NEW$ & VIEW$ (22 MARCH 2013)

U.S. LEI firm. Philly Fed Index somewhat better. Existing home sales solid, inventory down sharply. U.S. oil demand keeps falling. Europe in deep trouble: France sinking, Germany holding (!), Italy, mamma mia! Inflation watch.

Sun  U.S. Leading Economic Indicators Continue To Firm

The index of Leading Economic Indicators, published by the Conference Board, increased 0.5% (2.0% y/y) during February after a revised 0.5% January increase, initially reported as 0.2%. Eighty percent of the component series had a positive influence on the index. A steeper interest rate yield curve, the leading credit index, more building permits and a longer average workweek were the primary drivers of last month’s gain. These were offset by lower consumer expectations for business & economic conditions and fewer real orders for nondefense capital goods excluding aircraft.

Recession risk is low as these two charts fro Doug Short attest:

Click to View

Click to View

Philly Fed Index Shows Manufacturing Expansion

The Philadelphia Fed said its index of general business activity within its regional factory sector increased to 2.0 after it unexpectedly fell to -12.5 in February from -5.8 in January.

The new orders index increased to 0.5 from -7.8, and the shipments index rose to 3.5 from 2.4.

Readings on labor demand, however, were mixed. The important hiring index rose to 2.7 from 0.9 in February, but the workweek index plunged to -12.9 from -1.6.


Existing-Home Sales Hit Highest Point Since 2009  Sales of previously owned properties grew last month to the highest level in more than three years and more people put their properties up for sale, a sign the improving housing market will lift the economy this year.

Existing-home sales increased 0.8% in February from a month earlier to a seasonally adjusted annual rate of 4.98 million, the highest level since November 2009, the National Association of Realtors said Thursday. Sales were 10.2% above the same month a year earlier, the 20th consecutive month of year-over-year gains.

Pointing up Inventory is down 19.2% from February 2012.


(Haver Analytics)

U.S. Oil Demand Declined in February, API Says

Total petroleum deliveries, a measure of demand, dropped 4.1 percent from a year earlier to 18 million barrels a day, the lowest February level since 1993, the industry-funded group said in a monthly report today. (…)

February gasoline deliveries were 8.36 million barrels a day, down 3.1 percent from a year earlier and the lowest demand for the month since 2001, the API said.

Pointing up  Demand for ultra-low-sulfur diesel, the type used by the trucking industry, fell 6.1 percent to 3.21 million. Jet fuel consumption decreased 8.7 percent from a year earlier to 1.23 million barrels a day.

U.S. crude-oil production jumped 14 percent from a year earlier to 7.09 million barrels a day, the highest February output in 21 years. 

Click to View(Chart from Doug Short)

Lightning  LSE’s De Grauwe: Euro area in ‘deep trouble’

Paul De Grauwe, a professor at the London School of Economics, told Tom Keene on “Bloomberg Surveillance” today that the euro area is at risk because “so many big mistakes have been made.”
De Grauwe went on to say that the “ineptitude of policy makers” allowed Cyprus to “degenerate into systemic crisis” and that European leaders should not allow Russia to take over gas in Cypriot waters as it would allow Russia to “increase its near monopoly.”

“Merkel should go out to Cyprus, together with the rest of the euro zone, and make a deal and say we are going to set up an investment fund with you and the future proceeds of that will be part of the total package.”

“(…) of course, there have been stupidities in Cyprus, but refusing to help them out would make things even worse. So we should set aside our concerns that taxpayers in Germany and the other countries are not – do not like this. We should, at some moment, if we are in a union, right, you have to help each other out. If you don’t want to do that, you shouldn’t be in the union.”

Deep Trouble? En Français, Please


The Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, fell from 43.1 in February, to 42.1.

Dragging the composite figure down was a faster decline in service sector business activity during March. The latest fall was the steepest since February 2009. Manufacturing output was also down markedly, but the pace of decline eased slightly to the slowest in three months.

Incoming new business also decreased at a sharper rate in March. Mirroring the trend seen for activity, the latest reduction in new work was the fastest in four years. Service providers and manufacturers both reported steeper reductions in new orders (in the case of the former, the fastest since March 2009). (…)  Manufacturers signalled that new export orders fell at the sharpest rate in three months(…) .

Backlogs fell at the steepest rate since September 2012, with service providers and manufacturers both signalling accelerated rates of decline.

