This a.m.:
Advance estimates of U.S. retail and food services sales for December 2019, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $529.6 billion, an increase of 0.3 percent (±0.4 percent)* from the previous month, and 5.8 percent (±0.7 percent) above December 2018.
Total sales for the 12 months of 2019 were up 3.6 percent (±0.4 percent) from 2018. Total sales for the October 2019 through December 2019 period were up 4.1 percent (±0.5 percent) from the same period a year ago. The October 2019 to November 2019 percent change was revised from up 0.2 percent (±0.4 percent)* to up 0.3 percent (±0.3 percent)*.
Retail trade sales were up 0.4 percent (±0.4 percent)* from November 2019, and 6.0 percent (±0.5 percent) above last year. Nonstore retailers were up 19.2 percent (±1.4 percent) from December 2018, and gasoline stations were up 11.3 percent (±1.2 percent) from last year. (…)
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UNEMPLOYMENT INSURANCE WEEKLY CLAIMS
Back within the channel:
Cass Transportation Index Report December 2019
Both the shipments and expenditures components of the Cass Freight Index marked their lowest reading of 2019 and took another step backwards in terms of y/y growth. (…) Shipment volumes dropped 7.9% vs December 2018 levels, as the index posted its lowest reading since January 2018. It was also the steepest y/y decline since the Great Recession of 2008-2009. Although there were the same number of working days in December 2019 and December 2018, some industry participants we’ve spoken with about the sluggish end to the year cited Christmas and New Year’s Day both falling on a Wednesday as the reason for soft volume and low productivity the last week or so.
Regardless of the holiday effect, the freight market is weak, largely due to higher inventories and contraction in the manufacturing economy, as noted by December’s 2019-low ISM reading of 47.2 (its lowest level since June 2009). We saw corroborating evidence from the rail data (Chart 3), which showed deceleration through the end of the year as well. And while we expect comps to ease and volumes to flatten out, we are not forecasting much growth in terms of freight volumes in 2020. The U.S. industrial economy – rebound or no rebound – will likely be the biggest swing factor. And the tariff relief from the Phase 1 deal seems to be just that – a relief for some, but not a stimulus. (…)
U.S. rail y/y carload declines seen all year accelerated in 4Q19, reaching its lows in December
Trade Deal Aims High for Chinese Purchases Some are skeptical that Chinese purchases of American farm products, manufactured goods, business services and energy can hit the trade deal’s aggressive targets.
(…) The deal specified targets for Chinese purchases, measured against 2017 levels. In 2020, China must buy at least $77 billion extra of U.S. goods and services, and in 2021 at least $123 billion extra, for a two-year addition of $200 billion.
In 2017, the U.S. exported $186 billion in goods and services to China, and the most recent data for 2019 puts the figure at about $160 billion. To meet the targets, exports to China would have to rise to around $262 billion in 2020 and $309 billion in 2021, according to a Wall Street Journal analysis. For this year, that amounts to an increase of around 60%, in what would be an unprecedented jump in bilateral trade. (…)
Trade groups said the signing was a positive step, but that further tariff reductions are needed on both sides before U.S. companies can expect to realize big gains in exports. (…)
The biggest chunk of the $200 billion in increased purchases by China would come from U.S. manufacturers. The deal calls for manufacturing trade in 2020 to climb by $32.9 billion from the baseline level and be $44.8 billion above baseline in 2021.
President Trump has often touted the agricultural purchases in the deal as one of its centerpieces. To meet the goal for 2021, China would need to import a little over $40 billion in U.S. agricultural goods—a nearly 90% increase from 2017, according to the Journal’s calculations.
In addition to the purchase targets, China has agreed to steps that allow more market access for U.S. dairy products, poultry, beef, fish, rice and even pet food. (…)
In 2017, the U.S. exported to China about $7.6 billion of the energy products specified in the deal. Meeting its goals would require energy exports of $26 billion in 2020 and over $41 billion in 2021. That figure represents more-than-quintupling energy exports, the Journal calculated.
American capacity to export energy, especially liquefied natural gas, has grown in recent years, but accommodating that volume could require a significant investment in energy infrastructure.
