Tuesday, July 03, 2007
No Good News
Jan: 108.5For the pending sales report, 100 is equivalent to sales in 2001. The annual pending indexes for the last three years run as follows:
2004: 120.9We will not get anywhere close to 2006 numbers. The best it looks like we can possibly do is around 100. This report pretty much burnt the housing toast for 2007. It is practically impossible to see a sales recovery by the end of this year. It's looking increasingly unlikely to see a recovery in 2008. Since prices continue to fall for at least a year after sales begin to recover, it looks set in stone to have several more years of falling prices.
NSA numbers have also fallen for the second month. I could go on and on about how terrible this pending report is, but I won't. Let this suffice - the seasonally adjusted May figures show only one region exceeding 2001 sales, and that region is the south. Sounds great? Not really, because the south took the worst YoY drop. It is also likely that sales in the south will be affected the most by the FNMA subprime tightening, which has yet to show in these figures. Calculated Risk comments on just how addled Paulson at the Treasury is on housing.
We also got the updated May (preliminary) Mfr's Shipments, Inventories & Orders. It's not very different than the advance report. There was a slight upward revision for new orders; durables only decreased 2.4%, while non-durables increased 1.6%. Shipments of durables increased .5%, while shipments of non-durables increased overall 1.6%, mostly due to petroleum and coal shipments which increased 5.4%. Inventories were up again, leading me to suspect that we are either seeing inflation in inventory valuation or that new orders have or are close to peaking. Most of the real activity is in energy. If we all decide to turn out the lights and turn the thermostats up this summer, industrial production could be badly impacted.
As of this report (download the "highlights" release you can get on the left of the link above):
- YTD 2007 all manufacturing industries shipments are down -.9 compared to YTD 2006, with the worst shipment percentage declines coming from wood products, construction machinery and heavy trucks. Petroleum and coal products are down -8.1. Needless to say, burning corn instead of oil has produced a 12.1 increase in ag chem (fertilizers, pesticides, etc). Anyone who really believes ethanol will prove to be a clean environmental fuel has rocks in their head and environmental ants in their drawers, IMO.
- YTD 2007 all manufacturing industries new orders are down -.6 compared to YTD 2006.
- YoY May value of unfilled orders for all manufacturing are up 20.0. However, this is not a recent trend. Why doesn't this translate into shipments? Possibly the answer lies in the concentration in nondefense aircraft and parts, which are up 40.8, and ships and boats, up 31.7%. They have a long lead time.
- YoY May value of manufacturer's inventories are up 4.3%. Caution must be used here because of inflation/deflation (both of which are occurring), however, this does not look all that stimulative.