Wal-Mart same-store sales miss estimates as shoppers cut spending – Wal-Mart Stores Inc reported lower-than-expected quarterly U.S. same-store sales growth, saying its customers were using their tax refunds and savings at the pump to pay down debt rather than spend on discretionary items.
“Based on recent surveys, we know that many of our U.S. customers are using their tax refunds and the extra money from lower gas prices to pay down debt or put it into saving,” CEO Doug McMillon said in a statement.
The company reported a 1.1 percent rise in same-store sales in the United States in the first quarter ended April 30, missing the consensus of an increase of 1.5 percent, according to analysts polled by research firm Consensus Metrix.
U.S. Home Builders Index Is Loosing Upward Momentum
The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo retreated to 54 in May (+20.0% y/y) following unrevised improvement to 56 in April. The index has moved slightly lower since reaching a ten-year peak last September. During the last ten years, there has been an 80% correlation between the y/y change in the home builders index and the y/y change in single-family housing starts.
Realtors reported that their traffic index retreated to 39 and remained nearly 20% below last year’s peak.
Eurozone Exports Boosted by Weaker Euro
Eurostat said the 19 countries that use the euro had a surplus in their trade in goods of €23.4 billion ($26.2 billion), up from €16.1 billion in March 2014.
That widening gap was due to an 11% increase in exports, while imports were up by 7%. Over the first three months of the year, exports were up 5% from the same period last year, while imports were unchanged.
ECB Jolts Markets With Comments on QE
Comments by two ECB officials have jolted markets early on Tuesday. Benoît Coeuré said the central bank will moderately frontload its debt purchases to avoid too much buying in the quiet summer holiday period. And Christian Noyer added that the ECB is ready to go beyond its already announced stimulus in order to hit its inflation target, if necessary.
Investors have taken it as a sign the ECB means business.
The euro has tumbled more than 1%. (…)
A weaker euro is one of the ECB’s tools for driving up ultralow inflation.
Bonds in the eurozone are rallying, having sold off sharply in the past month as some investors worried the rally spurred by ECB quantitative easing was overdone.
(…) “I do not see the recent reversal in the price of Bunds and other sovereign bonds as a cause for concern,” to the extent that it reflects a market correction and more optimistic growth outlook, said Mr. Coeuré.
“It is the rapidity of the reversal that worries me more,” he said. “After several similar episodes, it is yet another incident of extreme volatility in global capital markets showing signs of reduced liquidity.” (…)
Annual inflation at 0.0% in the euro area Also at 0.0% in the EU
Euro area annual inflation was 0.0% in April 2015, up from -0.1% in March. In April 2014 the rate was 0.7%. European Union annual inflation was also 0.0% in April 2015, up from -0.1% in March. A year earlier the rate was 0.8%.
Curiously, this Eurostat inflation release got very little space in mainstream media this morning. Yet, it reveals that deflation has given way to inflation in 2015. Core inflation in the Euro area has sharply accelerated this year:
- January –1.8% MoM
- February +0.6%
- March +1.4%
- April +0.3%
- Last 4 months: +0.5% or +1.5% annualized (-0.9% annualized in Germany, +1.2% in France, +1.5% in Italy)
- Last 3 months: +2.3% or +9.5% annualized (+ 3.6% annualized in Germany, +7.4% in France, +15.6% in Italy)
As a result, April YoY core inflation reached +0.6% in the Euro area (+1.1% in Germany, +0.5% in France, +0.3% in Italy).
BTW, Bunds are yielding 0.5%…
Japan’s IP Deflates on Revision Japan’s industrial production had a very good start to the quarter; since then it has been all downhill.
After rising by 4.1% in January, IP fell by 3.1% in February and fell by 0.8% in March. Still, because of the jackrabbit start of IP at the outset of the quarter, output will grow at a 6.4% annual rate in Q1. Yet, that is a distortion of performance since output in March is already 1.6% below the Q1 average. This is clearly setting up Q2 for some real weakness, not for strength.
Output of all the major categories is lower in most for two months running. Only the manufacturing sector, transportation equipment has an increase of 0.8% in March after a 1.5% decline in February. The same is true for monthly output at the product level. Of the five groups in the table, there are two month declines in each sector except for electricity and gas; that sector posted a 3.9% drop in March with a thin 0.1% increase in February. (…)
Japan clearly continues to be in a difficult period. The consumption tax hike once again was implemented too soon and it has cost the economy all the momentum it had built up. Just today Japan’s tertiary sector (services sector) reading for March saw an unusual drop, its first in 11 months. Industrial output shows a lot of variability and not much trend. Only the year-over-year pattern for IP shows a clear trend and that one is still eroding. We have seen recent weakness in Japan’s consumer confidence and retail spending. The Industrial output report shows yet another aspect of Japan’s economy that is struggling to post growth against a trend of declines.
Energy groups axe $100bn of spending Delays and cancellations will curb output in coming years
More than $100bn of spending on new projects by the world’s energy companies has been slowed, postponed or axed following the oil price plunge, evidence of the drastic industry action that will curb output in coming years.
Companies including Royal Dutch Shell, BP, ConocoPhillips and Statoil have led moves to curtail capital spending on 26 major projects worldwide, according to analysis commissioned for the Financial Times. (…)
The research by consultancy Rystad Energy shows that producers have targeted some of the highest-cost areas as they have trimmed spending, with nine Canadian oil sands projects put back, each ranging from $1bn to $10bn in planned expenditure. (…)
While the $118bn total expenditure would be spread over several years, the impact of deferring investment on such projects would be to delay future production, with as many as 1.5m barrels a day — nearly 2 per cent of global oil output in 2013 — to come two years later than planned, said Rystad.
The project deferrals that have already been announced could be just the start of a big wave of delays. Goldman Sachs has identified 61 new projects, more than half of those awaiting final approval, as uneconomic at an oil price of $60 a barrel, putting more than $750bn of capital expenditure at risk and 10.5m barrels a day of peak production. (…)
Memorial Day Trips at 10-Year High Point to Busy Vacation Season
About 37.2 million Americans will travel 50 miles or more from home during the upcoming holiday weekend, the most in 10 years, according to AAA, based in Heathrow, Florida. This 4.7 percent projected increase from 2014 includes trips by car, air, cruise, train and bus in the May 21-25 period. (…)
Such optimism is echoed by hotel chain La Quinta Holdings Inc., which sees “very strong demand” for lodging during the Memorial Day weekend, Chief Executive Officer Wayne Goldberg said on an April 29 conference call. (…)
Advance reservations for North American hotel rooms signal “sustained growth in the low single digits” into the summer, as destinations such as Orlando and San Diego “look really strong,” said John Hach, senior industry analyst at TravelClick Inc., a New York-based provider of technology services to the hotel industry. This has given operators confidence to increase the average daily room rate, which is up 4.4 percent for the 12 months through March 2016, he said, citing data the company collects from chains including Hyatt Hotels Corp. and Hilton Worldwide Holdings Inc. (…)
A “big question mark” related to summertime travel is whether the strong U.S. dollar will hurt demand, Freitag said. Many Europeans could find vacationing in the U.S. too costly, while Americans may be motivated to book trips abroad because of favorable exchange rates, he said. (…)
FYI, from Doug Short:
