U.S. Retail Sales Fell 0.2% in June Decline contributed to the first back-to-back sales drop since July and August 2016
Retail sales had declined a revised 0.1% in May. It was the first back-to-back sales drop since July and August 2016. (…)
Excluding autos, sales were down 0.2% last month; economists had expected a 0.2% gain. Excluding both autos and gasoline, sales fell 0.1% in June, the first decline for the measure in nearly a year.
In the second quarter, total retail sales were up just 0.2% from the first three months of the year. Overall retail sales rose 3.9% in the first half of 2017 compared with the same period a year earlier, well outpacing the recent trend for consumer-price inflation. (…)
Sales at nonstore retailers, mostly online-shopping outlets, were up 0.4% from May and rose 9.2% on the year. (…)
- The next chart illustrates retail sales “Control” purchases, which is an even more “Core” view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places.
US Restaurant Industry Stuck In Worst Collapse Since 2009
One month after we reported that the “restaurant industry hasn’t reported a positive month since February 2016“, we can add one more month to the running total: according to the latest update from Black Box Intelligence‘s TDn2K research, in June both same-store sales and foot traffic “growth” declined once more, dropping by -1% and -3%, respectively, extending the longest stretch of year-over-year declines for the US restaurant industry to 16 consecutive months – the longest stretch since the financial crisis – with sales rising in 45 markets while declining in 150 with Texas, the worst region in the US, suffering a 2.2% and 4.1% decline in sales and traffic respectively. (…)
Source: TDn2K
Auto Defaults Are Soaring
U.S. CPI Again Weaker than Expected in June
The headline index was unchanged from May (+1.6% y/y) against a market expectation (from the Action Economics Forecast Survey) of a 0.1% m/m increase. This index had unexpectedly slipped 0.1% m/m in May. The core index (that excludes food and energy prices) edged up 0.1% m/m (1.7% y/y, remaining at its lowest reading since May 2015) in May but market expectations were for a 0.2% m/m rise in June.
The energy index declined again in June, falling 1.6% m/m (+2.3%y/y), offsetting the monthly increase in the index for all items less food and energy. This was this index’s fifth monthly decline in the past six months. All the major energy component indexes declined in June, with the gasoline prices falling 2.8% m/m (-0.4% y/y). The food index was unchanged in June from May (+0.9% y/y) following a 0.2% m/m increase in May.
The June increase in the index for all items less food and energy was its third straight such increase. The rise was due to core services prices. Goods prices excluding food and energy fell 0.1% m/m (-0.6% y/y) for their fourth consecutive monthly decline. Of the major categories, only prices of medical care goods posted a monthly increase (+0.7% m/m, +3.2% y/y) in June.
Prices of services excluding energy rose 0.2% m/m in June (+2.5% y/y) with monthly increases in all the major subcategories. The shelter index continued to rise (+0.2% m/m), and the indexes for medical care (+0.3% m/m), motor vehicle insurance (+1.0% m/m), education (+0.3% m/m), and personal services (+0.3% m/m) also increased. Airfares (-2.7% m/m) and prices for wireless telephone services (-0.8% m/m) fell in June.
- The good news about the softening consumer inflation is the recent improvement in real (inflation adjusted) wages. (The Daily Shot)
U.S. Industrial Production Improves
Industrial production increased 0.4% during June (2.0% y/y) following a May 0.1% gain, revised from no change. A 0.3% increase had been expected in the Action Economics Forecast Survey. A 1.6% rise (9.9% y/y) in mining output drove the total higher, strong for the fifth month this year. Utilities output held steady (-2.2% y/y).
Factory sector production gained 0.2% (1.2% y/y) as it followed a 0.4% decline. Consumer products production held steady (0.3% y/y) as nondurable goods output declined 0.3% both m/m and y/y. (…) Motor vehicle & parts production gained 0.7% (0.9% y/y) and computer & video output rose 0.3% (4.5% y/y). Production of business equipment rose 0.2% (0.8% y/y), but information processing & related equipment production fell 0.3% (+4.5% y/y).
ECRI Weekly Leading Index: WLI Growth Index Continues Decline in 2017
- Advisors Perspectives has a lot more charts on this.
- More signs of economic weakness (from Evergreen Gavekal):
First-Time Home Buyers Show More Interest in Market
Google searches related to buying a first home jumped 11 percentage points to 44% of all home buying-related search activity in 2017 compared with a year earlier, according to a study of Google search data conducted by Chase Home Lending.
In all, first-time buyers accounted for 33% of all home sales in May, up from 30% a year earlier, according to the most recent data from the National Association of Realtors. (…)
But so far this year, new purchasers accounted for 42% of all buying this year through April, up from 40% in 2016 and 31% during the lowest point during the recent housing cycle in 2011, according to the most recent data from Fannie Mae, which defines first-time buyers as anyone who hasn’t owned a home in the last three years.
Some first-time buyers captured by the Fannie Mae data are older, including former spouses who downsize after a divorce or death or people who rented for a period after losing their homes to foreclosure.
