U.S. Existing-Home Sales Plunged in November Sales of previously owned homes plummeted in November as delays caused by new mortgage red-tape and a dwindling supply of residences on the market pushed down sales to a level not seen since April 2014.
Existing-home sales fell 10.5% last month to a seasonally adjusted annualized rate of 4.76 million, the National Association of Realtors said Tuesday, well below the 5.32 million economists expected. The double-digit decline was the sharpest since July 2010, when sales took a hit from the expiration of a home-buyer tax credit.
The NAR blamed the lion’s share of the November decline on closing delays caused by new federal rules implemented by the Consumer Financial Protection Bureau in October, although it said rising home prices and tight inventory continued to challenge potential buyers. (…)
The number of existing homes for sale fell more than 3% on the month in November and was down nearly 2% on the year. (…)
In November, the national median home price rose to $220,300, the 45th consecutive month of gains year over year, and 6.3% higher than the same month last year.
We will get November pending home sales (contracts recorded at the time of sale) next week but October pending sales were +0.2% MoM and +2.1% YoY, thus not pointing to the outsize November decline. Nevertheless, pending sales have been weakening since they peaked in May. Seasonally adjusted, pending sales dropped 4.3% (-13.5% a.r.) between May and September.
The Federal Reserve Bank of Philadelphia reported that its Index of Nonmanufacturing Sector Activity at the company level fell to 25.5 in December, the lowest level since August. The reading was well below the year-ago level of 47.5, and the full-year number of 31.5 was down from 39.1 in 2014. These diffusion indexes are not seasonally adjusted.
A lower inventory figure of 0.0 provided the largest drag on December activity. A shorter workweek and fewer capital expenditures also weighed on business.
Offsetting much of this reduction was improvement in new and unfilled orders Revenues and full-time permanent employment also improved along with pricing power.
The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data.
Pretty weak readings lately!
Richmond Fed: December Retail Sales Contracting
Service sector activity remained subdued in December, according to the latest survey by the Federal Reserve Bank of Richmond. Retail sales contracted for a second consecutive month and shopper traffic dropped. Big-ticket sales fell sharply. Retail inventories were little changed. Revenues rose at a slightly faster pace at other services firms, however.
Service sector employment strengthened further in December, with more hiring than a month earlier and continued increases in average wages.
Retail sales remained in a slump going into the holidays, with the index dropping to -36 from last month’s reading of -12. Big ticket sales fell in December, pulling the index seven points lower to -32. In addition, shopper traffic declined, reducing the index to -19 from -3.
If this is a reflection of the entire USA…
The S&P 500, down 2.6% so far this month, is on track for its worst December since 2002 and, before that, 1986 in spite of encouraging earnings trends as per Thomson Reuters.
Alexander Ineichen does great work with his Risk Management Research group. It is unfortunate that his pricing is beyond my means. However, he occasionally graciously sends me some of his work.
Speaking of China:
- Dec. 21: Bloomberg reports that “To boost growth, China says fiscal policy must be forceful and monetary policy must be flexible.”
- Dec. 22: “China will take further steps to support growth, including widening the fiscal deficit and stimulating housing.”
- Bond yields in China declined to 2.93%, anticipating another rate cut.
Corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent, according to a preliminary finding of the U.S. Department of Commerce. (…)
In November, the government found that all those countries, except Taiwan, subsidized their domestic production by as much as 236 percent of its price.
Tuesday’s tariffs, combined with countervailing duties as high as 236 percent announced on Nov. 3, create a barrier to imports of these steel products from China, said Caitlin Webber, an analyst at Bloomberg Intelligence in Washington. (…)
In its closelywatched annual World Oil Outlook,published Wednesday, the Organization of the Petroleum Exporting Countries said it expects the price of its basket of crudes to rise to $70 a barrel in 2020 and $95 a barrel in 2040, compared with$30.74 a barrel on Monday. (…)
The organization’s report suggests the group might have to change tack. It said it expects to cut its own supply to 30.6 million barrels a day in 2019. That is more than one million barrels a day lower than its production of 31.7 million barrels a day in November, which was its highest in three years. (…)
The current decline in oil prices is driving up demand for oil,the report said, forecasting a rise to 97.4 million barrels a day by 2020, compared with an estimated 92.8 million barrels a day this year. But OPEC added that the impact of lowercrude prices would be mitigated by high taxes on motor oil along with fuel-efficiency measures, notably in China.
On the other hand, technological breakthroughs and a rebound in oil prices mean North American production likely will prove resilient despite their high cost.
