CONSUMER PRICE INDEX –DECEMBER 2018
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis after being unchanged in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.9 percent before seasonal adjustment.
The seasonally adjusted decline in the all items index was caused by a sharp decrease in the gasoline index, which fell 7.5 percent in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index fell 3.5 percent, as the gasoline and fuel oil indexes fell, but the indexes for natural gas and for electricity increased. The food index increased 0.4 percent in December.
The index for all items less food and energy increased 0.2 percent in December, the same increase as in October and November. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined.
The all items index increased 1.9 percent for the 12 months ending December; this was the first time the 12-month change has been under 2.0 percent since August 2017. The index for all items less food and energy rose 2.2 percent over the last 12 months, the same increase as for the 12 months ending November. The food index rose 1.6 percent over the past year, while the energy index declined 0.3 percent.
Strong Economy Can’t Save Retailers From Holiday Blues The strong U.S. economy wasn’t enough to give many mall-based retailers a strong year-end boost, as Macy’s and others posted tepid holiday sales, fueling a selloff in retail stocks.
(…) Macy’s said total comparable sales rose 1.1% during November and December. The chain lowered its sales and profit forecasts for the fiscal full year, which ends in February. (…) Kohl’s comparable sales rose 1.2% in November and December, but its growth was slower than in the year-earlier period. (…)
Target’s sales, including in-store and online, rose 5.7% between Nov. 4 and Jan. 5. The result compares with 3.4% growth in the year-earlier period and puts Target on track for its biggest annual sales gain in 13 years, the company said Thursday. Costco reported late Wednesday that its sales climbed 7%, excluding gasoline and currency fluctuations, in the five weeks ended Jan. 6. Both retailers said strong store traffic drove growth over the holidays. (…) Target’s online sales grew 29% over the holidays. (…)
Traffic to physical stores fell 3% between Nov. 18 and Dec. 29, according to ShopperTrak, which uses cameras to track shoppers in stores.
On Tuesday, department-store operator J.C. Penney Co. said comparable sales fell 3.5% in the nine weeks ended Jan. 5 and that it planned to close more stores this year after a stretch of weak sales figures. L Brands said comparable sales for its Victoria’s Secret brand declined during the holiday season and margins suffered, sending its shares down 4.5%. (…)
Fed Chief Affirms Flexibility on Rates
(…) “The U.S. economy is solid,” Mr. Powell said. “The principal worry I would have is global growth,” which is slowing somewhat. “The question would be how much does that affect us,” he added, noting that global economies are more interconnected today than in the past.
The slowdown in China’s economy “is a concern, is something we’re watching,” Mr. Powell said. Increased tariffs between the U.S. and China haven’t left a visible mark on either economy, he added. (…)
“There is no preset path for rates,” Mr. Powell said Thursday when asked about last month’s projection of two more rate increases this year. “We’ll take into account tightening financial conditions, which we’ve seen, and we’ll also lower our rate path and try to have monetary policy offset weakness before it even happens.”
He said he didn’t see any sign that the possibility of a recession is elevated in the near term. (…)
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U.S. Recession Risk Hits Six-Year High Dangers are mounting from financial markets, the trade war and the government shutdown.
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Most Economists Expect Fed Will Hold Rates Steady at Least Until June
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Missing Government Data Make Job Tougher for Policy Makers, Traders The U.S. government shutdown is making it harder for Federal Reserve officials, investors and trade negotiators to read the economy at a critical moment.
Especially for a data-dependent Fed!
Given the FOMC’s keen interest for things global, The Daily Shot has these charts:
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Global new orders are on hold:
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Inventories don’t seem problematic but confidence is waning. Trade war certainly not helping.
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Automobiles are particularly weak across the world. Maybe the large number of new electric vehicles coming to market during 2019 is putting consumers on hold…
Ford to Slash Jobs, Shut Plants in Major European Revamp: Ford Motor has launched talks with trade unions in Europe about job cuts that could run into the thousands as it shuts European plants and cancels production of unprofitable models in response to a storm of bad news for global car makers.
