Following on the heels of yesterday’s stronger than expected Empire Manufacturing report, today’s release of the Philly Fed Manufacturing report for January also came in stronger than expected. While economists were looking for the headline index to come in at a level of 8.7, the actual reading was slightly higher at 9.4, which was three 3 points higher than the reading for December.
As shown, the majority (5) of components increased this month, while just three declined. The biggest increases this month came from Number of Employees and Unfilled Orders. The fact that Number of Employees increased seems to provide more evidence that last Friday’s employment report was an outlier. On the downside, the biggest declines were seen in Inventories, Average Workweek, and New Orders. Believe it or not , the 35.6 decline in the Inventories index was the largest month to month drop in the history of the survey (since 1980). While that drop is large for one month, it takes that index back to levels seen as recently as April.
Homebuilder sentiment for the month of January slipped from a revised reading of 57 down to 56 (expectations were for 58). While sentiment slipped, it is important to note that any reading above 50 indicates optimism among homebuilders.
The table to the right breaks out this month’s report by components and region. As shown, Present Sales, Future Sales, and Traffic all declined this month, with the biggest drop coming in traffic. (…)
The chart below shows the historical levels of the NAHB Sentiment survey going back to 1985 with recessions highlighted in gray. The current level of 56 is down slightly from the post-recession high of 58 reached in August. While the index has seen a remarkable improvement since the lows from the recession, optimism still has some work to do on the upside before getting back to the highs from the prior expansion.
So while everybody is talking deflation risk:
- Core CPI rose at a 1.8% annualized rate in Nov-Dec. and is up 1.7% YoY.
- Same with the Cleveland Fed’s 16% trimmed-mean Consumer Price Index .
- The median CPI has accelerated from +0.1% MoM in October to +0.2% in November and to +0.3% in December. The median CPI is up 2.1% YoY in December, unchanged for 6 months.
The WSJ recently polled economists on a number of items. The tilt towards faster growth is clear:
Even more interesting is that the WSJ did not bother to enquire about inflation and interest rates. Bernanke really did a fine job!
A disappointing holiday shopping season has investors dialing back expectations for retail stocks after last year’s big runup in the sector.
A long-term change in shopper habits has reduced store traffic—perhaps permanently—and shifted pricing power away from malls and big-box retailers.
(…) Retailers got only about half the holiday traffic in 2013 as they did just three years earlier, according to ShopperTrak, which uses a network of 60,000 shopper-counting devices to track visits at malls and large retailers across the country. The data firm tracked declines of 28.2% in 2011, 16.3% in 2012 and 14.6% in 2013.
Online sales increased by more than double the rate of brick-and-mortar sales this holiday season. Shoppers don’t seem to be using physical stores to browse as much, either. Instead, they seem to be figuring out what they want online then making targeted trips to pick it up from retailers that offer the best price. While shoppers visited an average five stores per mall trip in 2007, today they only visit three, ShopperTrak’s data shows. (…)
On Wednesday, J.C. Penney said it planned to close 33 underperforming stores and trim 2,000 positions to focus on locations that generate the strongest profits.
Such closings could accelerate: Leases for big retailers typically last between 10 and 25 years, meaning many were negotiated before e-commerce really took off.
Only 44 million square feet of retail space opened in the 54 largest U.S. markets last year, down 87% from 325 million in 2006, according to CoStar Group, Inc., a real-estate research firm. (…)
NMHC Survey: Apartment Market Conditions Softer in Q4 (CalculatedRisk)
Apartment market conditions weakened a bit in January compared with three months earlier. The market tightness (41), sales volume (41) and debt financing (42) indexes were all a little below the breakeven level of 50, although the equity financing index rebounded to 50. (…)
Although markets are a little looser than in October, this is largely seasonal; overall markets remain fairly tight.
“New supply is finally starting to arrive at levels that will more closely match overall demand. In a few markets, we are seeing completions a little higher than absorptions, but this is likely to be short term in nature. Fundamentally, demand for apartment homes should be strong for the rest of the decade (and beyond) – provided only that the economy remains on track.”
From SocGen via ZeroHedge:
US corporates do indeed hold lots of cash, which is currently at record levels, but they also hold record levels of debt. Net debt (so discounting those massive cash piles) is 15% above the levels seen in 2008/09. The idea that corporates are paying down debt is simply not seen in the numbers.
Don’t forget that corporate cash is heavily concentrated in just a few companies.
The company said profit would be significantly weaker partly because of higher exploration costs. The warning is rare for an oil major, and marks an inauspicious start to energy earnings reports.
The oil major said it expects to post fourth-quarter earnings of $2.2 billion on a current-cost-of-supplies basis—a figure that factors out the impact of inventories, making it equivalent to the net profit reported by U.S. oil companies—down from $7.3 billion a year earlier. Full-year earnings on a CCS basis are expected to be about $16.8 billion, down from $27.2 billion last year.
Shell blames refining woes for warning Oil group issues first profits warning in 10 years
And the wrap up:
Royal Dutch Shell issued a “significant” profit warning on Friday, detailing across-the-board problems and the extent of the challenges facing the oil major’s new boss Ben van Beurden, who took over two weeks ago.
Now you know!