Retail Sales Gain Shows Resilient American Consumer
The U.S. retail sales report showed that figures used to calculate growth, which exclude categories such as gasoline and automobiles, climbed 0.5 percent for the second time in three months.
Nine of 13 major retail sales categories showed gains last month, led by a 1.2 percent advance at clothing stores, the biggest in more than a year, according to today’s report. Receipts at general merchandise outlets, which include department stores, climbed 1 percent, the most since March 2012.
Cars and light trucks sold at a 14.9 million annual pace in April, down from a 15.2 million rate the prior month, according to data from Ward’s Automotive Group. The average for the first quarter was 15.3 million, the strongest since the same period in 2008 and a sign the longer-term outlook remains positive. (Chart from Haver Analytics)
Markit provides more details:
US retail sales rose 0.1% in April, according to official data, representing a welcome improvement after sales had dropped 0.5% in March (revised from -0.4%). Core sales, which exclude building materials, car dealers and gasoline, were even perkier, rising 0.5% after a 0.1% increase in March.
Core retail sales in the three months to April were up just 0.9% on the previous three-month period; the weakest rate of expansion since last October and down from 1.3% at the start of the year.
However, weekly chain store sales actually peaked at the end of April and have declined 3% sequentially during the last 2 weeks. Not new for this volatile series but the 4-week moving average has clearly rolled over and is now only up 2.0% YoY.
Small Business Optimism Up in April
The Index gained 2.6 points, rising to 92.1. That beats falling, but it is
barely above the recovery average of 90.7, making it another very poor
reading. Four Index components rose, 2 fell, 6 were unchanged, a lot of
“noise”, no clear direction. Owners are very pessimistic about the
economy, with a net negative 15 percent expecting business conditions to
be better in 6 months. As bad as that sounds, it was a 13 percentage point
improvement over March.
Economists Cut China Forecasts
Many economists are cutting their forecasts for China’s economic growth this year after a fourth month of disappointing data prompted fresh looks
A survey of 18 economists by The Wall Street Journal late last year showed the median forecast for economic growth in 2013 at 8%, up from the 7.8% rise China’s economy posted last year.
But now the numbers are telling a different story. A new survey of 12 economists this week showed that the median forecast has since fallen to 7.8%.
The chart illustrates what I pointed out yesterday.
Industrial production up by 1.0% in euro area
In March 2013 compared with February 2013, seasonally adjusted industrial production grew by 1.0% in the euro area (EA17) and by 0.9% in the EU27, according to estimates released by Eurostat, the statistical office of the European Union. In February production increased by 0.3% in both zones.
A turn? Only very cold weather that boosted energy production in February and March. Still, cap. goods and durable cons. goods, though volatile, are perking up.
German Investor Confidence Rose Less Than Forecast in May
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 36.4 from 36.3 in April.
ZEW’s gauge of the current situation fell to 8.9 from 9.2 in April.
EARNINGS WATCH
Updated Q1 Earnings Season EPS and Revenue Beat Rates
About 500 companies reported earnings last week, pushing the total number of companies that have reported this season up to more than 2,100. And while the market is up on the week, earnings haven’t been great. At the start of the week, the percentage of companies that had beaten earnings estimates this season stood above 59%. The additional 500+ companies that reported this week only beat earnings at a 52% rate, pushing the overall earnings beat rate down to 57.6%. As shown below, this would be the weakest reading of the entire bull market if earnings season ended today.


Guidance Spread Negative But Inching Higher
More than 2,000 companies have reported earnings so far this season, which ends next Thursday when Wal-Mart (WMT) reports. So far this season, the spread between the percentage of companies raising guidance minus those lowering guidance has been -2.9 percentage points. This means that more companies have lowered guidance than raised guidance, and if it holds in negative territory, it will be the seventh straight quarter with a negative guidance spread. As shown in the chart below, the spread this season is much better than it was in the prior three quarters. If we hear positive things from companies next week before earnings season ends, the spread could get a little better even. That being said, it’s pretty amazing that companies have had a negative slant regarding the future for nearly two years now, and over this time period the market has soared. What would the market be doing if companies were actually optimistic? Who knows with so much attention paid to Bernanke and his easy money policy.

And this from ISI: revisions remain negative.
That equities/commodities disconnect
The moves are logical. Stocks are up because of rampant QE, which is squeezing investor flows out of bond markets and into equities. And the reason we’ve got rampant QE is the continued lack of near-term economic recovery globally, which is manifestly bad for industrial commodities.