Jaguar Land Rover Confirms 4,500 Job Losses in Cost-Cutting Drive: Jaguar Land Rover will cut around 4,500 jobs as part of a broad restructuring effort aimed at bringing down costs, the company said.
Xi’s Top Trade Aide to Visit U.S. for Talks, Shutdown Permitting China and the U.S. are set to hold a round of higher-level talks to resolve the trade conflict, with Chinese Vice Premier Liu He scheduled to visit Washington in late January—though the plan could be delayed by the U.S. government shutdown. 
Default Fears Add Fresh Stress to Chinese Private Sector A surge of defaults has shaken China’s $4.2 trillion corporate bond market, further disadvantaging struggling private firms against a resurgent state sector.
(…) After rapid growth in the past decade, China’s $12.7 trillion bond market is the world’s third largest. Debt issued by the central and local governments and the nation’s policy banks makes up about 55% of the total, with tradable certificates issued by largely state-run banks accounting for another 11.5%. Ownership remains dominated by the nation’s state-run banks, insurers and brokerages, with foreign holdings totaling less than 2%.
Last year, 165 bonds worth 157.2 billion yuan ($23.3 billion) defaulted, according to data provider Wind. That was just 0.6% of the entire corporate bond market—but it was more in both volume and value than all such debt in the four years starting 2014, when China saw its first onshore default by a private company.
Private companies, hardest hit by Beijing’s clampdown in recent years on financial risk and an economic slowdown aggravated by trade tensions, accounted for 45 of the 52 defaulting issuers. (…)
Huawei Executive Is Charged With Espionage in Poland Polish authorities detained and charged the sales director of Huawei’s local office, a Chinese national, for allegedly conducting high-level espionage on behalf of a Chinese spy agency, part of an increasingly global crackdown on the company.
(…) Officers of Poland’s counterintelligence agency searched the Huawei office, leaving with documents and electronic data, as well as the home of the Chinese national, on Tuesday, Poland’s state-owned Telewizja Polska said Friday. The individual wasn’t named, but was identified as a graduate of one of China’s top intelligence schools as well as a former employee of the Chinese consulate in the port city of Gdansk.
As part of the same investigation, Poland’s Internal Security Agency also detained one of its own former leaders, a Polish citizen who was deputy head of the agency’s IT security department. That person, who wasn’t publicly identified, had knowledge of the inner workings of the Polish government’s encrypted communications network, which is used by its top officeholders, Telewizja Polska said. (…)
EARNINGS WATCH
American Airlines’ Profit Warning Sends Carrier Shares Lower U.S. carriers aren’t boosting revenue as much as expected
(…) American said Thursday that year-end revenue didn’t rise as much as expected. Delta Air Lines Inc. DAL 0.54% last week also trimmed its fourth-quarter revenue outlook, a result of slower-than-expected sales of pricey last-minute holiday tickets. (…)
American, the world’s largest airline by traffic, said it now expects adjusted earnings of $4.40 to $4.60 a share for 2018, down from an October forecast of $4.50 to $5 a share and below the $4.62 a share that analysts polled by FactSet had expected.
American also cut its expectations for unit revenue, a measure of income per seat flown a mile. American predicted its fourth quarter unit revenue rose 1.5% from a year ago, after previously projecting it could climb as much as 3.5%. (…)
Allegiant TravelCo. said its Allegiant Air unit, a leisure-focused budget carrier, said Wednesday that its unit revenue climbed between 3.7% and 4.1% in the fourth quarter. (…)
Analysts have turned very, very gloomy…
…not so much on the USA, however…
…although growth forecasts keep being trimmed down:
Barring big surprises, Q1’19 looks pretty weak for half the S&P 500:
So far in Q4’18, surprises remain widespread and large (20 companies in):
1 thought on “THE DAILY EDGE: 11 JANUARY 2019”
WSJ: “U.S. companies are so inundated with inventory that some are renting truck trailers to use for storage space, parking them on warehouse lots or behind storefronts to hold goods until a surge in imports is cleared from crowded distribution hubs.
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