But by another measure, young people in particular are getting more active in the housing market. Customers under the age of 35 made up 36% of Chase’s mortgage origination volume in 2016, up 16 percentage points from the year before. (…)
China Maintains 6.9% Economic Growth as Beijing Walks Tightrope
China’s growth data released Monday by the National Bureau of Statistics came in above a forecast for 6.8% growth by economists polled by The Wall Street Journal.
On a quarter-over-quarter, seasonally adjusted basis, gross domestic product expanded 1.7%, the bureau said, compared with growth of 1.3% in the first quarter, suggesting that momentum in the economy may be even stronger than the year-over-year figure indicates. (…)
Industrial output rose 7.6% in June from a year earlier, coming in above both May’s 6.5% gain and market expectations. Retail sales grew by 11.0% in June from a year earlier, accelerating from the previous month’s 10.7% and also beating forecasts. Fixed-asset investment in nonrural areas of China climbed 8.6% year over year in the first six months of 2017, matching the increase in the January-May period but exceeding economists’ expectations.
A deceleration in property investment was an indication that still-robust housing sales might lose steam later this year. Large developers have pulled back on new construction as credit becomes harder to come by and local governments set restrictions on property purchases. The property sector accounts for about a third of overall GDP. (…)
EARNINGS WATCH
From Factset:
Overall, 6% of the companies in the S&P 500 have reported earnings to date for the second quarter. Of these companies, 80% have reported actual EPS above the mean EPS estimate, 10% have reported actual EPS equal to the mean EPS estimate, and 10% have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is above the 1-year (70%) average and above the 5-year (68%) average.
In aggregate, companies are reporting earnings that are 8.2% above expectations. This surprise percentage is above the 1-year (+4.7%) average and above the 5-year (+4.2%) average.
In terms of revenues, 83% of companies have reported actual sales above estimated sales and 17% have reported actual sales below estimated sales. The percentage of companies reporting sales above estimates is well above the 1-year average (56%) and well above the 5-year average (53%).
In aggregate, companies are reporting sales that are 1.7% above expectations. This surprise percentage is above the 1-year (+0.5%) average and above the 5-year (+0.5%) average.
The blended earnings growth rate for the second quarter is 6.8% today, which is higher than the earnings growth rate of 6.4% last week. If the Energy sector is excluded, the blended earnings growth rate for the remaining ten sectors would fall to 4.3% [+3.9% last week] from 6.8%.
The blended sales growth rate for the second quarter is 4.8% today, which is equal to the sales growth rate of 4.8% last week. If the Energy sector is excluded, the blended revenue growth rate for the index would fall to 3.9% from 4.8%.
Thomson Reuters IBES compilation gives Q2 ES rising 8.1%, +5.2% ex-Energy
(…) J.P. Morgan Chase led the way with record profit in the second quarter of $7.03 billion. Even so, executives cut their guidance for lending growth in 2017 as well as for interest income. (…)
“It’s just unfortunate, but it’s hurting us, it’s hurting the body politic, it’s hurting the average American,” Mr. Dimon said of Washington inaction. “We have become one of the most bureaucratic, confusing, litigious societies on the planet. It’s almost an embarrassment to be an American citizen traveling around the world and listening to the stupid shit we have to deal with in this country.
“We have to get our act together,” he added. (…)
(…) J.P. Morgan said it now expects net interest income to rise by around $4 billion this year, down from its earlier expectation of $4.5 billion, on slower loan growth and a decline in long-term interest rates during the second quarter. (…)
But in the second quarter its total loans were up just 4% from a year earlier, compared with 6% in the first quarter and 7% for all of last year.
Others are feeling the impact even more strongly. Total average loans at Wells Fargo were up just 1% from a year earlier, compared with 4% in the first quarter. (…)
OPEC Quietly Opened the Taps in June
SENTIMENT WATCH
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Optimism in Financial Markets Fails to Show in Real Economy Though stocks have been hitting records and big U.S. banks reported stronger-than-expected quarterly earnings, consumers reduced their spending at midyear and became less optimistic about the future.
(…) Taken together, the indicators pointed to an economy that is entering the ninth year of expansion steady and still creating jobs at a healthy clip, but without obvious additional momentum. (…)
“Rather, the data indicate that hopes for a prolonged period of 3% GDP growth sparked by Trump’s victory have largely vanished, aside from a temporary snapback expected in the second quarter.” (…)
For the recently ended second quarter, forecasting firm Macroeconomic Advisers projected 2.3% growth and the Federal Reserve Bank of Atlanta’s high-profile GDPNow model predicted a 2.4% growth pace. (…)
(…) The greenback sank to a 10-month low Friday, rounding out its worst week since May, as weaker-than-forecast economic data raised doubts about the prospect of additional Federal Reserve tightening this year. (…)
CETERIS NON PARIBUS:
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Competitors From China, Russia Threaten Airbus and Boeing The sudden competition is unfamiliar for both jet makers, and it adds pressure on them as they face waning demand in other markets.
Trump’s Economic Agenda Is Almost Dead
Trump Knows Exactly What He’s Doing: Tom Barrack on the President