Thursday
Mar152012

Philly Fed Also Surpasses Expectations

Given their close proximity to each other on a geographical basis, it shouldn't be too much of a surprise that like the NY Fed report, this morning's release of the Philly Fed came in better than expected.  The strongest component of this morning's report was prices paid, followed by prices received.  On a positive note for employment, the percentage of companies seeing an increase in their headcount was the third highest subcomponent of the monthly survey.  

The charts below show the historical monthly readings of the Philly Fed and each of its subcomponents with recessions highlighted in gray.  At a level of 12.5, the overall March reading was the highest since April of 2011, and has now rebounded sharply from last Fall's decline.

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Thursday
Mar152012

NY Fed Manufacturing Survey At Highest Level Since June 2010

This morning's release of the NY Fed monthly manufacturing survey rose to 20.21, which is the highest level since June 2010.  This survey conducted by the NY Fed measures the percentage of companies showing an increase or improvement in conditions.  Readings above zero are considered positive, while negative readings indicate that respondents are seeing deteriorating conditions.  As shown in the chart below, both the current general business conditions and the business conditions six months out are at or near their highest levels in more than a year.

In the table to the right we highlight this month's responses for the overall survey and each of its sub-components.  As shown, all of the readings for six months out are higher than current conditions, which indicates that most manufacturers in the NY area are bullish on their outlooks.  We would caution readers not to read too much into this, however, as historically manufacturers have always been more positive on their outlook (see charts below).  We can gain some insight into their outlooks, though, by looking at which categories have the biggest gaps between the current conditions and the conditions six months out.  Here, manufacturers are looking for big increases in New Orders and Shipments.  Delivery Times, Average Workweek and Inventories have the smallest gaps between now and six months out.

In what should be a positive sign for Technology and Industrial companies, survey respondents are also planning to increase investment spending.  32% of companies surveyed are expecting to raise spending on capital expenditures (highest since January 2011), while 25% of companies are planning to spend more on technology.

 In the charts below, we show the historical levels for each of the subcomponents of the Fed Manufacturing survey.

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Thursday
Mar152012

First Decline in Jobless Claims in Four Weeks

Initial jobless claims for the week ending March 9th declined 14K to 351K.  This breaks a string of three weekly increases, and matches the post-credit crisis low we saw in February.

While weekly jobless claims dropped 14K, the four week moving average actually remained unchanged (356), as this week's reading of 351K was the same as the reading we dropped from five weeks ago.

On a non-seasonally adjusted basis (NSA), jobless claims fell to 337.7K.  This is the lowest reading for the second week of March since 2008, and below the historical average since 2000 for the second week of March (368K).

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Tuesday
Mar132012

February Retail Sales Grow 1.1%

This morning's release of retail sales for February showed monthly growth of 1.1%, which was inline with forecasts.  Ex Autos and ex Autos and Gas, the numbers came in better than expected.  Not only were these numbers better than expected, but January's results were also revised higher.

On a year/year basis, retail sales rose 6.5% in February.  After accounting for inflation, the y/y reading drops down to 3.5%, and although that is down from last year's highs, it is still well above the historical average of 2.1%.  As shown in the chart below, the Consumer Discretionary sector closely tracks retail sales, so this month's strength helps to explain the continued resilience of the Consumer Discretionary sector.

The table to the right shows the monthly change in retail sales by category.  As shown, Gas stations saw the largest monthly increase in sales with a 3.3% gain, followed by Clothing (1.8%), Autos (1.6%), and Building Materials (1.4%).  The fact that Clothing, Autos, and Building Materials all saw among the largest gains is a positive signal, as all of these sectors are generally considered discretionary in nature.  Only two sectors saw a decline during the month (Furniture and General Merchandise).  Subtracting the number of sectors that saw declines in the month from the number of sectors that saw gains gives us a net of positive nine.  This is the highest monthly reading since August 2010.

The chart below shows the six-month average of the net number of sectors showing gains in their monthly retail sales.  After this month's report, the diffusion index rose to +4.0.

When we look at the monthly retail sales report, we also like to look at trends in each sector's total share of retail sales.  At a level of 17.79%, Autos currently account for the largest share of total retail sales, which is why the recent improvement in the monthly Auto sales numbers is so positive.  Over the last year, sectors that have seen the largest increase in their % of total sales are Gas Stations, Bars & Restaurants, and Building Materials (housing rebound?).  On the downside, General Merchandise, Food & Beverage Stores, and Health and Personal Care have seen their share of total retail sales drop more than any other sector.  Based on these numbers, it appears as though Americans are cooking at home less (decline in sales at Food and Beverage Stores) and eating out more (increase at Bars and Restaurants).

