Holiday Sales Rise, but Not All Are Cheery
(…) Retail sales rose 3.3% from Oct. 31 through Jan. 4, about the same pace as they grew the previous year, according to First Data Corp., which processes credit-card transactions and analyzed payments at 1.3 million retailers.
The gains came despite fewer visits to physical stores: Foot traffic fell 6.4% in November and December, according to RetailMetrix, which collects data through analytics software provided to retailers. (…)
Macy’s Inc. warned that sales at existing stores fell 4.7% in November and December and said it would cut thousands of jobs as it closes stores. Gap Inc., which is also closing stores, said December sales for existing stores fell 5% from a year earlier. But L Brands Inc., owner of mall stalwarts such as Victoria’s Secret and Bath & Body Works, posted an 8% jump in sales at existing locations, and said last month was its “best December ever.” (…)
In 2015, consumer spending adjusted for inflation likely contributed its largest share to GDP growth in a decade, according to research firm IHS Global Insight. That was partly due to the roughly $722 less that each household spent on gas last year.
But people aren’t spending that extra money on clothing or other items that typically top holiday shopping lists. Rather, they are eating out, buying cars and making improvements to their homes—and when they are buying apparel they are shopping at sporting goods stores for “athleisure” items, IHS found. (…)
Amazon.com captured 42.7% of online sales in November and December, according to Slice Intelligence, a research firm that gathered data on the email receipts of 3.5 million consumers. That compares with 24.8% share for the next 10 biggest retailers combined, including Wal-Mart, Target Corp., Macy’s, Nordstrom Inc. and Best Buy Co.
ComScore expects total e-commerce sales in November and December likely rose about 13% to $69 billion, according to preliminary estimates from the Internet analytics company. (…)
“The two biggest growth areas in retailing today are online and off-price,” said Jerry Storch, chief executive of Saks Fifth Avenue and Lord & Taylor parent Hudson’s Bay Co.(…)
Most sales are still made at physical stores. Some 91% of shoppers made a purchase at a brick-and-mortar store this holiday season, according to a survey by the International Council of Shopping Centers. The primary reason for going to a store was the ability to see, touch and try on the merchandise, the survey said.
Macy’s blamed unseasonably warm weather, which sapped demand for coats and winter gear, for much of its sales declines. On Thursday, the Japanese owner of the Uniqlo chain of fast-fashion stores, Fast Retailing Co., also blamed warm weather for an 11.9% drop in December same-store sales. But J.C. Penney Co. reported a 3.9% increase in sales at existing stores, despite the warm weather, in part due to “record” online sales for the holiday season.
I don’t understand how “record online sales” can boost same store sales.
A $500 Car Repair Bill Would Send Most Americans Scrambling
An unexpected car repair or medical bill would cause the vast majority of Americans to scramble because they lack the needed funds in their savings accounts.
Only 37% of adults have the necessary savings to cover a $500 car repair or a $1,000 emergency room bill, according to a survey Bankrate.com released Wednesday. The finding is little changed from last year, when 38% said they didn’t have the cash on hand, despite a year of steady job creation and the unemployment rate falling to 5%.
Without the savings, 23% of those surveyed said they would have to cut back on spending elsewhere, and 15% said they would turn to credit cards. The same share said they would have to borrow from friends or family. (…)
WHY EMERGING MARKETS MATTER
The WSJ has a neat piece on Why Emerging Markets Are Melting Down, and Why It Matters, in 10 Charts. The Chinese slowdown and the ensuing rout in commodity prices have had a huge impact on economic growth in emerging markets…
…Some countries have faced bigger downgrades than others, for example, Russia, Brazil and China…
…but in the end, developed countries are also negatively impacted in spite of lower inflation:
Emerging markets make up a much larger share of the global economy than in decades past. The major developing nations—Brazil, Russia, India, China and South Africa, or BRICS—alone account for roughly 25% of gross global product, up from around 8% at the turn of the century.
That’s why the World Bank estimates that every 1 percentage-point decline in BRICS growth can sap 0.8 percentage point from growth rates in other emerging markets and 0.4 percentage point from the global economy.
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Rout Forces Oil, Mining Firms to Cut Deeper
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A New Saudi Arabia Is Suddenly in a Hurry in Era of Low Oil
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Saudi Arabia Mulls Selling Shares in Aramco Saudi Arabia is said to be considering selling shares in its state-owned oil company, Saudi Arabian Oil Co.
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Shock, Laughter Greet Plan for Saudi Arabian Sale of the Century
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Kazakhstan’s $64 Billion Oil Fund in Jeopardy, Central bank Official Says Kazakhstan’s $64 billion oil fund could run out within six or seven years as slumping oil prices cut revenue and the government spends its savings, a central bank official said.
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Mexico warns of China triggering ‘perverse’ currency wars
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Beijing Said to Expand Restrictions on Vehicle Use to Fight Smog
Latin America’s second-biggest economy, which saw its currency tumble to a historic low of 17.72 pesos to the dollar on Thursday — on top of a slide of more than 14 per cent in 2015 — would be in the front line since the peso is the most widely traded emerging market currency and is often used by traders as a proxy.
