Friday, June 26, 2015
Got Up Early To Watch Shanghai
Regarding the US, the puzzling thing is that all indications are that housing is just fine. First-time buyers are coming in due to mortgage changes (FHA & agreements to restrain pushbacks) and high rents, which, combined with household formation changes, should place a pretty solid floor under the markets this year.
Yet, even with the indications on housing and continued strength in motor vehicles, June's data was mixed to poor. It seems as if the manufacturing arm might be stabilizing a bit from some indicators, but if Markit's Services PMI is any decent indicator, the June overall trends are not that great, with Flash PMI coming sharply lower than anticipated. This, btw, was indicated by May NACM CMI, which forecast an uptick in manufacturing and a downtick in services.
Rail sticks at a declining trend, moving inexorably it appears to a significant YoY negative 1%. Intermodal has been slowing a bit recently.
ATA trucking shows a sharper shift than rail, with May being up monthly, but the YoY trend now falling, apparently trying to converge with rail.
Durable Goods advance just was not reassuring at all. Five months into the year, YTD shipments are up 2.8% and YTD new orders are down 2.2%, and this does not indicate any life in the sector. Further, while motor vehicles are still the stand-out, they may be topping. You always have to wait for three total months to make that determination, esp. around model year shifts.
The odd placement of Memorial Day can affect multiple lines of data for May, so one can't get too excited right now. In particular, durable goods for June might look much, much better.
Still, we have softness and not a ton of net momentum build moving into the third quarter.
Housing, however, is excellent, which leads me to puzzle over trucking. Perhaps it will look stronger by August.
As things now stand, the US economy is not falling through the rails with gathering negative correlations. It is hard to see how it could with housing showing such strength. Further, crude production in the US is still increasing, albeit quite slowly, and fuel supply indicators confirm that the US economy is NOT declining. However if motor vehicle sales and production top out, the picture may change.
If I have time I will write some more this weekend, because an interesting situation is developing here.
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