December U.S. Auto Sales Surge
Sales of light cars and trucks in the U.S. rose 5.9% from a year earlier to more than 16.5 million in 2014, according to market researcher Autodata Corp. December sales were roughly 1.5 million, up nearly 11% from a year earlier, Autodata said. (…)
Consumers are flocking to higher-margin and less fuel-efficient pickup trucks and sport-utility vehicles.
The WSJ headline above is somewhat misleading. December sales were 16.8 million so sales have been flattish since May. (Charts from CalculatedRisk)
Car sales keep bumping along with previous cyclical peaks.
The drop in oil prices should benefit car sales in 2015. The decline in monthly energy bills will encourage many Americans to buy cars before the well advertised increase in interest rates.
Replay:
Brinkmanship Returns to the Eurozone Paris, Berlin Pressure Greece on Commitments
Europe has returned to the signature brinkmanship of the debt crisis that brought its currency union close to collapse five years ago: France and Germany are again warning Greece it is putting its eurozone membership at risk.
With a Greek election looming this month, and a party hostile to European-imposed austerity apparently poised to win, French President François Hollande on Monday raised the possibility of Greece exiting the 19-member bloc—departing from the traditional stance that euro membership is irrevocable.
Sigmar Gabriel, Germany’s economics minister and vice chancellor, warned that Berlin wouldn’t be blackmailed into offering concessions on Greece’s debt or the terms of the international plan that rescued the country’s finances. (…)
“It isn’t us blackmailing the Greek people to cast the right vote, but it’s Mr. Tsipras who would like to blackmail the EU for receiving money in future…without having to meet obligations,” said Norbert Barthle, a senior lawmaker and budget spokesman for the party of German Chancellor Angela Merkel . Michael Fuchs, the party’s deputy parliamentary floor leader, said that “if the Greeks aren’t willing to continue on their austerity path and to continue with reforms, then they must leave the euro area.” (…)
Economists agree that the currency union is more resilient today than in 2010. Less than a fifth of Greece’s debt is now in the hands of the private sector, and the rest is held by governments and other official lenders. That means the direct risk of contagion attacking the rest of the eurozone financial system is reduced. (…)
In some respects, meanwhile, the region even appears more fragile today than it did five years ago. The euro area has slid from acute crisis into chronic malaise marked by economic stagnation, persistently high unemployment and low inflation, making it harder to reduce high debt levels across the region. Indeed, the ratio of debt to gross domestic product has risen in many members of the eurozone’s periphery. (…)
Last, many governments face mounting challenges from rising antiestablishment parties in the region. Such parties have gathered strength in countries from Spain and Italy to France and even Germany, where the euroskeptic, anti-immigration Alternative for Germany is currently polling about 6%, well above the threshold to enter the federal parliament. (…)
China’s Service Sector Shows Resilience The HSBC China services purchasing managers index rose to 53.4 in December from 53.0 in November, HSBC Holdings PLC said, pointing to economic resilience outside the nation’s factory sector.
The HSBC China services purchasing managers index rose to 53.4 in December from 53.0 in November, HSBC Holdings PLC said Tuesday, pointing to economic resilience outside the nation’s factory sector. New business volumes and employment both improved for the service sector in December, HSBC said.
An alternative measure, the official nonmanufacturing purchasing managers index, rose to 54.1 in December from 53.9 in November, data from the National Bureau of Statistics showed Thursday.
China Fast-Tracks $1 Trillion in Projects to Spur Growth
China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year as policy makers seek to shore up growth that’s in danger of slipping below 7 percent.
Premier Li Keqiang’s government approved the projects as part of a broader 400-venture, 10 trillion yuan plan to run from late 2014 through 2016, said people familiar with the matter who asked not to be identified as the decision wasn’t public. (…)
The projects will be funded by the central and local governments, state-owned firms, loans and the private sector, said the people. The investment will be in seven industries including oil and gas pipelines, health, clean energy, transportation and mining, according to the people. They said the NDRC is also studying projects in other industries in case the government needs to provide more support for growth. (…)
Oil price rout takes Brent to 5½-year low Decline in number of active US oil rigs fails to halt slide
(…) The count dropped by 17 to 1,482 rigs in the week to January 2, Baker Hughes data showed — the lowest level since March. It reached a record high of 1,609 in mid-October.
Bloomberg adds:
The rig count fell by 93 in the three months through Dec. 26, and lost another 17 last week, Baker Hughes Inc. (BHI) data show. About 200 more will be idled over the next quarter as U.S. oil explorers make good on their promises to curb spending, according to Moody’s Corp.
Drillers are already running the fewest rigs in nine months (…) “At $50 oil, half the U.S. rig count is at risk,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said by telephone from Houston.
Back to the FT:
(…) investors are continuing to make bearish bets on oil, with an increasing number buying contracts — or so-called “put options” — that pay out if US prices drop to $45 a barrel.
Since the start of December the number of contracts on the February $50 put on WTI has climbed from 193 to 21,275 contracts. Contracts on the $45 put are up from 8 to 19,490; and interest on the $40 put is up from 1 to 8,270 contracts, according to longstanding oil market watcher Stephen Schork.
Contracts have also been taken out on even lower prices. Open interest — the number of contracts that have not been closed or delivered — on the March 2015 $30 put option is up from 34 to 1,811. For the June 2015 $30 put option it is up from 35 to 51,252 contracts, according to Mr Schork. Last week 30 contracts on the June $20 put also traded.
Oil’s Doomsayer Says Doom … Again
Citigroup Inc.’s Ed Morse was the analyst who prominently called $75-a-barrel global oil prices last March (…)
In a new research note titled “Oil and Trouble Ahead in 2015” distributed Monday, Mr. Morse said that 2014’s price drop was supply driven, and that the oversupply situation will continue to grow in the first half of the year as the U.S. shale production boom continues and Saudi Arabia prices aggressively to regain U.S. import market share. Meanwhile, hundreds of thousands of barrels of Canadian crude will be making their way down to the U.S. Gulf Coast, the Middle East is ramping up new refining capacity, and Iraqi-Kurdish exports are expected to continue growing.
The revision takes Citi’s new outlook below its previous bear-case scenario. But in what could be most troubling for oil bulls, the bank only assigns this new estimate a 55% probability and warns that prices could go even lower, with a 30% likelihood that Brent could average $55 a barrel, more than 12% below its new outlook. The bank sees prices recovering only later this year and into next as low prices ultimately prompt a production pullback, particularly among member nations of the Organization of the Petroleum Exporting Countries such as Libya and Venezuela, and as global economic growth improves.
Troublesome for oil producers and bullish oil traders but worth noting is that the revised estimate translates into a $4.4 billion reduction in daily oil costs, which is money that should provide a big boost for other consumer spending – or, as the note puts it, “a $1.6 trillion quantitative easing program for the world economy.”