“There is real concern that, in the face of the deceleration of the Chinese economy, the public policy response will be to start a round of competitive devaluations,” said Luis Videgaray, finance minister.
He called that prospect “frankly perverse” because copycat devaluations would leave everyone in the same position and would not really alter anything. Mexico’s peso floats freely, but the central bank has been auctioning dollars in recent months to shore up the currency. (…)
Jeffrey Gundlach via the WSJ:
The veteran bond investor said sharp declines for oil, commodity, junk-bond and stock prices signal deep fundamental economic problems that some investors are overlooking in the U.S. and abroad. Mr. Gundlach worries the Federal Reserve is compounding the problems by raising interest rates. (…)
“You have to wonder what’s going on when every single indicator is weaker, and some frighteningly weaker,” said Mr. Gundlach, who expects global growth of about 2% this year. “The stock market has woken up to the message screamed by credit markets for some time that all is not well.”
Mr. Gundlach said managers at the firm this week bought nondollar bonds for the first time since 2011. “It was a large number, a basket. Not a rifle shot, a wide net,” he said. The bet reflected a view that the dollar wouldn’t continue to rally.
“We think there’s a significant probability that the Fed’s rhetoric will be forced to change,” he said, citing recent market weakness.
Mr. Gundlach said there is about a 30% chance the U.S. heads into recession in 2016, especially if the Fed makes good on its promise to continue raising rates.
“If they keep talking about raising interest rates, I have a hard time believing we’ll see traction” in financial markets, he said.
Mohamed El-Erian seems to implore politicians to do something on the fiscal front:
(…) While triggered in the short term by China-related concerns, what we are seeing this week on financial markets is, in fact, a broader phenomenon. It speaks to the gradual ending of a world in which central banks have been both able and willing to suppress financial volatility. The longer it takes for other policymaking entities to step in, the higher the risk of even greater financial instability and economic insecurity down the road. (FT)
China steps up capital controls to stem outflows Regulator orders banks to limit clients’ dollar buying
The foreign exchange regulator has provided verbal guidance to banks in Shenzhen instructing them to limit dollar buying by individual and corporate clients, according to a person with knowledge of the situation.
Chinese residents are permitted to buy up to $50,000 annually, with the quota resetting at the beginning of the calendar year. (…)
The latest tightening comes after the central bank temporarily suspended some foreign banks in China, including Standard Chartered, Deutsche Bank and Singapore’s DBS, from conducting certain foreign exchange transactions designed to arbitrage the gap between the onshore and offshore renminbi exchange rates. (…)
German Industrial Output Drops
Total industrial production, adjusted for seasonal swings and calendar effects, dropped 0.3% in November from the previous month, falling short of a median forecast rise of 0.5% in a Wall Street Journal poll of economists. Manufacturing production dropped 0.8% from October, but construction output surged 1.6%.
The economics ministry said that weak demand from developing economies has kept a lid on German industrial activity. Industrial output was up just 0.1% from November 2014, in calendar-adjusted terms.
But industrial activity should gather speed over the coming months, the economics ministry said Friday. “Manufacturing orders are picking up again and business sentiment is brightening, too,” it said.
That forecast is supported by Markit’s German PMI in December:
German manufacturing companies reported accelerated growth of new business in December, with the respective pace of expansion the fastest in four months. Survey participants commented on stronger demand from both the domestic and foreign markets. Indeed, new export orders rose for the fifth month running, which some companies linked to higher new order intakes from Asia and the US. Moreover, new export orders rose at the sharpest rate in nearly two years.
In response to increased new work, German manufacturers scaled up production in December. Robust expansions were reported at consumer, intermediate and investment good producers alike.
France is not so upbeat:
Industrial production in neighboring France was weak, too. The Insee statistics agency said Friday that industrial output in the eurozone’s second-largest economy fell 0.9% in November from October, even as manufacturing output rose 0.4%. Mining output fell 6.7% in November.
From Markit’s France PMI:
Output growth was supported by a rise in the level of new orders received by French manufacturers. December’s increase was the third in successive months. Although quickening to the sharpest since April 2014, the rate of growth remained modest overall. New export orders rose for the second time in the past three months, albeit marginally.
Rout scythes $2.3tn off world bourses China-fuelled volatility sees big fund redemptions in US
(…) Investors accelerated their retreat from US equities amid the turmoil, registering the largest weekly outflow since September, according to fund tracker Lipper. Mutual funds and exchange traded funds invested in US stocks recording $12bn of withdrawals in the week to January 6. (…)
An analysis of more than 6,000 global stocks by the Financial Times showed more than three-fifths had fallen into bear market territory, a decline of 20 per cent or more. In total, 5,372 of the 6,178 stocks had fallen at least 10 per cent from their 52-week highs. (…)
From Bespoke Investment:
1 thought on “NEW$ & VIEW$ (8 JANUARY 2016):”
The SML and MID both made 52-week lows this week, and the Transports continued to make fresh 52-week lows as well.
The Fed drain, while not the $800-billion plus some had predicted, may be having some of the effect on the markets a few pundits feared prior to last month’s Fed Funds rate hike.
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