May U.S. Auto Sales Slump
(…) In total, Americans purchased 1.54 million cars and light trucks last month in the U.S., according to data provider Autodata Corp., 6% fewer than a year earlier. The drop largely is due to two fewer selling days last month; sales were up modestly when adjusted for seasonal factors. (…)
May’s seasonally-adjusted annual sales rate, or SAAR, was 17.45 million vehicles, a healthy number by historic standards, but well behind the pace set in May 2015 and short of the 18 million-plus level set late last year. (…)
For now, substantial gains from fleet buyers who purchase outside the dealer network is propping up industry sales and keeping volumes near the record pace set in 2015. Fleet sales last month increased 13% compared with May 2015. (…)
But other key measures fell last month compared with a year ago, including annualized sales pace and consumer purchases at dealers. That shift is fueling worries that demand in the world’s most profitable vehicle market has peaked.
The nation’s largest auto maker, General Motors Co., which recently has focused more on retail buyers, posted a sharper decline than rivals. Toyota Motor Corp. also reported a sales drop, eroding U.S. market shares for two of the biggest auto makers in the world in 2016.
Overall, sales to individual consumers fell 10.6% in May, according to GM. Such sales are considered the best indicator of market demand. (…)
Another red flag: Sales incentives crept up 11% last month compared with the prior May, exceeding $3,000 per vehicle on average, Autodata reports. (…)
CalculatedRisk has the auto charts strongly suggesting that that we have seen the cyclical peak.
Auto inventories were already high at the end of April:
There is also this new problem for U.S. manufacturers:
Imports share of the light vehicle market rose to 21.4%, the highest level since December 2013. Imports share of the passenger car market of 27.4% compared to 27.1% during all of last year. Imports share of the light truck market jumped to 17.2%, the highest level since March 2010. (Haver Analytics)
High inventories and rising imports share mean tougher days for the U.S. manufacturing industry, already hurting from oil and the dollar:
Speaking of manufacturing, yesterday’s PMIs from across the world were pretty dismal as order books were weak across the globe. China, in particular, seems nowhere near –re-accelerating:
Order books were hit by an increased rate of decline in new export orders during May. Producers of investment goods such as plant and machinery reported the steepest decline in export sales, as well as reduced total new orders, pointing to weak domestic and global investment demand. In contrast, manufacturers of consumer goods reported improvements in new orders and exports.
The past year has seen the largest culling of factory jobs seen over the survey’s 11 year history, exceeding that seen during the height of the global financial crisis as firms cut capacity to bring production in line with demand. So far this year, the highest incidence of job cutting has been seen in the energy & extraction, transport and chemicals & plastics sectors. The food & drink sector has seen the lowest rate of job cutting. (Markit)
Elsewhere, the Asian PMI excluding China and Japan pointed to stagnation, with the GDP-weighted index coming in at exactly 50.0.
The ongoing malaise in Asian manufacturing was once again linked to a downturn in trade flows, in turn broadly the result of weak global demand growth. New export orders fell across Asia at the second-fastest rate seen for just over three-and-a-half years.
Japan saw the steepest fall, suffering the largest monthly decline since January 2013 as the stronger yet hit competitiveness, followed by China, where the downturn was also one of the steepest seen over the past three years. Only Vietnam eked out any noteworthy increase in exports, although both Malaysia and South Korea reported marginal gains. (Markit)
U.S. Construction Activity Reverses Earlier Gain
The value of construction put-in-place declined 1.8% during April (+4.5% y/y) following a 1.5% March rise, revised from 0.3%. February’s 1.4% gain also was revised from 1.0%.
So when Mrs. Yellen says that “growth looks to be picking up from the various data that we monitor” …
Does the Fed monitor the Redbook data?
