Retail Strength Gives Fed Some Clarity on Growth Outlook U.S. retail sales rose solidly in May, the latest evidence of accelerating growth as the Federal Reserve considers the economic outlook amid a recent slowdown in hiring.
Led by increased spending online and at gas stations, retail sales climbed a seasonally adjusted 0.5% in May, the Commerce Department said Tuesday. The better-than-expected gain comes on the heels of April’s 1.3% surge, which was the strongest advance in more than a year. (…)
Spending at gas stations increased 2.1% last month, and purchases of motor vehicles and parts rose 0.5%. But sales at general merchandise stores fell 0.3%, indicating spending remains somewhat uneven.
(…) May’s gain was led by a 1.3% gain in nonstore sales, which includes purchases on Amazon.com and its internet rivals. That category grew 12.2% from a year earlier. By comparison, department-store sales were down 5.8% from a year earlier.
Sloppy reporting by the WSJ. Here’s Haver Analytics:
Total retail sales & spending at restaurants increased 0.5% (2.5% y/y) during May following an unrevised 1.3% April jump.
The increase in motor vehicle sales cooled to a 0.5% pace (2.1% y/y) following a 3.1% jump. The rise compares to a 0.2% gain in unit auto sales which followed a 5.1% gain. Excluding autos, total retail spending increased 0.4% (2.7% y/y) after a 0.8% rise. A 0.3% increase had been expected.
Spending in the retail control group, which excludes autos, gasoline, building materials and restaurants increased 0.4% (3.5% y/y) after a 1.0% jump.
As prices rose, gasoline service station sales jumped 2.1% (-9.5% y/y) following two months of even stronger increases. Building material store sales fell 1.8% (+3.6% y/y), the fourth decline this year. Purchases at restaurants improved 0.8% (6.5% y/y) following a 0.5% increase.
(…) To the downside, general merchandise store sales eased 0.3% (-0.7% y/y), their third decline this year. Furniture & home furnishings spending fell 0.1% (+0.2% y/y) following a 0.3% rise.
Charts from Doug Short:
GDPNow latest forecast: 2.8 percent — June 14, 2016:
Redbook sales:
Same-store sales continued in their sluggish pace in the June 11 week and were up 0.7 percent from the same week a year ago and down 1.0 percent month-over-month from May.
BTW: U.S. retail gasoline prices have surged from $1.70 to $2.37!
U.S. Import Prices Continue to Rise With Oil; Nonoil Prices Are Strengthening
Import prices jumped 1.4% during May (-5.0% y/y) following an upwardly revised 0.7% April rise. It was the strongest increase since March 2012, and double the 0.7% gain expected in the Action Economics Forecast Survey. These figures are not seasonally adjusted.
Petroleum import prices firmed 17.4% (-29.1% y/y) following two months of strong gain. Nonpetroleum import prices increased 0.4% (-1.9% y/y). It was the first rise in prices since March 2014. (…)
Export prices increased 1.1% (-4.5% y/y) following an unrevised 0.5% rise. It was the firmest gain since March 2011. A 0.3% increase had been expected.
Credit-Card Warning Sends Synchrony Shares Dropping Credit-card issuer Synchrony Financial warned of rising losses and charge-offs, adding to alarms over consumer lending and sending down its shares and those of other consumer-finance companies.
(…) Synchrony Financial, the largest U.S. issuer of retail-store credit cards, increased its forecast for credit losses over the next year, saying some customers were failing to catch up on overdue payments. The increase in expected losses wasn’t huge—0.2 to 0.3 percentage point—but it rattled investors who are nervously watching for a peak in the credit cycle. (…)
Defaults on general-purpose credit cards, which had been mostly declining since April 2010, have started to rise in recent months. April marked the fourth consecutive month of higher defaults, to 3.09%, according to the S&P/Experian Consumer Credit Default Indices.
Deteriorating performance is leading to more losses for lenders. U.S. credit-card net charge-offs among banks increased to 3.10% in the first quarter, from 2.97% a year earlier, the first year-over-year increase for the quarter since 2010, according to the Federal Reserve.
