Travelling week.
We got the U.S. retail sales stats for March yesterday. Pick your analysis:
From Haver Analytics:
Total retail sales increased 0.6% (4.5% y/y) during March following an unrevised 0.1% slip in February. The gain was the first in four months. A 0.4% increase had been expected in the Action Economics Forecast Survey. Excluding motor vehicles and parts, retail sales improved an expected 0.2% (4.5% y/y) following an unrevised 0.2% rise.
From the WSJ:
(…) Overall retail sales edged up 0.2% in the first quarter from the fourth quarter. In the fourth quarter, a holiday-sales period, they rose a more robust 2.5% from the prior quarter.
Car sales were up in March but only because the Easter weekend fell in March (with Easter Monday as a bonus) this year. Non-auto ex-gas is +0.3% in Q1, that’s +1.2% annualized, in nominal terms.
This won’t help going into the summer: from the FT:
US consumer finances hit by higher fuel prices American households expected to spend on average $400 more this year on petrol
(…) By contrast, middle-income US households will on average gain $930 each from the tax cut bill passed at the end of last year, according to the Urban-Brookings Tax Policy Center. Fuel accounted for 4 per cent of total household spending for middle-income Americans, but only 2.6 per cent for the highest earning fifth. (…)
Yesterday I posted this from Randall Forsyth in Barron’s:
BofA ML had anticipated that a third of the respondents to its “Word From Main Street” survey would spend the cash from the tax cuts. Instead, just 16% of respondents said they’d use the money for big-ticket purchases or day-to-day expenses, while 22% said they’d save the tax cuts, and 20% said they’d pay down debt. In other words, close to half of those polled plan to use the tax savings to shore up their personal balance sheets, although the bank suggested that people might be more responsible in surveys than in reality. (Some 20% said they didn’t get a tax cut, although the bank hypothesized that there might have been delays in getting the reductions or that the respondents didn’t notice them.)
Millennials (ages 22 to 37) said they’d be more likely to save the tax-cut money than Gen Xers (ages 38 to 53). Millennials also were less likely to use the windfall for daily spending and more likely to invest or pay down debt, most likely student loans. All of which suggests a “greater sense of responsibility than is often credited to this cohort,” the bank commented.
Really amazing:
Empire State Manufacturing Survey
The index for current “general business conditions” in April dropped slightly. But the index for future conditions cratered to 40.3%, its lowest level since February 2016. The 25.8-point plunge from March to April was the steepest monthly plunge in the history of the survey. Trade issues?
China Fends Off Trade Trouble With 6.8% Growth China’s economy expanded at a faster-than-expected 6.8% in the first quarter, though flagging exports and factory output may prove a drag in the coming months.
(…) Retail sales held up particularly well, rising 9.8% in the quarter from the year-earlier period. (…) Meanwhile, industrial production grew just 6% in March, compared with 7.2% in the first two months of the year, and 6.8% overall for the quarter. Investment in buildings, factories and other fixed assets grew 7.5% in the first quarter, below the 7.7% expected by economists polled by The Wall Street Journal. (…)
The Daily Shot has some good charts in China:
- Quarter to quarter:
- IP is not strong:
- And this chart suggests that we will see slower growth going forward due to tighter credit conditions.
Source: IIF
- Already happening according to this RSM sales index for China:
The Chinese government is trying to solve its debt problem. The FT writes that “in the first quarter of this year, growth of fixed-asset investment by private companies was the fastest in over two years at 8.9 per cent and outpaced investment by state groups for the first time in almost three years.”
JC Capital argues that reduced availability of capital is hurting GDP growth:
Numbers published Friday showed that financing in March was more restrained than expected, coming in at ¥1.3 trn, with bank loans accounting for ¥1.15 trn of that amount. This data show that nearly all the new financing came fromthe official banks, fitting with the regulators’ (new)view that shadow banks are simply parasites on the body of the state. China’s credit “impulse,” or total bank assets, has fallen as a percentage of GDP every month since February 2017 and is now growing more slowly than nominal GDP for the first time since 2011. The growth of new credit—10.5% YoY—decelerated month on month.
Housing needs to be monitored closely. There is tremendous housing overcapacity in China. If demand wanes, the whole economy will suffer, not best when over-indebted.
Putting aside the indicated appreciation of property values, sales transactions tend to be a good indicator of demand, and transactions are significantly down in March and April. The amount of property sold in the top 10 markets, according to Wind, was down 37% in March and 16% in the first two weeks of April. Prices were uneven, some up and some down, but the reports of publicly listed developers suggested weak pricing. Every major developer except for Poly and Evergrande reported a decline in sales in the first quarter, with the drop in value steeper than the drop in floor space sold. In other words, developers were discounting and still could not sell as much as they did last year.
China Targets American Farmers With Sorghum Surcharges
The ministry said Tuesday that it would require importers to pay deposits worth 178.6% of the value of U.S. sorghum shipments, following an investigation that initially found the grain was being dumped at prices that hurt domestic producers. (…)
China launched the anti-dumping investigation into U.S. sorghum in February, after Washington placed tariffs on imports of Chinese-made solar panels and washing machines. American sorghum, which is used in animal feed and in China to make liquor, is also on a separate target list of tariffs on goods worth $50 billion.
U.S. sorghum exports to China peaked at $2 billion in 2015 and have averaged nearly a $1 billion a year over the past two years, according to official U.S. data. That makes it a sizeable export—though well below soybeans, more than $12 billion of which were sent to China last year.
China Boosts Its U.S. Treasuries Holdings by Most in Six Months
EARNINGS WATCH
We now have 34 S&P company reports in. The beat rate is 74% and the EPS surprise factor is +4.4% (revenues +1.4%).
Chris Whalen writes what you probably will not ready elsewhere on banks:
U.S. Executives Boost Appetite for Deals Following Tax Reform
(…) 54% of U.S. executives plan to pursue a merger or acquisition transaction within the next 12 months, up from 42% in the prior report six months ago. EY surveyed more than 500 U.S. executives as part of a wider panel of 2,500 respondents from 43 countries interviewed in March and April.