Today: Latest NFIB looks good overall. More signs that the consumer is spending. Good news for housing…and some bad news.
NFIB CHARTS
From September’s report:
Two percent reported reduced worker compensation and 25 percent reported raising compensation, yielding a seasonally adjusted net 22 percent reporting higher compensation, up 1 point and the second best reading since the first quarter of 2008. A net seasonally adjusted 15 percent plan to raise compensation in the coming months (up 1 point). The reported gains in compensation are now solidly in the range typical of an economy with solid growth, but it isn’t clear that we have “solid growth”, unless we are ready to settle for the sub-par tunnel we have been in.
Pretty good overall, isn’it?
Consumer Borrowing Accelerated in July as Credit-Card Borrowing Rose Consumer borrowing accelerated in July as Americans took on more credit-card debt and other loans.
Total outstanding consumer credit, excluding loans secured by real estate like home mortgages, rose at a seasonally adjusted annual rate of 9.7% in July from the prior month to $3.238 trillion, the Federal Reserve said Monday. That was up from growth of 7.1% in June and 7.3% in May.
Outstanding revolving credit, mostly credit-card debt, rose at a 7.4% pace in July to $880.54 billion, the fastest growth rate since April. Outstanding nonrevolving credit, a category that includes car and student loans, rose at a 10.6% rate to $2.357 trillion, its fastest monthly pace since February 2013. (…)
Hmmm…So, how could the savings rate rise as much as it reportedly did in July? I continue to expect that July’s weak sales and expenditures data will be revised up (chart from Haver Analytics).
Ed Yardeni also thinks something is amiss with recent eco data:
This weakness simply doesn’t jibe with lots of other labor market indicators showing very low layoffs, plenty of job openings, and lots of national and regional business surveys with solid employment indicators. This more upbeat view of the economy was confirmed by our Earned Income Proxy (EIP), which is aggregate hours worked multiplied by average hourly earnings in the private sector. It is highly correlated with private wages and salaries in personal income. Our EIP rose 0.4% m/m to yet another new record high last month, auguring well for consumer spending.
FYI, weekly chain store sales remained pretty good through September 6. The back-to-school season was strong which augurs well for the all-important Thanksgiving and Christmas periods.
Why More Renters Aren’t Buying (Hint: Weak Incomes, Savings) A new survey says that younger workers and other renters aren’t turning away from homeownership because they lack the desire to own homes. Instead, they’re staying on the sidelines because they lack the capacity to purchase.
Destroying the myth that Millenials don’t dream of owning a house:
The analysis from the New York Federal Reserve Bank comes via their survey of consumer expectations in February. It polled 867 homeowners and 344 renters on their attitudes toward homeownership and their plans to move.
(…) Around three in five respondents think that buying a home in their ZIP Code is a good investment, compared with one in eight that think it’s a bad one.
So what does all of this mean? The good news from the standpoint of the real-estate industry is that there’s less evidence of a structural shift in Americans’ preference for owning homes. “With a stronger economy and eased credit standards, homeownership would pick up,” the authors write.
But there is this:
Single Americans Now Comprise More Than Half the U.S. Population Single Americans make up more than half of the adult population for the first time since the government began compiling such statistics in 1976.
Some 124.6 million Americans were single in August, 50.2 percent of those who were 16 years or older, according to data used by the Bureau of Labor Statistics in its monthly job-market report. That percentage had been hovering just below 50 percent since about the beginning of 2013 before edging above it in July and August. In 1976, it was 37.4 percent and has been trending upward since.
Singles, particularly younger ones, are more likely to rent than to own their dwellings. Never-married young singles are less likely to have children and previously married older ones, many of whom have adult children, are unlikely to have young kids, Yardeni wrote. That will influence how much money they spend and what they buy.
The percentage of adult Americans who have never married has risen to 30.4 percent from 22.1 percent in 1976, while the proportion that are divorced, separated or widowed increased to 19.8 percent from 15.3 percent, according to the economist.
Schäuble Defends German Monetary Stance Germany’s Finance Minister Shows Reluctance to Give In to Deficit Demands From Italy, France
The E.U. remains far from being united:
“Growth and jobs aren’t a result of higher deficits, because we shouldn’t have any problems if that was the case… The only way out is innovation, structural reforms, investment, reliable conditions and trust in the sustainability” of public finance.
The comments signal Germany’s continued reluctance to give in to demands from France and Italy to grant them more leeway in achieving their deficit goals and instead spend more money to help generate growth.
“Everybody should adhere to European rules,” he said, adding countries must not only pledge to overhauls but, also, implement them. (…)
“They [ECB officials] do what they can, but they have basically exhausted their toolbox,” Mr. Schäuble said. “Cheap money also can’t force growth, otherwise we wouldn’t have any problem right now.”
SENTIMENT WATCH
Wall Street Bear Changes Course A prominent Wall Street bear just ditched his pessimistic views on U.S. stocks. Deutsche Bank strategist David Bianco planted his flag in the bullish camp on Monday, lifting his S&P 500 year-end price target to 2050.
Deutsche Bank DBK.XE +0.22% strategist David Bianco planted his flag in the bullish camp on Monday, saying he now sees ”a long lasting economic expansion of moderate growth, which should rival the U.S. record of 10 years.”
He boosted his year-end S&P 500 target to 2050, reflecting an additional 2.5% gain for the rest of the year. That compares to his previous target of 1850, or a 7.5% drop from recent levels. His old 1850 estimate was tied for the lowest forecast among prominent Wall Street strategists tracked by Birinyi Associates.
A combination of continued profit growth among S&P 500 companies at about a 6% rate and lower-than-normal long-term interest rates should bode well for stocks in the coming years, Mr. Bianco said. As long as the risk of recession remains low, he now says there is little reason the bull market won’t keep going.
He also boosted his 2015 S&P 500 target to 2150 from 2000, unveiled a 2016 target of 2030 and said the index could reach 2050 by 2018.