Employment in the French private sector fell further during March. The pace of job shedding remained solid, despite moderating to the slowest in three months. Job losses were broad-based across services and manufacturing, and at similar rates.

Sentiment regarding future activity in the French service sector fell into negative territory during March, and reached its lowest level since December 2008.

France is the second largest economy in Europe, the fifth largest in the world. Thank God Germany is holding up. Cross your fingers:image

Volumes of new work received by private sector companies in Germany dropped for the first time in 2013 so far. March data indicated marginal falls in new orders in both the manufacturing and service sectors, with the former partly reflecting a renewed decline in new export business. Manufacturers cited softer demand from southern Europe, while demand was reported to have improved in Asia and North America. Some manufacturers also reported that inventory reductions among their clients had negatively influenced order intakes during March.

Storm cloud  German Business Confidence Falls

German business confidence deteriorated unexpectedly in March, following February’s sharp rise, the Ifo business survey showed, as manufacturers grew less optimistic about their export prospects.

The Ifo business confidence index declined for the first time in five months, to 106.7 in March from 107.4 in February.

Overall, companies’ business expectations for the next six months worsened, as the corresponding Ifo subindex declined to 103.6 in March from 104.6 in February. The roughly 7,000 companies participating in the Ifo institute’s monthly survey were also less satisfied with their current business situation. The corresponding subindex declined to 109.9 from 110.2 the previous month.

French Economy to Stay Stalled in First Half, Insee Predicts

Gross domestic product will be unchanged in the first quarter and expand 0.1 percent in the second, Insee said yesterday in a report. GDP hasn’t registered quarterly growth of more than 0.2 percent since the first three months of 2011 and has had three quarters of declines since then.

Italy’s stalemate unnerves investors
Four weeks after polling there is no sign a new government is near

(…) On Thursday Mr Monti’s government revised down its GDP forecast for 2013 to minus 1.3 per cent from its previous projection of a 0.2 per cent fall. Its 2013 budget deficit target was revised up to 2.9 per cent from 1.8 per cent because of the recession and thanks to plans approved by Brussels to raise debt by €40bn over the next two years to pay arrears owed by the public administration to the private sector.

“The big question is how long finances can hold if recession deepens,” Ms Carletti said. (…)


Yesterday`s flash PMIs revealed a world going on 1 1/2 cylinder as only a strong U.S. and an OK China are propelling the world economy. ZeroHedge adds this:

Goldman’s ‘Swirlogram’ places the global industrial cycle squarely in the ‘Slowdown’ phase as growth momentum fades rapidly. Driven by plunges in aggregate confidence levels and New Orders (less inventories) – as well as CAD and AUD data – this reinforces last month’s preliminary view of a slowdown beginning. Goldman notes we could potentially see weaker global activity over the coming months. Is it any wonder we are seeing bellweather names missing in a big (un-unique) way.


  • [image]Plywood Becomes Hot Item in Housing Recovery Growing demand and tight supplies have pushed up plywood prices by 45% in the past year. Now, Georgia Pacific and other U.S. producers are scrambling to get back up to speed after slashing output during the housing bust.

Georgia-Pacific, the largest U.S. producer of plywood, will announce Friday it plans to invest about $400 million over the next three years to boost softwood plywood and lumber capacity by 20%.

He said plants have done what they can to add shifts and make smaller fixes to improve capacity, but now significant capital investment is needed.

  • Obviously, lumber prices are also up sharply:



Natural-gas prices rose above $4 a million British thermal units during intraday trading on Thursday and are up 73% from a year ago.

A chilly start to spring brought natural-gas stockpiles nationwide closer in line with average levels for this time of year. Further stoking the rally, traders and investors said, are signs that the boom in U.S. gas output is slowing, which could trim supplies even more. (…)

Less drilling “is definitely part of the equation,” he said. The number of rigs drilling for natural gas stood at 431 last week, down 35% from a year earlier, according to oil-field-services company Baker Hughes Inc. BHI -0.62%

The Department of Energy forecasts that the nation’s gas output will rise 0.7% this year, the smallest increase since 2005. (..)

Cold weather and slowing output growth are cutting into U.S. stockpiles. The amount of gas held in underground storage totals 1.876 trillion cubic feet, down about 21% in the past year, according to the latest Department of Energy data.


  • Health Insurers Warn on Premiums 

    Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law.


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