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Tuesday, May 26, 2015

I Wouldn't Call That Reassuring

I saw a perky headline about April's durable goods release. It didn't quite match the reality.

There are signs of a more structural slowdown in April's report. YoY, shipments are up and new orders are down. Total +3.5%/-1.3%. And so it goes, with autos being about the best category. 

If this continues - which it may well not - we are in for a much slower economy the rest of this year than the Fed expects. You can make a case that the oil slowdown accounts for a lot of this, but it doesn't matter - if it persists, things will be difficult this fall. YoY YTD capital goods new orders are down 5.9% (-5.9%).

On the other hand, it might be that this clears out in May/June, and we pick up some impetus. 

So far rail has not shown improvement - we have gone slightly negative on the YoY YTD in the last rail report, and we will have to wait two more weeks to see if that is real or will redress after the difference in the Memorial Day calendar works its way out of the figures. The weakness is in carloads, which generally does precede the decline in intermodal.

So far this year the economic data is stunningly equivocal, which makes me think that we'll stagger through with the help of construction. But in a month or two I may revise my thinking if there are no signs of life elsewhere. 

The KC manufacturing index for May was frankly disturbing. 

Comments:

I can make lots of excuses for the carload data. The oil slowdown, the War on Coal, yada yada.

But like you say, I suppose it doesn't matter why. When you're skimming the boundary, any dislocation that is big enough will do the job.

 
I would call it skimming the boundary. So far I think we are on the right side of it, but as this wears on the possibility of bad luck grows.

Dallas was really down way more than expected. I suppose the floods in Texas won't help that any!

Richmond was okay - just barely positive, but we'll take it. We're probably gaining a little, but so little that one becomes concerned.

Neil, at AAR the carloads excluding coal still are pulling below last year's carloads ex coal, and the four week trend is worsening.
 
Sounds like KC Fed was largely energy driven. Many of the formations in OK (and CO and WY to a lesser extent) have weaker economics than other basins, so this is not too surprising. The stock chart of Sandridge (SD) is a pretty good proxy for the woes of a lot of OK based production. Their capex budget is going from $1.6B to $700B this year and they spent half of that in the first quarter, so rest of the year will be down ~70% y/y, and it sounds like the supply chain is feeling that.
 
Did you see this one today?

http://www.telegraph.co.uk/finance/economics/11625098/HSBC-fears-world-recession-with-no-lifeboats-left.html


 
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