Store sales rose 0.9 percent year-on-year in the May 28 week, helped by Memorial Day promotional sales and food shopping ahead of the long weekend. Month-to-date May store sales were a solid 2.2 percent higher than in April, which however was a rather weak sales month, but they were up only 0.7 percent from May of last year, well below the 2.2 percent year-over-year monthly growth rate seen at the beginning of the year. What may be considered to be disappointingly slow same-store sales growth was exactly in line with Redbook’s targets, and despite expectations of strong seasonal sales by retailers, Redbook’s preliminary targets for June are not exactly challenging either, up 0.8 percent year-over-year and down 0.8 percent from May.
Fed’s Beige Book: ‘Tight Labor Markets’ Are Pushing Up Wages Labor markets are tightening across most regions of the U.S., lifting wages for many workers, the Federal Reserve said in its latest beige book report on regional economic conditions.
The central bank’s latest report on regional economic conditions, known as the beige book, said Wednesday that “tight labor markets were widely noted in most districts.” Employment and wage growth were described as modest, with pay raises “concentrated in areas of labor tightness.” (…)
An exception was the oil patch, with “soft labor markets” reported across energy sectors in the Atlanta, Cleveland, Dallas, Kansas City and Minneapolis districts.
More generally, the Fed reported modest or moderate economic growth in the majority of its 12 districts. (…)
The wide-ranging report released Wednesday said consumer spending was “up modestly on balance” in many regions. Reports on the factory economy were mixed, and banks generally saw higher demand for loans. Crop conditions were described as “promising in many districts,” though “low commodity prices continued to put pressure on agricultural incomes.” (…)
Long-sluggish U.S. inflation remained subdued, with price pressures rising “slightly” across most regions, according to the report.
Brazil’s data reveal depths of recession
Brazil’s economy contracted 5.4 per cent in the first quarter from a year earlier, highlighting the challenge facing interim president Michel Temer as he tries to end the country’s worst recession in more than a century.
The figures were better, however, than analysts had expected with a Reuters poll forecasting a 6 per cent contraction, while the quarter-on-quarter decline was 0.3 per cent compared with a consensus estimate of 0.8 per cent. (…)
GDP contracted for the fifth straight quarter in the three months to March and has declined or been virtually flat in eight of the past 10 quarters. (…)
Government spending “increased by 1.1 per cent quarter-on-quarter, reflecting a last-ditch attempt by the Dilma administration to win back public support”, said Capital Economics’ Mr Shearing. “But with fiscal policy now set to tighten, this prop to the economy will go.” (…)
Saudis say Opec must steward oil market Riyadh considers output ceiling, Iran wants individual quotas
Saudi Arabia’s new energy minister has said it is time for Opec to “steward the market” to help supply and demand back into balance, suggesting the cartel’s largest producer is shifting approach after two years of letting oil prices fall.
Khalid Al Falih, speaking at the Opec secretariat before the group’s twice-yearly meeting, said the group should “encourage the rebalancing to take place” and said the kingdom wanted to avoid any oil shocks, damping fears Saudi Arabia is preparing to raise production significantly.
“Whatever action we take will be taking into consideration that the market is doing quite well by itself, so we will be very gentle in our approach,” said Mr Falih.
Saudi Arabia is expected to propose reinstating the group’s production ceiling, which was removed entirely at the December gathering of ministers.
The meeting is likely to be a showdown between the kingdom and its regional rival Iran, which has said any production target must be governed by individual output quotas.
“Anything without country quotas means nothing,” said Iran’s oil minister Bijan Zanganeh, who added the country’s output had risen to 3.8m barrels a day since sanctions against its oil industry were largely lifted in January.
He added Iran was targeting more than 4.7m b/d in the long term, illustrating the difficulty Opec may face in agreeing any output constraints. (…)
Saudi Arabia’s Gesture for OPEC Unity Meets Iranian Resistance
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Success of Saudi Post-Oil Plan May Still Depend on Crude Prices
Internet Boom Times Are Over, Says Guru Mary Meeker
Growth of internet users worldwide is essentially flat, and smartphone growth is slowing, too. Those sobering insights were among the hundreds packed into the much-awaited Internet Trends report, an annual tech industry ritual led by Mary Meeker, a general partner at Kleiner Perkins Caufield & Byers. (…)