Personal income was unchanged during June (2.6% y/y) following a 0.3% May rise, revised from 0.4%. A 0.4% increase had been expected in the Action Economics Forecast Survey. Figures back to 2014 were revised and last year’s increase in income was lowered to 2.4% from 3.4%. The 5.0% increase in 2015 was increased from 4.4%. (…)
Wages & salaries improved 0.4% (2.5% y/y) following a 0.1% uptick. (…)
Disposable income was unchanged (2.6% y/y) following a 0.4% rise. Adjusted for price changes, take-home pay eased 0.1% (+1.2% y/y) after a 0.5% jump.
Personal consumption expenditures improved 0.1% (3.8% y/y) following a 0.2% rise. A 0.1% uptick had been expected. Earlier figures were little revised. Adjusted for price change, personal spending held steady (2.4% y/y) after a 0.2% rise. Real durable goods purchases eased 0.1% (+5.3% y/y) after a 0.2% rise. Real nondurable goods spending fell 0.2% (+1.5% y/y) following a 0.4% gain. Real spending on services rose 0.1% (2.2% for a second month.
The personal savings rate eased to 3.8% and the downward revisions to income resulted in the May rate being lowered to 3.9% from 5.5% , along with downward revisions to earlier periods.
The chain-type price index held steady (1.4% y/y) for the second straight month. Excluding food & energy, prices increased 0.1% (1.5% y/y) also for a second consecutive month. Durable goods prices fell 0.2% (-2.0% y/y), down for the fifth straight month. Nondurable goods prices fell 0.2% (+0.5% y/y), after a 0.8% decline. Services prices rose 0.1% (2.3% y/y), following a 0.2% rise.
- How were US households able to maintain this level of spending when income growth has been tepid? The answer seems to be that Americans dipped into their savings. The chart below shows the post-revision savings rate. (The Daily Shot)
Source: Capital Economics
Some Insurers Seek ACA Premium Increases of 30% and Higher Major health insurers in some states are seeking 2018 premium increases on Affordable Care Act plans of 30% or more, according to new federal data.
Big insurers in Idaho, West Virginia, South Carolina, Iowa and Wyoming are seeking to raise premiums by averages close to 30% or more, according to preliminary rate requests published Tuesday by the U.S. Department of Health and Human Services. Major marketplace players in New Mexico, Tennessee, North Dakota and Hawaii indicated they were looking for average increases of 20% or more.
In other cases, insurers are looking for more limited premium increases for the suites of products they offer in individual states, reflecting the variety of situations in different markets. Health Care Service Corp., a huge exchange player in five states, filed for average increases including 8.3% in Oklahoma, 23.6% in Texas, and 16% in Illinois. (…)
Insurers face a mid-August deadline for completing their rates. The companies have until late September to sign federal agreements to offer plans in 2018. In some cases, insurers warn, the figures revealed by federal regulators may not reflect their up-to-date thinking. (…)
“There’s a lot of risk associated with the uncertainty in Congress right now, and we are pricing appropriately for that risk.” (…)
The exchange in California said Tuesday that insurers there were seeking an overall average increase of 12.5%—but there would be an additional 12.4% boost layered onto middle-tier “silver” plans if the cost-sharing subsidies aren’t paid.
However, in a number of cases, insurers’ rate requests are well above 20% because of market factors not directly tied to the federal uncertainty. Anthem has warned that it may need to add 18% to 20% to its existing rate requests if the cost-sharing payments aren’t locked in, and it may pull back in more states beyond the five exchanges where it has disclosed plans to leave or sharply reduce its footprint. (…)
Car Makers Report Steep Sales Fall Auto sales sharply declined in July, the seventh month of a slowdown punctuated by manufacturers’ reluctance to sell discounted cars through leases and car-rental chains.
Sales fell 7% last month, compared with a year earlier, according to Autodata Corp. Research firm J.D. Power said manufacturers typically pull back on sales incentives after the July Fourth holiday, “but this year elevated inventory levels coupled with the sales slowdown, have compelled them to maintain aggressive discounts throughout July.” (…)
Overall industry demand softened over the first seven months of 2017, falling about 3% in June, according to Autodata. The development ushers in an expected plateau for auto sales, an important driver for the broader U.S. economy.
