Personal consumption expenditures increased 0.6% (4.5% y/y during November following a 0.2% October gain, revised from 0.3%. (…) Adjusted for price inflation, personal spending increased 0.4% (2.7% y/y) after holding steady.
Real durable goods purchases rose 0.2% (7.1% y/y) and repeated October’s gain. Motor vehicle buying declined 2.6% (+4.2% y/y) after a slight decline. Real spending on home furnishings & appliances jumped 1.7% (9.4% y/y), the third consecutive month of strong increase. Real spending on recreational goods & vehicles surged 2.6% (9.2% y/y) following a 0.3% decline.
Constant dollar spending on nondurable items rose 0.7% (3.0% y/y), the strongest increase since March. Real purchases of clothing & footwear strengthened 2.5% (4.9% y/y), the strongest rise since March 2007. Real spending on gasoline & oil eased 0.2% (-1.8% y/y) after a 0.4% slip. Real spending on food & beverages rose 0.5% (2.5% y/y) following a 0.3% rise.
Real spending on services gained 0.4% (1.9% y/y) on the heels of a 0.1% slip. Real recreation spending increased 1.0% (2.0% y/y) after a 1.3% fall. Real health care outlays rose 0.2% (2.6% y/y) following a 0.1% uptick, while housing & utilities expenditures improved 0.4% (1.5% y/y) after holding steady.
Personal income rose 0.3% (3.8% y/y) last month following an unrevised 0.4% October gain. A 0.4% rise had been expected. Wages & salaries rose 0.4% (4.5% y/y) following a 0.2% increase. (…) Disposable income gained 0.4% (3.7% y/y) for the third straight month. Adjusted for price changes, take-home pay inched 0.1% higher (1.9% y/y) after a 0.3% rise that followed four consecutive months of zero increase.
The personal savings rate declined to 2.9%, the lowest level since November 2007. Personal saving declined by 17.1% y/y.
The PCE chain-type price index improved 0.2% (1.8% y/y) after a 0.1% uptick. Excluding food & energy, prices nudged 0.1% higher (1.5% y/y) following two 0.2% gains. (…)
Haver’s table reveals how expenditures are rising so much faster than income. When economists say that consumers dipped into their savings, they really mean that Americans borrowed to maintain a spending level their income could not sustain:
Low interest rates are currently keeping monthly payments low but the reality is that leverage has increased tremendously for the average American, particularly the bottom 90%.
This next chart is weekly and seasonally adjusted , as of Dec. 13. It shows that consumers took out $26 billion in new loans since last Oct. 11. That’s $206 per household on top of the existing $5,850 average household revolving debt.
As a reminder:
- Middle-income households will get $61 billion in tax cuts according to an analysis released late Monday by Congress’s Joint Committee on Taxation.
- On a static basis, the Tax Cuts and Jobs Act would increase the after-tax incomes of taxpayers in every taxpayer group in 2018. The bottom 80 percent of taxpayers (those in the bottom four quintiles) would see an average increase in after-tax income ranging from 0.8 to 1.7 percent ($200 to $1500 or $650 on average).
U.S. Retailers Feel Christmas Cheer After a Tough Year Shoppers of all income levels spent more this holiday season, prompting some Yuletide joy among retailers that struggled through a difficult year.
Sales, excluding automobiles, rose 4.9% from Nov. 1 through Christmas Eve, compared with a 3.7% gain in the same period last year, according to the Mastercard Inc. MA 0.21% unit, which tracks all forms of payment. E-commerce continued to drive the gains, rising 18.1%.(…)
Sales of electronics and appliances grew 7.5%, the strongest increase of the past decade, according to Mastercard. Home furnishings and home improvement grew 5.1%. And jewelry sales grew 5.9%, driven by last minute purchases. (…)
Overall, apparel sales rose 2.7%, but women’s apparel didn’t contribute to the gain, according to Mastercard. (…)
Overall, the average level of discounting was unchanged from a year ago at 39%. (…)
Sales increased 17.5% in November from the previous month to a seasonally adjusted annual rate of 733,000, the Commerce Department said Friday. It was the strongest pace since July 2007. (…)
Hurricanes in Florida and Texas and wildfires in California may also have provided a boost to new-home sales. The strongest growth in sales was in the West, where sales jumped 31.1% compared with a month earlier, and the South, where they were up 14.9% from the previous month. (…)
Friday’s report showed the median sale price for a new home sold in November was $318,700, up from the $315,000 median price in November 2016. (…)
The median new house sale price is now $319,000, not out of line with median wages.
