Empire State Manufacturing Index Rebounds
The Empire State Manufacturing Index of General Business Conditions jumped 9.4 points in March to 22.5 from 13.1 in February. This reading was well above the median expectation of 15.0 from the in the Action Economics Forecast Survey.
Based on some of these measures, Haver Analytics calculates a seasonally adjusted index that is comparable to the ISM series. The calculated figure rose to 57.5 from 55.3. During the last ten years, the index had a 69% correlation with the quarter-on-quarter change in real GDP.
The number of employees was the only index which deteriorated, declining to 9.4, though this followed a healthy gain in February. (…) The employee workweek reading increased to 5.9 from 4.6.
The new orders index rose to 16.8 in March from 13.5, while shipments more than doubled to 27.0 from 12.5. This is the highest level of shipments since October 2009. Delivery times jumped to 16.2 from 11.1, just besting the previous record of 16.1 in April 2017. The volatile inventories index edged up to 5.6.
The prices paid index continued its steady climb, up 1.7 to 50.3, its highest level since March 2012. Fifty-three percent of respondents indicated increased prices, while just three percent reported a decrease. Prices received rose 0.9 to 22.4, its peak since January 2012.
Economists See Steeper Fed Rate Path, Stronger Inflation Economists nudged higher their forecasts for how much the Federal Reserve will raise short-term interest rates this year to keep inflation under control as the economy strengthens.
A Wall Street Journal survey this month found economists, on average, forecast the Fed’s benchmark federal-funds rate will end the year at 2.25%, up from 2.21% in the February survey and 2.17% in the January poll.
The survey respondents were roughly split into two camps, expecting the equivalent of either three or four quarter-percentage-point rate increases in 2018.
Economists also saw the equivalent of two rate increases in 2019. (…)
Economists in the latest survey saw annual inflation rising to 2.1% in the fourth quarter of 2018 and remaining relatively stable thereafter. (…)
Speaking of rate increases, American consumers have been taking advantage of low interest rates, borrowing based on monthly payments rather than actual indebtedness and leverage. Interest rates have yet to rise meaningfully but banks are getting worried and more careful.
Smaller banks are already feeling the pinch:
Here are the delinquency rates at some banks and other lenders courtesy of RBC:
BANK OF AMERICA
JP MORGAN
DISCOVER FINANCIAL
CAPITAL ONE
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Fitch: Macro Crosscurrents Cloud U.S. Auto Lender Credit Outlook
Loss frequency and severity ticked up slightly from historically low levels for the largest U.S. auto lenders, according to the latest U.S. Auto Asset Quality Review from Fitch Ratings. Excluding General Motors Financial Co. (GMF), whose credit performance continues to benefit from a significant portfolio mix shift, the average net chargeoff rate for lenders covered in this report increased to 0.95% in fourth quarter 2017 (4Q17) from 0.92% in 4Q16. Likewise, delinquencies increased in 4Q17, with the 30+ day delinquency rate up to 3.07% at YE17 from 2.86% at YE16.
“We continue to see a divergence in subprime credit relative to prime credit and expect performance to weaken further in 2018 due partially to the expansion in recent years of less-tenured, independent auto finance companies that have demonstrated higher-risk appetites and less underwriting discipline,” said Michael Taiano, Senior Director.
Underwriting for auto loans/leases continued to tighten for banks in 2H17, albeit at a more moderate pace, which Fitch views as a credit positive. The tighter standards are likely in response to deterioration in used vehicle prices and weaker credit performance in the subprime segment. After a respite in 2H17 that was partially due to increased vehicle demand stemming from the hurricanes in Texas and Florida, Fitch expects further deterioration in used car prices in 2018 to be driven by increases in off-lease vehicles, elevated new-car incentives, and tighter subprime lending. Lower used vehicle prices will put downward pressure on lenders’ recovery values and lease residuals, resulting in higher credit losses.“The outlook in 2018 for auto asset quality is clouded to some extent by macro crosscurrents. Positive indicators including greater household net worth, low unemployment and increased wage growth are countered by rising consumer debt levels, weaker used vehicle prices and rising interest rates,” added Taiano.
The OECD unemployment rate is the lowest in decades.
Source: @jsblokland; Read full article (Via The Daily Shot)
SENTIMENT WATCH
Billions of Dollars Pour Into Tech Funds, Powering Stock-Market Gains Investors are increasing their bets on shares of technology companies, renewing concerns that the market is becoming too dependent on a few big stocks to power its gains.
Nearly $5 billion has poured into tech-focused stock funds so far this year, the most of any major sector, according to Thomson Reuters Lipper data. That figure represents nearly half of what the group pulled in for all of 2017. In January alone, tech funds received $3.9 billion in inflows, the most in a single month for such funds since March 2000—the peak of the dot-com bubble.
Tech shares have gained 13% since major indexes fell into correction territory on Feb. 8, compared with a 6.4% gain for the S&P 500 index. (…)
A half-dozen tech companies are responsible for much of the S&P 500’s gains so far this year:Microsoft Corp. , Apple Inc., Cisco Systems Inc.,Nvidia Corp. , Alphabet and Adobe Systems Inc.Including online retail giant Amazon and streaming service Netflix, both of which are tech companies that sit among other consumer-discretionary stocks, those eight companies have contributed more than half of the S&P 500’s gains in 2018. (…)