Today (post internet outage): Strong retail sales, oil windfall? U.S. housing.
Retail and food sales rose a seasonally adjusted 0.6% from July, the Commerce Department said Friday. Sales in July advanced 0.3% from June, up from an initial estimate that said spending had been unchanged. The revision largely dispelled earlier fears of a summer lull.
I was right on that.
Friday’s report showed relatively broad-based gains. Even after excluding sales of cars, sales rose 0.3%. Retailers and restaurants also benefited from declining gas prices. Excluding both autos and gasoline, sales advanced 0.5%.
Total retail sales were up 5% from a year earlier, the largest such gain in more than a year.
The report showed sales grew across a range of retail sectors during the back-to-school season. Sales of building materials rose 1.4%, the largest monthly gain since April, while sales at furnishing and appliance stores rose 0.7%.
Pretty strong report, unsurprising given the strengthening consumer fundamentals. Read on.
U.S. Import Prices Fall on Cheaper Oil Prices of imported goods fell sharply in August, a sign cheaper oil is helping keep a lid on inflation in the U.S.
Import prices fell 0.9% from July, matching the biggest decline since June 2012, the Labor Department said Friday. The drop fell in line with the forecast of economists surveyed by The Wall Street Journal.
Compared to a year earlier, prices fell 0.4%, ending three months of year-over-year gains.
Excluding petroleum, prices fell 0.1% but were up 0.8% from a year earlier. That marked the largest 12-month advance since the year ended in March 2012.
Oil Glut Ignites Gasoline Price Swoon Gasoline prices have tumbled 19% since June and markets are signaling further relief at the pump for consumers.
(…) The average retail price for a gallon of regular gasoline was $3.42 on Thursday, down 3.8% from the same period in 2013, according to motor club AAA. For this time of year, gasoline prices are at their lowest level in four years. (…)
Oil prices have broken the $100 floor that existed since 2010. Weak Chinese and Euro demand coupled with increased supply (U.S., Lybia) explain the recent slip from $115 to $100. However, the break below $100 is because Saudi Arabia has seemingly decided to preserve market share rather than protect its budgeted price level.
In the U.S., gasoline futures have plunged $0.28 to $2.50 since Labor Day, meaning that retail prices should drop to the $3.20 area over the next six weeks, another 6.4% decline. In all, gasoline prices are $0.35 (-10%) lower than at this time last year. This equates to a $37.5B quarterly saving for consumers, potentially boosting expenditures by 1.2% annualized.
New applications for purchase mortgages declined another 2.6% w/w last week and are now down -11.7% Y/Y. That is in spite of mortgage rates being down 53 bps Y/Y. Raymond James notes that
(,,,) credit availability has seen little change since the beginning of the year, creating a meaningful deterrent to a more robust housing recovery. We note, relative to credit standards prior to 2007, mortgage availability is roughly seven times more difficult today according to this index. In a recent Federal Reserve Bank of New York survey, 65.6% of renters in the sample said it would be somewhat or very difficult for them to get a mortgage while only 5.5% thought it would be very easy.
Americans have no problem borrowing for cars and credit card offerings have been rising rapidly lately. Yet, mortgage availability remain significantly constrained. It must be just a matter of time given rising employment and incomes and improving bank balance sheets. Developers must be praying for a change given the rise in their inventory of unsold homes as this BloombergBriefs chart illustrates:
Dollar’s Rise Starting to Have Far-Reaching Effects After a lengthy period of inaction in currency markets, things have become interesting.
(…) But now the fortunes of major economies are diverging and a long-awaited rally in the dollar is shaking the market back to life. Since the start of July, the greenback has gained 5.5 per cent against the euro, as European Central Bank easing finally curbs the strength of the single currency. It has climbed 5 per cent to a six-year high against the yen; and gained 5.5 per cent against sterling as doubts grow over the timing of UK rate rises and the campaign for Scottish independence gains traction.
Just what the world needs now: a weak yen and a weak euro where growth is too low, and a strong dollar to keep commodities and inflation contained.