Beyond 2021, the U.S. and China said their deal envisions continued rapid escalation in purchases. (…)
Source: @LizAnnSonders, @CapEconUS (via The Daily Shot)
Source: Scotiabank Economics (via The Daily Shot)
A China Trade Relief (The WSJ Editorial Board) The tariff truce is welcome, but the price has been high.
(…) Manufacturers that rely on Chinese imports are globally less competitive. Those that do sizable business in China have also been harmed. Ford reported a 26.1% drop in sales in China last year, and GM’s were down 15%. China is their biggest foreign market. Boeing last fall complained that China was delaying jet purchases because of trade tension. (…)
Damage to manufacturers has been especially acute in Pennsylvania, Ohio and Wisconsin. Beijing’s retaliatory tariffs also whacked American farmers, to whom the President paid $25 billion in taxpayer subsidies as political amends.
The tariff war has led to a decline of business investment, and a Federal Reserve study says trade uncertainty cut U.S. GDP growth by about a percentage point. Some say this is a price worth paying. But it’s simply false to assert that the President’s trade wars have been cost free. Americans have paid a high economic price in the hope that China will behave better in the future as the result of this deal. (…)
In the best case this initial deal offers a year or two of trade calm, China will honor its commitments, Mr. Trump will sheath his tariff sword, and he or his successor can move on to the thornier issues of Chinese subsidies for state-owned industries and high-tech protectionism in 2021 or 2022.
The phase-one deal is progress, but U.S.-China economic and political competition has decades to run.
For Economy, Climate Risks Are No Longer Theoretical Climate crises in the next 30 years may resemble financial crises in recent decades: potentially quite destructive, largely unpredictable and, given the powerful underlying causes, inevitable.
(…) Climate change can’t be directly blamed for any single extreme weather event, including Hurricane Maria, California’s wildfires or Australia’s bushfires. But it makes such events more likely. “They are starting to be more than tail events, they’re starting to affect economic outcomes,†Robert Kaplan, president of the Federal Reserve Bank of Dallas, told an economic conference earlier this month. (…)
Every year, the World Economic Forum asks business, political, academic and nongovernmental leaders to rank the most probable and consequential risks, from cyberattacks to fiscal crises. This year, ahead of its annual meeting next week in Davos, Switzerland, climate-related risks took the five top spots in terms of probability, the first time a single issue had done so in the survey’s 14-year history. (…)
This relationship is driven home in a study released Thursday by the McKinsey Global Institute. It estimated that “unusually hot summers†affected 15% of the Northern Hemisphere’s land surface in 2015, up from 0.2% before 1980.
McKinsey estimated that climate change made the European heat wave that in 2019 killed 1,500 in France 10 times more likely and the forest fires that devastated northern Alberta in 2016 up to six times more likely. (…)
Tesla says it plans to open China design and research center U.S. electric car maker Tesla plans to open a design and research center in China to make “Chinese-style” vehicles, the company said in a recruitment notice on its official WeChat account.
U.S. Producer Price Index & Core Prices Edge Higher
The Producer Price Index for final demand rose 0.1% during December (1.3% y/y) after having been unchanged in November. Producer prices excluding food & energy also rose 0.1% (1.1% y/y) following a 0.2% decline. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, edged 0.1% higher (1.5% y/y) after holding steady in November. (…)
Finished consumer goods prices less food & energy rose 0.1% (1.6% y/y). Core nondurable goods prices held steady (1.8% y/y) and durable product prices improved a minimal 0.1% (1.1% y/y) for a second straight month. (…)
Services prices for final demand were unchanged (1.3% y/y) following November’s 0.3% decline. Trade services prices fell 0.3% (+0.4% y/y), off for the second consecutive month, as the cost of finished goods trade declined 0.5%. (…)
What to watch as fourth-quarter earnings kick into high gear U.S. corporate reporting season is expected to show lackluster profit growth, and it has already gotten off to a bumpy start, with big banks kicking off the fourth quarter to mixed investor reaction so far on the stock market.
TECHNICALS WATCH
The 13/34–Week EMA Trend Chart (CMG Wealth):