I thought QEs were supposed to lift all asset classes. Well, there is something called supply in the demand/supply equation…
OIL: This is now a front page story (see Facts & Trends: The U.S. Energy Game Changer):
IEA: North American Oil to Dominate World Supply Growth North American oil production will dominate world-wide supply growth over the next five years, the International Energy Agency predicted, the result of growing production from “fracking” and other technologies.
In its most recent analysis, which takes a five-year view of the oil market, the IEA said U.S. production is rising much faster than previously forecast as a result of sustained high prices and more-efficient operations.
The latest forecast marks a shift in the IEA’s previous thinking, which saw supply growth split between OPEC and non-OPEC countries in the medium term. The fast U.S. supply growth has diminished U.S. demand for oil from OPEC members like Nigeria, and in the long term, growing U.S. exports of oil and natural gas could further weaken OPEC, says Amy Myers Jaffe, who studies energy and the oil industry at the University of California at Davis but didn’t know the contents of the IEA report. (…)
According to the IEA, average North American production is expected to grow by 3.9 million barrels a day between 2012 and 2018, accounting for more than half of the increase in non-OPEC production for the period.
(…) the IEA expects demand for OPEC oil to fall below 30 million barrels a day—the organization’s self-imposed production ceiling. IEA expects that trend to endure until 2018. (…)
According to the IEA’s projections, average OPEC production capacity will rise by 1.75 million barrels a day between 2012 and 2018 to reach 36.75 million barrels a day by the end of the period. The previous estimate pegged OPEC production capacity between 2011 and 2017 to grow 3.34 million barrels a day to 37.54 million barrels a day in 2017.
These changes coupled with the continuing rise in Asian demand will have a profound impact on the market over the next five years, the IEA said.
“There is hardly any aspect of the global oil supply chain that will not undergo some measure of transformation over the next five years, with significant consequences for the global economy and oil security,” the IEA said.
SENTIMENT WATCH
IPOs Set to Raise Most Cash Since Crisis
U.S. companies are on track to raise the most money through initial public offerings since before the financial crisis, driven by the same thirst for risk among investors that has pushed the stock market to new highs.
Already this year, 64 U.S.-listed public offerings have raised $16.8 billion, according to Dealogic. In the same period in 2012, the biggest year in dollars since the financial crisis, 73 companies raised a total of $13.1 billion. Last week alone brought 11 U.S.-listed IPOs, making it the busiest week for such deals since December 2007.
The largest 25 IPOs this year have risen on average 22% from their initial prices, according to Dealogic, versus a 15% gain for the Standard & Poor’s 500-stock index since the beginning of the year.
The U.S. retail sales report showed that figures used to calculate growth, which exclude categories such as gasoline and automobiles, climbed 0.5 percent for the second time in three months.
A survey of 18 economists by The Wall Street Journal late last year showed the median forecast for economic growth in 2013 at 8%, up from the 7.8% rise China’s economy posted last year.
![[image]](http://si.wsj.net/public/resources/images/OB-XI373_Jobs05_NS_20130503093204.jpg)


After several months at the highs for the economic recovery, U.S. vehicle sales have begun to decline. Unit sales of light motor vehicles during April fell 2.3% m/m (+5.7% y/y) to 14.92M (SAAR) according to the Autodata Corporation. These sales compare to the recovery peak of 15.54M in November. Sales disappointed expectations for 15.3M according to Bloomberg.
Reversals and revisions can change the picture of an economic series. Such was the case with the latest construction put in place numbers. Building activity fell 1.7% (+4.8% y/y) in March and reversed a 1.5% February rise. Moreover, it added to a 4.0% January decline which was double the last estimated drop. As a result, the level of construction activity was 4.1% lower than at yearend 2012.

Home prices are generating improved upward momentum throughout the country. The seasonally adjusted Case-Shiller 20 City Home Price Index increased 1.2% (9.4% y/y) during February and built on a 1.0% January rise. The 3-month annualized rate of increase of 13.4% was the strongest since late-2005. Home prices in the narrower 10 city group rose 1.2% (8.6% y/y) in February. 




The official Purchasing Managers’ Index came in at 50.6 in April, below expectations of a reading in line with the 50.9 recorded in March.
New orders for all durable goods plunged 5.7% in March, about double the 2.9% drop expected. Falling demand for aircraft and defense goods contributed much of the weakness, but not all of it. Of the major categories, only computer makers reported an increase in new orders.
Almost 240,000 people lost their jobs in the first three months of the year, according to 

Industrial orders in Italy fell by 2.5% in February adding to a string of declines that extends back over four months. The declines over the recent two months are steeper than the declines over the previous two months.




![[image]](http://si.wsj.net/public/resources/images/AI-BZ591_JECON_NS_20130311010303.jpg)