 

Finally, below we highlight four charts that look at the total share of retail sales by sector.  Building Materials and Autos were two of the sectors hardest hit during the recession but in recent months have been showing substantial improvement and appear to be forming new uptrends in their share of total retail sales.  The lower two charts highlight the secular shift taking place in the US economy from bricks (traditional retailers) to clicks (online).   As shown, the total share of sales coming from Non-Store retailers (online) continues to make new highs at the expense of Electronics and Appliance retailers where the total share of sales continues to make new lows. 

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Thursday
Mar082012

Initial Jobless Claims Show Modest Rise

They can't fall every week.  This week initial jobless claims rose by 8K to 362K.  While it seems like claims have been dropping every week lately, after taking revisions into account, claims have actually now risen for three straight weeks.  That being said, they are only up 11K from the four-year low of 351K that we saw in early February.

The charts below show jobless claims on a seasonally (weekly and four-week moving average) and non-seasonally adjusted basis.  As shown, claims remain right near their recent lows on a seasonally adjusted basis.  On a non-seasonally adjusted basis, claims came in at 366K, which is actually below the average reading that we typically see in the first week of March going back to 2000.

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Monday
Mar052012

ISM Non Manufacturing Posts a One Year High

Unlike last week's ISM Manufacturing report, this morning's release of the ISM Non Manufacturing report was stronger than expected (57.3 vs. 56.1).  It was also the highest reading since last February.   In the charts and table below we have broken out the report based on its various subsectors.

As shown in the table below, relative to last month, most subsectors saw an increase during the month.  The only subsectors that were down relative to last month were Supplier Deliveries, Employment, Exports Orders, and Import Orders.  Relative to last year, though, most of the subsectors are actually lower.  

Finally, this month's composite ISM index which combines both the Manufacturing and Non Manufacturing segments of the monthly survey rose to 56.7.  With three straight monthly increases, this measure is now at its highest level in eleven months.

 

Thursday
Mar012012

ISM Manufacturing: 3/1/12

This morning's ISM Manufacturing report for February showed weaker than expected economic growth as the headline number came in at a reading of 52.4 versus consensus expectations of 54.5.  In the charts and table below we have broken out the report based on its various subsectors.

While the overall headline reading was weaker than expected, with the exception of three subsectors, every subcomponent is currently showing growth.  That being said, most sectors are showing weaker momentum relative to the last month and year.  One consolation is that the number of industries seeing overall growth, production growth, new order growth, and employment growth all increased compared to last month.  Let's just hope that in terms of economic activity, 2012 is not a replay of 2011's strong start that was followed by an abrupt slowdown.

 

Thursday
Mar012012

Initial Jobless Claims: 3/1/12

This morning's initial jobless claims report was modestly better than expected on all fronts.  The actual number came in at 351,000 versus an estimate of 355,000.  On a seasonally adjusted basis, jobless claims are at their lowest level since March 2008. 

The four-week moving average also dropped to 354K, which was also the lowest reading since March 2008.

Finally, on a non-seasonally adjusted basis, jobless claims fell to 332K, which is the lowest reading for the last week of February since 2007.  Going back to 2000, there have only been three years (2005, 2006, and 2007) where non-seasonally adjusted jobless claims were lower than the current reading in the last week of February.

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Tuesday
Feb282012

Stronger Than Expected Consumer Confidence

This morning's Consumer Confidence report for February not only was stronger than expected, but it was also the first time in a year that the overall index exceeded 70.  It was the second highest reading since the Lehman brothers bankruptcy.  

The chart below shows the historical levels of the Consumer Confidence report going back to 1967.  Although overall confidence is well off its lows from the credit crisis, it is still at historically low levels compared to prior periods.

Within each month's report, the Conference Board also asks numerous questions with regards to the economy, markets, and buying intentions of consumers.  Two of those questions involve interest rates and the stock market.  The first chart below shows the percentage of respondents who are expecting higher (green) and lower (red) interest rates.  Given the fact that interest rates are at historically low levels, it is not a surprise that more people are looking for higher interest rates than lower interest rates.  What is somewhat interesting, however, is the fact that the number of people looking for higher interest rates has actually been declining over the last few months.

In terms of stock prices, the percentage of people looking for higher and lower stock prices in the months ahead is about the same.  That's a big shift since last Fall when the number of people looking for lower stock prices was practically as bearish as it was at the height of the credit crisis.  it just goes to show that investors still have the nightmare of 2008 and 2009 fresh in their minds.  

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