Synchrony said it expects them to rise to 4.5% to 4.8%. (…)
The percentage of loans and leases that were 30 days late in the first quarter increased slightly from a year ago to 2.1%, according to credit-reporting firm Experian. Some subprime auto loans have recently seen a higher level of early delinquencies. (…)
MANPOWER EMPLOYMENT SURVEY
During Quarter 3 2016, 23 percent of U.S. employers surveyed expect payrolls to increase. Meanwhile, 5 percent of employers anticipate a decline in staffing levels and 71 percent expect no change in their hiring plans.
Once the data is adjusted to allow for seasonal variation, the Net Employment Outlook is +15%. Hiring prospects nationwide remain relatively stable, both quarter-over-quarter and year-over-year.
When compared with Quarter 2 2016, Net Employment Outlooks weaken in three of the four U.S. regions surveyed.
Note that Evercore ISI Company Survey of U.S. Employment plans also shows weakness going into Q3.
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Bank of America to cut thousands of jobs Headcount set to fall by up to 8,000 as digital banking advances
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Manpower China survey:
Chinese employers hiring plans show some limited signs of expected payroll growth during July-September period, with 3% of employers expecting to increase staffing levels, and 1% forecasting a decrease. Once the data is adjusted to allow for seasonal variation, the Outlook also stands at +2%. However, the Outlook matches the weakest reported since the survey began in 2Q 2005, last reported seven years ago. Hiring plans decline by 2 and 12 percentage points quarter-over-quarter and year-over-year, respectively.
Q3’16 down 12 percentage points YoY! 
Curious about other countries? There you go!
China rows back on state-sector reforms
China’s Communist party is moving to tighten its grip on state-owned enterprises, reversing nearly two decades of attempts to remodel them along the lines of western corporations.
The new push, outlined in recent state media articles and party documents, comes amid a tightening of controls over civil society, the military and media as President Xi Jinping seeks to consolidate power within the party.
By giving greater power to the party cells within every SOE, the new direction undermines efforts to establish boards of directors to push SOEs to make decisions based on market conditions, profitability and hard budget constraints. (…)
Almost all executives at SOEs are party members. Within the Chinese system, their corporate status gives them a rank equivalent to the government officials who regulate them. The heads of the largest SOEs also enjoy senior party ranking. (…)
Oil industry faces $1tn spending cut Fears grow over potential tightening of supply
Oil and gas companies will spend $1tn less on finding and developing reserves between 2015-2020 because of the crude price crash, a leading consultancy says, stoking fears about potentially tight supplies towards the end of the decade.
Wood Mackenzie, the consultancy, said it expected “upstream” oil and gas spending to be 22 per cent lower than it projected two years ago, before prices started to slide. (…)
The slowdown in investment is expected to cut next year’s global oil and gas production by 4 per cent. (…)
Expectations that oil prices could stay at about $50 a barrel for years to come imply that many possible oil and gas projects will not be economically viable.
Goldman Sachs has calculated that potential projects worth $550bn might be scrapped if oil hovers around $55 per barrel. (…)
Cost control:
Business travellers have all but abandoned taxis
(…) In the first quarter of 2016, services such as Uber and Lyft accounted for 46% of business “ground transportation” trips in America, according to Certify, an expense-management firm. That compares with 40% for car-hire and a piddling 14% for taxis. The share of business trips taken by taxi in America has dropped by 23 percentage points over the past two years. (…)
Gundlach: “Central Banks Are Losing Control” – His Latest Presentation
“Central banks are losing control and they don’t know what to do … just like the Republican establishment and Donald Trump…. The Fed is confused and their confusion spills into investor psychology,” said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine. “The Fed changes its tone so frequently, it seems every other week the message is different. They’ve turned into the ‘Zombie Fed.’ They say the meeting this week is ‘live,’ but investors all know it isn’t at all.”
China Shares Kept Out of Key Index: Blame Capital Controls MSCI said it would admit Pakistani stocks to its Emerging Markets Index while excluding Chinese A shares, citing the inability of investors to get their money in and out of the country freely as a key reason.
Here’s a chart explaining why MSCI just, once again, said no to China entering its emerging market indices club: (FT Alphaville)
