Higher Gasoline Prices Boost Retail Sales
Higher pump prices helped drive a 0.6% increase in total U.S. retail sales in August from the prior month, while consumers modestly boosted their spending on other goods, the Commerce Department said Thursday. Excluding gasoline, other sales at stores, online and at restaurants rose 0.2%. (…)
“The jump in energy prices is the new influence on inflation,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “Fuel filters into just about everything.” (…)
Shoppers also spent more last month at electronics and appliance stores and for clothes as students headed back to school. They boosted sales at car dealerships despite higher interest rates and prices. (…)
The producer-price index, which captures what companies charge businesses and other customers, rose 0.7% in August from the prior month, the Labor Department said.
Excluding energy, though, the PPI increased just 0.1% in August. A less volatile so-called core measure—which excludes food, energy and supplier margins—climbed 0.3% last month, the same as July’s revised reading. (…)
Based on this week’s inflation reports, the core PCE price index rose just 0.1% in August from the prior month, according to forecasts by economists at JPMorgan Chase, Goldman Sachs and Citigroup. That would mark the smallest monthly increase in over a year and would lower the 12-month core PCE inflation rate to 3.8% in August from 4.2% in July. (…)
So many ways to skin the retail sales cat as Wells Fargo shows.
Since April:
- total sales: +5.8% annualized, last 3 months: +5.2% a.r.. Last 2 months: +6.7% a.r..
- control sales: +5.6% annualized, last 3 months: +4.9% a.r.. Last 2 months: +5.5% a.r..
Americans are still buying a lot of goods.
Strong sales at apparel and general merchandise stores in July and August suggest a good back-to-school season which bodes well for holiday sales in the important 4th quarter.
A narrow measure of spending on services, sales at restaurant and bars rose 0.3% MoM in August after +0.8% in July. Since April: +9.2% annualized. Last 3 months: +7.0% a.r.. Last 2 months: +6.6% a.r..
This highly discretionary spending category is not showing any alarming sign, is it?
UAW Strikes at GM, Ford and Stellantis Plants The walkouts are the first to hit all three automakers at the same time and affect factories in Missouri, Ohio and Michigan.
China’s Economy Shows Fresh Signs of Fragile Recovery Spending in stores and factory production rose in August, and unemployment fell, but the property sector continued to threaten growth.
(…) Retail sales rose 4.6% last month from a year earlier, compared with a 2.5% annual gain in July. Industrial production expanded 4.5% year over year, after a 3.7% increase in the prior month.
The unemployment rate fell to 5.2% in August from 5.3% in July. China last month stopped publishing figures for youth unemployment, which had become a focus of international attention after joblessness among those ages 16 to 24 pushed past 20%. Officials said they wanted to make some methodological improvements to the data. (…)
The central bank said Friday that it cut the interest rate on 14-day loans to banks, while on Thursday it said it would lower banks’ reserve requirement ratio by 0.25 percentage point, to 7.4%, making more funds available for loans. The ratio was last cut in March. (…)
In the first eight months of 2023, outlays on buildings and other fixed assets were up 3.2% from the year-earlier period, slowing from the 3.4% pace of January-July. Investment in infrastructure and manufacturing was up, but real-estate investment was down 8.8%. Overall private investment was down 0.7%. (…)
Of the 70 cities, 52 reported a monthly decline in August, up from 40 cities in July. Average home prices in August were down 0.55% from a year earlier, compared with July’s 0.57%. (…)
(New home prices fell at the fastest pace in 10 months in August, down 0.3% month-on-month after a 0.2% decline in July, according to Reuters calculations based on National Bureau of Statistics (NBS) data. Prices were down 0.1% from a year earlier, after a 0.1% decline in July.
For August, property investment fell for the 18th straight month, down 19.1% year-on-year from a 17.8% slump the previous month, separate data showed on Friday. Home sales are down for the 26th consecutive month, according to Reuters calculations based on the data. (…)
Around 30 cities eased home purchase curbs and relaxed mortgage rules for buyers in recent weeks but analysts say Beijing may have to introduce more aggressive property easing measures to deliver a real recovery.
Authorities may also need to lift almost all restrictions on home transactions, invest more in the urban renovation programme, speed up infrastructure spending and restructure local government debt, said Nomura.
Moody’s on Thursday cut China’s property sector outlook to negative from stable, citing economic growth challenges, which the rating’s agency said will dampen sales despite government support. (…)
Sino-Ocean Group said on Friday that it has suspended payments on eight U.S. dollar bonds with a total face value of around $4 billion, and will seek to restructure its offshore debt. The developer, which is about 30% owned by state-owned insurer China Life, has hired Houlihan Lokey as its financial adviser and Sidley Austin as legal adviser.
The company said it recently experienced a rapid decline in contracted sales and has been facing mounting liquidity pressure. Sino-Ocean’s Hong Kong-listed shares dropped 9% on Friday. Prices of some of its dollar bonds had tumbled to below 10 cents on the dollar earlier this week, according to FactSet.
Some other state-linked property companies, including Central China Real Estate and Greenland Holdings, have defaulted in recent months. China’s top surviving private developer, Country Garden, narrowly averted an international debt default recently after making two overdue bond-coupon payments right before the end of a grace period.
European Central Bank Raises Key Interest Rate to Record High Central bank signals this might be enough to combat inflation, but doesn’t rule out further increases
In a split decision, ECB officials raised the bank’s deposit rate to 4%, the 10th increase in a row and a vertiginous rise from below zero last year. (…)
ECB officials judge that rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution” to reducing inflation to their 2% target, Lagarde said, repeating language used in the bank’s policy statement. (…)
New economic forecasts published by the ECB Thursday suggested that eurozone growth will slow significantly more than previously expected this year and next, while inflation will remain markedly above the ECB’s target of 2% through next year. The bank raised its forecast for inflation next year from 3% to 3.2%, mainly to reflect “a higher path for energy prices.” (…)
Underlying inflation in August was 5.3% in the eurozone and 4.3% in the U.S. (…)
Canadian household debt ratio down in second quarter as disposable income grew
The agency says household credit market debt as a proportion of household disposable income, on a seasonally adjusted basis, fell to 180.5 per cent in the second quarter compared with 184.2 per cent in the first quarter of the year. (…)
Meanwhile, the household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, was 14.79 per cent in the most recent quarter, down from 14.90 per cent in the first quarter, when it hit its highest point since 2019.
The moves came as seasonally adjusted household credit market borrowing fell to $17.1-billion in the second quarter compared with $20.4-billion in the first quarter as demand for mortgage loans fell to their lowest point since 2005.
The seasonally adjusted total stock of household credit market debt in the second quarter was $2.86-trillion, up 0.6 per cent from the first quarter, while mortgage debt totalled $2.13-trillion.
EQUITIES
Goldman’s Peter Oppenheimer’s charts show that the S&P 500 is up 17% YtD but the median stock is up only 3%.
This chart suggests that even excluding “Big Tech”, U.S. valuations are stretched.
The decline in core inflation from 4.7% to 4.3% reduced the Rule of 20 P/E to 25.0, still expensive, even using forward PS (R20 P/E = 23.5).
Since November 2022, trailing EPS have declined 2.9% but inflation slowed from 6.6% to 4.3%, boosting the Rule of 20 Fair Value (yellow line in chart) 16% to 3400.
