
For Europe’s auto industry, the gloomy outlook is underscored by the problem of overcapacity, with analysts reckoning the EU has between 15 and 20 factories operating at less than 50% of full capacity.
So, oil demand is falling just about everywhere but in China, and supply is rising. Why aren’t oil prices falling? Ask the Saudis.
North America set to dominate unconventional resources for decades
(…) In its latest energy outlook, BP said the shale revolution that had transformed the US energy market would spread to other parts of the world, with global output of shale gas trebling and tight oil growing more than sixfold by 2030. (…)
BP said the US would be 99 per cent self-sufficient in net energy by 2030 at the same time as large emerging economies such as China and India see their dependence on energy imports rise – a shift that “will have major impacts on trade balances”. (…)
Portugal’s central bank forecast a deeper slump this year than it predicted two months ago but said the economy will likely return to growth in 2014.
The Bank of Portugal now expects the economy to contract 1.9% this year, more than the 1.6% it forecast in November. It revised export growth downward to 2% from 5%. (…)
With its gloomier outlook, the central bank has distanced itself further from the Portuguese government’s own forecast of a 1% contraction this year.
Scotia Capital likes equities…
With the recent pick-up in the global LEI, we would expect S&P 500 top line to continue to expand in coming quarters. 2013 EPS expectations are somewhat elevated, but as long as earnings
are trending higher, equities should remain well supported.
…but of the larger kind:
According to Standard and Poor’s, S&P 600 Q4 EPS forecasts currently stand at US$6.20. This suggests an 11% sequential improvement and an 18.5% YOY increase. Although U.S. macro data improved in Q4, we doubt U.S. small caps will be able to deliver.
The NFIB Small Business Optimism index is deteriorating since last April, with the Earnings Trend and Sales Expectations components going down. Moreover, the ISM trend (rolling 12-
month) is still pointing toward softer earnings growth in the small cap space. Until the ISM trend reverse, we would expect earnings growth to moderate.