NEW$ & VIEW$ (6 NOVEMBER 2013)

Freight Shipments Down in October

October was a depressed month for freight and the economy in general. The number of shipments and freight expenditures both declined from September, by 3.5 and 2.6 percent respectively. This marks only the second time this year that both indexes declined in the same month. (Shipment volume in April dropped 3.5 percent, but expenditures fell only 1.6 percent.) The 16-day federal government shutdown is partly to blame for the declines, but prior to the shutdown the economy was already exhibiting signs of a cool down.

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The 3.5 percent decline in freight volumes followed two months of strong growth, but is reflective of the weakening state of the overall economy. Shipment volume has already been below corresponding 2012 volumes in six months of this year, and October contributed the seventh month, coming in 2.0 percent below a year ago.

The sharp reduction in the shipment volume in October can be linked to the government shutdown. Although Customs and Homeland Security workers were exempt from the furlough, many freight shipments were delayed because other government agencies were not open to perform necessary inspections or processing.

Railroad carloadings declined again in October, dropping 0.7 percent, while intermodal loadings reversed September’s drop and rose 2.5 percent. Truck tonnage rose in September (the month for which the latest data is available from the American Trucking Association), but spot market load indicators have declined sharply in October.

U.S. manufacturing output was almost flat in September, with even the automotive sector showing definite signs of slowing. With inventories growing and retail sales and business spending flagging, there has been little reason to restock. In addition, export demand began to stall in August and has just begun to rebound.

U.S. planned layoffs rise in October: Challenger

The number of planned layoffs at U.S. firms rose 13.5 percent in October on cuts in the pharmaceutical and financial sectors, a report on Wednesday showed.

Employers announced 45,730 layoffs last month, up from 40,289 in September, according to the report from consultants Challenger, Gray & Christmas, Inc.

But for the first time in five months, the October figure was lower than the year-ago tally, which came in at 47,724. For 2013 so far, employers have announced 433,114 cuts, close to the 433,725 seen in the first ten months of last year.

MBA: Mortgage Applications decrease 7% in Latest Weekly Survey

The Refinance Index decreased 8 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier and is at its lowest level since the end of December 2012. …

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Euro zone Sept retail sales fall more than expected

The volume of retail trade fell 0.6 percent on the month after a revised 0.5 percent rise in August, the EU’s statistics office Eurostat said. Analysts polled by Reuters expected only a 0.4 percent decline.

Sales of both food and non-food products fell and the volume of sales of automotive fuels was flat on the month.

Compared with the same period last year, September retail sales were up 0.3 percent, following three straight months of declines, the data showed.

The decline in retail sales was especially significant in the southern Europe, with Portugal recording an all-time low with a 6.2 percent slump on the month and Spain’s 2.5 percent decline was the biggest since April 2012.

Slovenia, now at risk of needing international financial assistance in case it fails to fix its banks and reform the economy, saw a 4.0 percent fall month-on-month in sales in September, the biggest decline since February 2009.

Core sales declined only 0.1% following two consecutive months of +0.4% growth. However, German retail sales are pretty weak, down 0.4% in September down 1.1% during the past four months (-3.4% annualized).

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High five  As a reminder, as posted here on October 31:

The Markit Eurozone Retail PMI remained below neutrality and declined to 47.7, from 48.6, indicating the fastest monthly rate of decline since May. In contrast, the average reading over the third quarter was the highest since Q2 2011 (49.5).

The faster decline in eurozone retail sales mainly reflected a steeper contraction in Italy, which had seen the slowest fall in sales in two years one month previously. Sales fell further in France, albeit at a slower rate, while the rate of growth in Germany was the weakest since May.

German Factory Orders Beat Estimate as Euro-Area Recovers

Orders, adjusted for seasonal swings and inflation, jumped 3.3 percent from August, when they fell 0.3 percent, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.5 percent, according to the median of 37 estimates in a Bloomberg News survey. Orders advanced 7.9 percent from a year ago, when adjusted for the number of working days.

Overseas orders climbed 6.8 percent in September, while those from within the country dropped 1 percent, today’s report showed. Demand from the euro area surged 9.7 percent as investment goods jumped 23.6 percent. Over a two-month period, international demand contracted while domestic orders rose, led by investment goods.

“Foreign demand continues to remain rather weak despite the September increase,” the ministry said in the statement. “The data confirm the picture of an increasingly domestically driven economic recovery.”

This latest comment was aimed at the U.S. Treasury…In any case, this has been a very volatile series, with negative numbers in 4 of the last 6 months, although orders did rise 2.7% during the whole period, assuming the latest +3.3% jumped doesn’t get revised.

WEALTH EFFECT WANING?

Disappointing start to NY auction season
Quarter of paintings are unsold

One-quarter of the high-profile Impressionist and Modern paintings under the hammer at Christie’s went unsold on Tuesday night, signalling a bleak start for the autumn auction season in New York.

Another disappointment was “Mann und Frau (Umarmung)” by Schiele, which did not receive a single bid. The anonymous seller of this piece was widely rumoured to be beleaguered hedge fund billionaire Steve Cohen. Crying face

Earlier this week Mr Cohen’s fund, SAC Capital Advisors, said it would plead guilty to insider trading violations and pay a record $1.2bn fine. Observers at the evening said the combination of sky-high valuations and mixed quality had weighed more heavily on the purchasing decisions of dealers and collectors than in previous stellar years.

EARNINGS WATCH

 

China Drags on Western Profits

Once fuel for Western profits, China has emerged as a weak spot, offsetting optimism that European markets may be turning the corner and promising continued sluggish sales growth.

(…) But the latest set of quarterly earnings results reveal that for many companies, China has been a drag. While some industries did well, the combination of slower economic growth, plus government crackdowns that have put fresh scrutiny on the way companies win new business, hurt sectors from technology to luxury goods to pharmaceuticals. As a result, the sluggish global sales that persisted through much of the recovery aren’t likely to pick up soon. (…)

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Analysts estimate that third-quarter revenue at companies in the S&P 500 index increased just 3.2%, according to Thomson Reuters, following several periods of flat or no growth. Profits are expected to fare better, rising 5.3%, as companies cut costs and buy back stock, which boosts earnings per share.

The picture in Europe is bleaker. Earnings for companies in the Stoxx Europe 600 are expected to decline 14.6% as revenue falls 1.9%. While many European companies have reported improved performance at home, the euro-zone recovery remains shallow. Emerging markets are a particular weak spot, in part because many currencies have weakened against the euro.

 

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