The OPEC report said oil supply from the U.S. and Canada would reach 19.8 million barrels a day by 2020, an increase of 2.5 million barrels a day over 2014.Even production of U.S. light-tight oil—in which hydraulic-fracturing techniques extract crude from shale formations, at a cost often higher than $50 a barrel—is expected to rise to 5.2 million barrels a day in 2020 from 4.4 million barrels a day this year, according to the organization.
From the FT we get this call for “the right signals”:
(…) “If the right signals are not forthcoming, there is a possibility that the market could find that there is not enough new capacity and infrastructure in place to meet future rising demand levels, and this would obviously have a knock-on impact on prices,” said Abdalla El-Badri, secretary-general of Opec, in the report. (…)
More good stuff from the Globe & Mail:
Demand for OPEC crude will reach 30.70 million barrels per day (bpd) in 2020, OPEC said, lower than 30.90 million bpd next year. The expected demand from OPEC in 2020 is about 1 million bpd less than it is currently producing. (…)
Nonetheless, the report shows that the medium-term outlook – from OPEC’s point of view as the supplier of a third of the world’s oil – has improved. In the 2014 edition, demand for OPEC crude was expected to fall to 29.0 million bpd by 2020. (…)
In a change of tack from previous reports, OPEC now says many projects work at lower prices too.
“The most prolific zones within some plays can break even at levels below the prices observed in 2015, and are thus likely to see continued production growth,” the report said.
Global tight oil output will reach 5.19 million bpd by 2020, peak at 5.61 million bpd in 2030 and ease to 5.18 million bpd in 2040, the report said, as Argentina and Russia join North America as producers.
Last year’s estimates were 4.50 million bpd by 2020 and 4 million bpd by 2040.
Under another, upside supply scenario, tight oil production could spread to Mexico and China and bring supply to almost 8 million bpd by 2040, OPEC said. As recently as 2013, OPEC assumed tight oil would have no impact outside North America. (…)
Bloomberg concludes (my emphasis):
(…) The 30.7 million barrels of daily output needed from 12 of OPEC’s members in 2020 is about 300,000 a day less than required this year, when it repeatedly pumped above its production target before scrapping the limit altogether earlier this month. The supply total excludes Indonesia, which formally rejoined OPEC on Dec. 4.
OPEC assumes that prices will rise to average $80 a barrel in nominal terms in 2020, and $70.70 in real terms. Last year it had anticipated nominal prices of $110 and real levels of $95.40. That means the value of the group’s output in 2020 would be $218 billion less than estimated a year ago, when it first embarked on the policy to protect market share.
The organization increased its estimate for global oil demand in 2020 by 500,000 barrels a day to 97.4 million a day. By then, fuel consumption in emerging nations will overtake that in the industrialized economies of the Organization for Economic Cooperation and Development, it said.
The group cut forecasts for non-OPEC supply in 2020 by 1 million barrels a day to 60.2 million a day as “market instability” leads to reductions in spending and drilling. Non-OPEC supply will still grow by 2.8 million barrels a day this decade, including 800,000 barrels of additional U.S. shale oil. OPEC said the outlook, which incorporated some data set in the middle of the year, was “clouded by uncertainties.” (…)
I don’t need to do the exact math: OPEC’s output gain: +2-3% thanks to 40-50% price drop…
Oil price slump hits Gulf economy Bigger deficits and spending cuts hit construction and confidence
(…) Gloom has descended on the region amid an oil price rout that has halved the price of crude over 18 months and wiped $360bn off export earnings just this past year. (…)
“2015 has been a difficult year, but this is just the beginning of a multiyear adjustment process: 2016 will be just as tough, and then there is 2017 and 2018,” says Masood Ahmed, the International Monetary Fund director for the Gulf region. “Next year the slowdown is not going to ease up.” (…)
From an overall fiscal surplus of more than 10 per cent of gross domestic product in 2013, the GCC economies have plunged deep into the red. In October, the IMF estimated that the six countries’ overall deficit would be 13 per cent of GDP this year and little changed next year.
Gulf governments are now contemplating the introduction of sale and corporate taxes to produce new, non-oil sources of revenues for state coffers.
Such moves are viewed with suspicion by populations accustomed to government support and are set to usher in a more difficult era for business. (…)
Standard & Poor’s, the rating agency, has estimated a 10–20 per cent slide in Dubai residential prices for 2015. (…)
Cash-strapped governments have been running down deposits in domestic banks to fund their budget deficits and the banker expects liquidity to tighten further as state oil revenues continue their decline. (…)
With some small and medium-sized businesses already closing down because of the rising cost of capital, optimism is hard to come by: almost every sector is affected by the crunch. (…)