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Wednesday, May 01, 2013

A Whole Lotta US Stuff Wednesday

A) ADP employment report. At +119,000. I suppose this is a disappointment from consensus, but after the weakness in the manufacturing surveys, it's really hard to call it a surprise. This is lower than March's initial figure of 158,000 revised down to 131,000, but since ADP has manufacturing losing 10K jobs, it makes sense. ADP does have construction employment rising by 15K, which is a good omen for construction spending later.

I'll update this as the drama rolls in and time allows today. 

B) No surprise on Markit US Mfrg PMI. Significant slowing from March, but not contracting.New order growth fell from 55.4 to 51.5, but new export orders were unchanged at 51.8. Thus the weakness is domestic. Only a very minor rise in finished goods inventories, so the story is just slackness.

C) Watching Ward's on auto sales - they are currently projecting a slight SAAR drop. I don't think it matters whether it comes in at 15.4 or 15.1 - the point is that it does seem likely that maybe we reached the natural high point on US auto sales, so that stops pushing us along this year. This may be something to watch
Update: Well, it had to happen sooner or later. Auto sales fell below the 15 million SAAR mark at 14.9. Lowest YoY DSR growth since August 2011:

D) ISM manufacturing okay. A headline of 50.7 doesn't say a whole lot, but customer inventories were reported down. Both new orders and backlog of orders is reported to have increased, which makes a continued slump in May unlikely. 50.7 matches August of last year, which was preceded by 50.2 and 50.5 in June/July 2012.

E) Construction spending dropped 1.7% in March from February? Total private construction dropped?

Not particularly brilliant, right? We were sort of shooting for the "better than 20010" range. This is not quite the green of spring. 

F) This winter was notably colder than the prior two in the US (and spring colder yet), so it's been a bit hard to compare oil usage. Today's 12.4 million dollar total commercial petroleum build is rather hefty, and the four week total product supplied YoY is -2.7.  This suggests that the trucking tonnage report for April won't be that great. So far in April rail figures have been disappointing. YTD compared to last year, total rail traffic is up only 0.7%. Last year intermodal was very strong, but this year it seems to be slowly weakening.

Light note: When one is contemplating a series of less-than-brilliant economic reports, it is somewhat unsettling to read this headline on Bloomberg: Amgen Drugs May Boost Survival During a Nuclear Attack

 Well, it depends: I've had this bookmarked, might as well throw it in here:
Net trailer orders for March were down 6% month-over-month and 12% year-over-year. This update on industry performance was reported in the latest State of the Industry: U.S. Trailers published by ACT Research Co.

Well, just as (ridiculously easily) predicted the FOMC stated that the economy continues to improve but still needs their support. Sheesh.
I wouldn't say anyone will look at the last few days of data as "improving".

They said it was growing at a moderate pace. It looks like we missed on light motor vehicle sales too - dropped out of the SAAR 15s, probably.

Just to round out a perfect day.
Without demand this economy stalls. I don't think it is
the sequester as much as the resumption regular payroll
tax rate.
Anon, I think you're right. The weather also hurt a lot of northerly households. But real disposable personal incomes just aren't growing fast enough to support spending.
The payroll change is one part, the other is that the US hasn't added full time jobs that deliver discretionary income for the middle class and poor. The SAAR rate was expected based off the FED pulling demand forward, they are running out of subprime customers. The Auto Sales pick up over last 3 years was partly due to 130% LTV loans on marginal credit profiles. The fed has done it's job and created more debt at improperly priced risk.

The ABS bubble will be fun to watch too. Look at junk debt creating, it's back to record territory on the backs of the Fed. Just as planned..

Yeah, HCG, this one is hardly subtle. I don't think I've ever seen worse.

As long as subprime keeps flowing like this (although I don't see how it can), used car prices stay high.

As soon as subprime tightens up, used car prices start to fall and new cars become less affordable on trade-ins, so there's a pretty strong transmission mechanism.

The only thing that has supported the ABS performance has been strong used car values!

All this fundamentally crappy data and yet the "Smart Money" keeps pushing equities up. When Helicopter Ben starts pushing the cash out of the whirly birds, maybe demand will pick up.

It's a lot like Alice in Wonderland. When will the Wizard be unmasked as a fraud? And when will I get to go home to Kansas? ;>)

lots of inflation in used vehicles, I say bubble. Used always holds more gross off vehicle sales from the mom and pop lot to dealer. I loved my 82 Honda for 2K that ran for 100k or more as I got rid of it. Lot's of hot money from fed via Ally into subprime...what a racket..
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