Sales to government fleets, commercial buyers and rental-car companies have fallen 7.8% in that period, according to J.D. Power, while sales to retail customers at dealerships fell less than 1%. (…)
That’s being felt across supply chains, with rail shipments of automobiles and vehicle parts falling at a double-digit pace in recent weeks. The inventory problem is hitting car makers from two directions: while new cars are stacking up at dealerships, the supply of cheaper used vehicles is swelling, and that has cut into the automobile leasing business that has taken a bigger role in moving cars.
July survey data signalled a solid improvement in operating conditions in the US manufacturing sector. The upturn in business conditions was largely driven by marked and accelerated expansions in both output and new orders. Meanwhile, firms added to their payrolls and raised purchasing activity at the quickest rates since February. Business confidence reached a six-month high, as firms became more optimistic regarding future output. Inflationary pressures remained relatively muted, despite a pick up in the rate of input cost inflation.
The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.3 in July, up from 52.0 in June to signal a further improvement in the health of the sector. Notably, the latest improvement in operating conditions was solid and the strongest in four months.
Production at US manufacturers increased for the fourteenth month running in July. The pace of expansion accelerated from that seen in June to a solid rate. Panellists commonly attributed the upturn to higher client demand.
New orders received by US manufacturing firms grew at a solid pace, recovering from the nine-month low seen in June. A number of respondents noted that the expansion in new business was due to larger client bases and an increased willingness to spend. That said, orders from abroad decreased for the first time in ten months, albeit only slightly.
Backlogs of work fell for the third month running in July. Respondents commonly stated that outstanding business had decreased due to job creation and efficiencies made in the production process. Notably, the latest expansion in staffing levels was the strongest in five months.
In line with greater production schedules, firms increased their purchasing activity and to the greatest extent in five months. At the same time, companies signalled higher inventories of both post- and pre-production items in July. Stock building was generally linked to increased output and greater client demand. However, stronger demand for inputs and stock shortages at vendors led to a further lengthening in average delivery times.
Business confidence among US manufacturing firms improved to a six-month high in July. Stronger optimism was generally linked to more encouraging market conditions and stronger client demand.
Average input costs rose at a modest pace in July. Anecdotal evidence linked input price inflation to higher component costs and supplier shortages. Meanwhile, average prices charged by US manufacturing firms increased at a modest pace.
The ISM factory sector composite index fell to 56.3 during July from June’s unrevised reading of 57.8. (…)
Declines in the component series were numerous. The new orders series fell m/m to 60.4, down from the February high of 65.1. (…)
The employment figure declined m/m to 55.2, also up from a low of 46.2 early in 2016. (…)
The export order index eased to 57.5, down slightly from the March high of 59.5 (…).
The value of construction put-in-place posted a surprisingly soft reading of -1.3% in June (+1.6% y/y), versus expectations (according to the Action Economics Forecast Survey) of a 0.4% increase. Revisions were mixed, with a slightly higher May report partially offsetting a sharply lower April figure. The net effect was a downward adjustment of 0.7 percentage points to past months.
Since peaking late last year at nearly a 10% y/y gain, construction spending has moderated sharply. The weakness has been particularly acute in the past three months, as total construction spending has fallen by 2.8% in that time.
While residential spending continues to post solid 9.0% y/y gains, the last three months have been down, reflecting sharply lower improvements and multi-family structures. These categories tend to be very volatile.
Public construction spending has been weak as well. Public nonresidential spending declined 8.1% in the past three months and 9.5% in the past year. In June, every major category of public nonresidential spending declined. The biggest contributors to the June drop were education (-5.5%) and roads (-6.6%).
From Thomson Reuters as of yesterday a.m.:
- 315 reports in, 72% beat rate and +5.6% surprise factor for blended Q2 EPs up 10.9% (+8.0% on July 1).
- Revenues: +4.9% (4.6%).
- Q3E: +7.3%. Q4E: +12.3%.
- Trailing 12-m EPS: $125.25.
Big Oil Bites the Low-Price Bullet Investors need to make sure companies can keep paying their generous dividends.
Major oil companies seem to have moved through the stages of grief about low prices, finally arriving at acceptance. During the latest round of sector earnings delivered in recent days, Royal Dutch Shell ’s RDS.B 0.55% boss Ben van Beurden even said oil could be “lower forever”: BP said Tuesday it is targeting a future break-even oil price of $35 to $40 a barrel. The question for investors is whether they and their global peers can protect their precious dividend payouts in this brave new world. (…)