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U.S. April Retail Sales Gain Points to Healthier Second Quarter
The value of sales increased 0.3 percent, matching the median forecast, after a 0.8 percent advance in the prior month that was stronger than initially reported, Commerce Department figures showed Tuesday.
So-called retail-control group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations, improved 0.4 percent after an upwardly revised 0.5 percent gain. (…)
Retail sales data for February were also revised up to unchanged from a previously estimated 0.1 percent decrease. (…)
Excluding automobiles and gasoline, retail sales also rose 0.3 percent, after an upwardly revised 0.4 percent gain in the previous month. (…)
STILL MORE ON INFLATION
IHS Markit PMI surveys indicate price pressures at highest since mid-2011
(…) To gauge consumer price developments, a useful construct is an index based on both input costs and suppliers’ delivery times. This “price pressures” index exhibits a 77% correlation with CPI inflation, and a 78% correlation with inflation as measured by the annual change in official PCE prices. In April, this price pressures gauge rose to its highest since June 2011.
Equally useful is the manufacturing input price index, which exhibits a 79% correlation with both PCE and CPI inflation with a lead of one month. Comparisons of the IHS Markit price gauges clearly signaled a rise in PCE inflation above 2.0% in April, and suggest the rate of inflation has further to climb.
This last chart suggests rising pressures on U.S. corporate margins, unseen in Q1’18 reports. Interestingly, Markit’s global price indices suggest rising global margins:
Could it be that margin pressure in the U.S. are being masked by rising margins on foreign sales which account for 40% of S&P 500 company revenues?
Consumers Skip More High-Rate Auto Payments Than During Crisis
German Economy Cools Sharply as Labor Issues Interrupt Boom Europe’s largest economy cooled sharply in the first quarter due to high levels of illness and labor disputes, mirroring similar developments in the region and denting hopes for another year of stellar growth rates.
Germany’s annualized growth rate slowed to 1.2% from 2.5% in the fourth quarter of last year, the Federal Statistical Office said Tuesday. (…)
But a range of temporary factors, such as the country’s flu season and a series of strikes in the metals and engineering sectors, likely contributed to the slowdown, and most private-sector economists expect economic activity to revive in the second quarter and beyond. (…)
Economists said that weak exports signal that the stronger euro—which has gained about 8% versus the greenback in the past 12 months—and the U.S.-led push towards greater protectionism is already leaving its marks on the export-dependent German economy. (…)
But economic indicators show that other European economies were affected by similar factors. The European Union’s statistics agency is expected to confirm later Tuesday that eurozone gross domestic product—the most comprehensive measure of the output of goods and services in an economy—increased at an annualized rate of 1.7% in the first quarter, down from 2.7% in the fourth quarter of last year.
The “similar factors” referred to above are not the flu or the metals strikes. Weak exports are the culprit as Markit’s PMI reports revealed two weeks ago:
Intakes of new work expanded to the least marked extent since November 2016, in part reflecting a slowdown in the pace of increase in new export orders (also to a 17-month low). Some firms linked this to the recent strengthening of the euro exchange rate, especially against the US dollar. Growth of new export orders slowed in almost all of the nations covered, the only exceptions being slight improvements in Germany and France.
The other problem is German’s frugality. German retail sales have declined MoM each of the last 3 months and are up only 1.3% YoY in March.
China Data Shows a Hint of Slowdown While Factories Still Hum
Industrial output rose 7 percent in April from a year earlier, the statistics bureau said Tuesday, versus a projected 6.4 percent in a Bloomberg survey and 6 percent in March. Retail sales expanded 9.4 percent from a year earlier, versus a forecast 10 percent, Fixed-asset investment rose 7 percent year-on-year in the first four months, compared with an estimated 7.4 percent. (…)
Property development investment in the first four months expanded 10.3 percent from the same period a year earlier. (…)
Shale Drillers Look Beyond Texas as Prices Rise As Permian Basin experiences bottlenecks, companies look to fields in Colorado, North Dakota, Oklahoma and Wyoming
While the Permian Basin in Texas and New Mexico remains the fastest-growing shale spot, congested pipelines and shortages of labor and materials there are crimping profits, making other fields attractive alternatives. (…)
Oil in Midland, Texas—where the local price of crude is set—recently sold for $12 to $15 below the price of crude elsewhere in the U.S., according to Citi Research, part of CitigroupInc. The discount reflects the added cost some face getting oil to refineries and export facilities out of the region using trucks and trains. (…)
Chinese Stocks Aren’t Normal—Whatever MSCI Thinks Mainland-listed Chinese shares will enter MSCI’s key benchmarks from June. That doesn’t mean all problems with the country’s stock markets are resolved.
Any sentient market-watcher has known for about a year that index provider MSCI will include stocks listed in mainland China in its benchmarks starting June 1. On Tuesday, it published a roster of the more than 200 Chinese companies listed in Shanghai and Shenzhen that will be the first to enter these hallowed portals.
Mainland Chinese stocks—known as A-shares—will account for around just 0.4% of the MSCI Emerging Markets index from June, rising to 0.8% in September. (…)
There’s already no lack of Chinese stocks in MSCI indexes. Chinese firms listed abroad, mainly in Hong Kong and the U.S., make up nearly a third of the MSCI EM index.
Seven of the index’s top 10 constituents are Chinese—including tech behemoths Alibaba and Tencent, and financial firms ICBC and Ping An Insurance . South Africa’s Naspers , whose value comes almost entirely from its 31% stake in Tencent, is also among the top 10. (…)
One of the reasons MSCI held back from admitting China-listed stocks to its indexes for years was companies’ penchant for suspending their shares from trading when hit by bad news. That problem hasn’t gone away. (…)
The worry is that the sort of mass trading halts seen during the Chinese market selloff in the summer of 2015—when half of its stocks were suspended—could happen again. (…)