by Calculated Risk on 1/25/2019 10:45:00 AM

Once again policy makers and analysts are flying blind without key economic data due to a government shutdown. As an example, the new home sales report for December wasn't released this morning (this is the second month in a row without a new home sales report).

I think the four most important releases are 1) the monthly employment report, 2) the quarterly GDP report, 3) the monthly housing starts report and 4) the monthly new home sales report.   Only the employment report is currently being released.   Of course many other reports flow into the quarterly GDP report - so those missing reports are also important.

All business people know that when there is a problem, a key first step is to measure the problem.    And everyone knows housing has been soft recently, so we need the housing starts and new home sales reports to understand how soft.

In the short term this is a minor inconvenience compared to the widespread suffering related to the shutdown, but these missing reports are important for understanding what is happening with the economy.

by Calculated Risk on 1/24/2019 07:14:00 PM

Probably the four most important data releases for tracking the economy are 1) the monthly employment report, 2) the quarterly GDP report, 3) the monthly housing starts report, and 4) the new home sales report.  Only the employment report is being released on time.

The government shutdown is delaying 3 out of 4 of these critical reports - so we are flying blind.

Friday:
• At 8:30 AM, Durable Goods Orders for December from the Census Bureau. The consensus is for a 1.8% increase in durable goods orders.

• At 10:00 AM, POSTPONED New Home Sales for December from the Census Bureau. The consensus is for 565 thousand SAAR.

by Calculated Risk on 1/24/2019 04:06:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 19 January

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 13-19 January 2019, according to data from STR.

In comparison with the week of 14-20 January 2018, the industry recorded the following:

• Occupancy: +5.0% to 58.4%
• Average daily rate (ADR): +3.4% to US$124.32
• Revenue per available room (RevPAR): +8.5% to US$72.54

STR analysts partially attribute the week’s substantial growth figures to a calendar shift. Growth for Monday of the week was especially pronounced due to comparison with Martin Luther King, Jr. Day last year: 14 January 2019 (standard business day) vs. 15 January 2018 (MLK Day). Significant performance increases were also noticeable on Saturday of the week. That was likely due in part to the Women’s March as well as the long weekend that ended with this year’s MLK Day.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2019, dash light blue is 2018, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

A solid start for 2019.

Seasonally, the occupancy rate will increase over the next couple of months.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 1/24/2019 12:13:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 1.3% compared in December to the rolling 12 months ending in November.   Outbound traffic was down 0.8% compared to the rolling 12 months ending in November.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.

In general imports have been increasing, and exports have mostly moved sideways over the last 8 years.

by Calculated Risk on 1/24/2019 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Continued to Grow Modestly

The Federal Reserve Bank of Kansas City released the January Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity continued to grow modestly, and expectations for future growth remained solid.

“Regional factories had another month of sluggish growth in January,” said Wilkerson. “About one-sixth of the firms in the survey said the partial government shutdown had negatively affected their business.”
...
The month-over-month composite index was 5 in January, similar to 6 in December, and lower than 17 in November. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The slow and steady increase in factory activity was driven by durable goods producers, particularly wood products, fabricated metals, electrical equipment and appliances, and furniture manufacturing. Month-over-month indexes were somewhat mixed. The production index jumped back into positive territory, while the order backlog index turned negative for the first time since June 2017. Most year-over-year factory indexes eased from the previous month, and the composite index decreased from 38 to 31. Future factory activity expectations remained solid. The future composite index eased slightly from 22 to 18, while the future production index increased.
…
This month contacts were asked special questions about how the partial federal government shutdown has affected their business, and how credit conditions have changed over the past year. Nearly 17 percent of manufacturing contacts reported negative effects from the federal government shutdown on their business. Of the firms that reported negative effects from the shutdown, most noted permit delays or trade disruptions due to federal agencies being closed. Over the past year, more than 13 percent of firms reported that access to credit had increased while only seven percent of firms said access had decreased (Chart 4). However, 54 percent of contacts reported that the cost of credit increased over the past year.
emphasis added

So far, most of the regional surveys have indicated slower growth in January than in December (and December was the weakest month for the ISM index in over 2 years).

by Calculated Risk on 1/24/2019 08:33:00 AM

The DOL reported:

In the week ending January 19, the advance figure for seasonally adjusted initial claims was 199,000, a decrease of 13,000 from the previous week's revised level. This is the lowest level for initial claims since November 15, 1969 when it was 197,000. The previous week's level was revised down by 1,000 from 213,000 to 212,000. The 4-week moving average was 215,000, a decrease of 5,500 from the previous week's revised average. The previous week's average was revised down by 250 from 220,750 to 220,500.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 215,000.

This was lower than the consensus forecast.

by Calculated Risk on 1/23/2019 08:52:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 217 thousand initial claims, up from 213 thousand the previous week.

• At 11:00 AM, the Kansas City Fed manufacturing survey for December.

by Calculated Risk on 1/23/2019 02:11:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Shows Signs of Slower Growth in U.S. Economy

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a 0.3 percent decline in January on a three-month moving average (3MMA) basis. This marks the barometer’s third consecutive month-over-month drop and suggests a slower rate of U.S. economic growth. On a year-over-year (Y/Y) basis, the barometer is up 0.8 percent (3MMA), a pronounced slowdown in the pace of growth as compared with late last year.
...
“The CAB continues to signal gains in U.S. commercial and industrial activity through mid-2019, but at a much slower pace as growth (as measured by year-earlier comparisons) has turned over,” said Kevin Swift, chief economist at ACC. “Despite three straight months of decline in the barometer, the cumulative decline is 1.0 percent – well below the 3.0 percent that would signal negative growth in the U.S. economy.”
…
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

The year-over-year increase in the CAB has softened recently, suggesting further gains in industrial production into 2019, but at a slower pace.

by Calculated Risk on 1/23/2019 11:30:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings slow, but close 2018 with growing demand

Architecture firm billings growth softened in December but remained positive for the fifteenth consecutive month, according to a new report released today from The American Institute of Architects (AIA). AIA’s Architecture Billings Index (ABI) score for December was 50.4 compared to 54.7 in November. Despite the positive billings, a softening in growth was seen across several regions and sectors, as well as in project inquiries and design contracts.

“Given the concerns over the ongoing tariff situation, it is not surprising to see a bit of a slowdown in progress on current projects,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Growing anxiety over unstable business conditions and the partial shutdown of the government may lead to further softening in the coming months.”
...
• Regional averages: Midwest (56.3), Northeast (51.6), South (49.4), West (49.2)

• Sector index breakdown: institutional (53.1), commercial/industrial (51.2), mixed practice (50.2), multi-family residential (49.8
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 50.4 in December, down from 54.7 in November. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index has been positive for 15 consecutive months, suggesting a further increase in CRE investment in 2019.

by Calculated Risk on 1/23/2019 10:04:00 AM

From the Richmond Fed: Fifth District Manufacturing Activity Was Soft in January

Fifth District manufacturing activity was soft in January, according to the latest survey from the Richmond Fed. The composite index rose from −8 in December to −2 in January but continued to indicate weak growth. The rise from December came from increases in the component indexes of employment and shipments, although the shipments index remained negative. The third component, new orders, dropped to −11, its lowest reading since June 2016. Meanwhile, the index for backlog of orders fell to −21, its lowest reading since May 2009. However, manufacturers remained optimistic that conditions would improve in the coming months.

Survey results indicated continued growth in employment and wages in January, but firms still struggled to find workers with the skills they need. Respondents expected this struggle to continue, along with employment and wage growth, in the near future.
emphasis added

This was another weak regional manufacturing reading for January.