(…) House Speaker Paul Ryan has said that change in those entitlement programs is high on the agenda for 2018, and President Donald Trump says he wants to move on to welfare reform. (…) More likely, the net effect of the new tax bill will be to establish that both parties have settled upon what they consider solid reasons to ignore the deficit.
“People say this is the starving of the beast,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “I don’t think so. This is the breaking of the fiscal dam. People will say, ‘If we don’t pay for tax cuts, why should we pay for new spending?’” (…)
In terms of estimate revisions, analysts have made smaller cuts than average to earnings estimates for companies in the S&P 500 for Q4 2017 to date. On a per-share basis, estimated earnings for the fourth quarter have fallen by 0.3% since September 30. This percentage decline is smaller than the trailing 5-year average (-4.2%) and the trailing 10-
year average (-6.0%) for a quarter.
In addition, a smaller percentage of S&P 500 companies have lowered the bar for earnings for Q4 2017 relative to recent averages. Of the 108 companies that have issued EPS guidance for the fourth quarter, 72 have issued negative EPS guidance and 36 have issued positive EPS guidance. The percentage of companies issuing negative EPS
guidance is 67%, which is below the 5-year average of 74%.
The earnings growth rate for the S&P 500 for CY 2017 is 9.6%. For companies that generate more than 50% of sales inside the U.S., the earnings growth rate is 7.0%. For companies that generate less than 50% of sales inside the U.S., the earnings growth rate is 14.9%.
The sales growth rate for the S&P 500 for CY 2017 is 6.2%. For companies that generate more than 50% of sales inside the U.S., the sales growth rate is 5.1%. For companies that generate less than 50% of sales inside the U.S., the sales growth rate is 9.2%.
In effect, margins keep rising within and without the U.S..
As of today, the estimated earnings growth rate for the S&P 500 for CY 2018 is 11.8%. The estimated (year-over-year) revenue growth rate for CY 2018 is 5.6%.
- From Thomson Reuters/IBES:
The estimated earnings growth rate for the S&P 500 for Q4 2017 is 12.0%. If the Energy sector is excluded, the growth rate declines to 9.5%.
The estimated revenue growth rate for the S&P 500 for Q3 2017 is 5.4%. If the Energy sector is excluded, the growth rate declines to 4.4%.
No earnings problem in the immediate future. Although…
Airlines’ Rising Costs Threaten Profit Margins Airlines are paying more for fuel, labor and maintenance, drawing scrutiny from investors who fear the industry’s rising costs threaten margins during a record stretch of profitability.
Expenses at the nine largest airlines rose 8.1% in the first nine months of 2017 compared with the prior-year period, according to the Airlines for America trade group, while revenue rose 3.8%. The run-up in expenses is well above the overall U.S. inflation rate of 2.2%.
The imbalance caused the pretax margins of the nine carriers to slide to 12% in the nine-month period from 15.5% the year before. (…)
Maine Is Short of Snowplow Drivers The New England state is having trouble finding enough workers to help clear roads in the winter, another sign that low unemployment is taxing parts of the country.
Lowry’s Research’s Selling Pressure analysis is not giving off any signs of increased liquidations. In fact, as recently as Dec. 18th, Selling Pressure dropped to another new bull market low. Thus, investors are still holding on to their stocks, expecting even higher prices in the months ahead.
This is understandable given that tax rates decline in 2018.
But Lowry’s measurement of Demand still reflects enthusiastic buying with their Buying Power Index rising to its highest level in 22 months.
Furthermore, the Lowry Operating Companies Only (OCO) Adv-Dec Line was at new bull market highs as of Monday, Dec. 18th, showing that market breadth is still improving. Based on Lowry’s past experience, “a major market top should be at least 4 to 6 months — or longer — into the future.”
Watch CNBC’s full interview with legendary investor Stanley Druckenmiller CNBC’s Kelly Evans speaks with iconic investor Stanley Druckenmiller on the stock market, tax reform and his stock picks.
Well worth the 31 minutes.
Evergreen Gavekal’s CIO David Hay goes all out on bitcoin.