U.S. Light Vehicle Sales Fall for Fifth Straight Month in September
The Autodata Corporation reported that light vehicle sales during September declined 6.3% (-25.6% y/y) to 12.27 million units (SAAR) from 13.09 million in August. Sales have fallen by one-third since the April peak of 18.50 million units.
Passenger car sales plunged 15.8% (-32.5% y/y) in September to 2.62 million after an 11.4% August decline. Purchases of domestically-produced cars weakened 19.5% last month (-41.5% y/y) to 1.61 million units after falling 11.9% in August. Down for a fourth straight month, sales of imported autos weakened 9.0% in September (-10.6% y/y) to 1.01 million following a 10.5% August shortfall.
U.S. consumers continue to prefer larger vehicles. Trucks’ share of the light vehicle market rose to 78.6% last month. That was increased from a low of 48.1% during all of 2009.
Sales of light trucks declined 3.4% (-23.5% y/y) in September to 9.65 million units after falling 10.9% in August. Purchases of domestically-made light trucks fell 4.2% in September (-26.8% y/y) to 7.23 million units after declining 11.2% in August. Sales of imported light trucks eased 0.8% last month (-11.7% y/y) to 2.42 million, down from April’s record 3.30 million units.
Imports’ share of the U.S. vehicle market rose last month to 28.0% and remained up from 23.5% in December. It has been rising steadily from 19.9% in 2015. Imports’ share of the passenger car market surged to a record 38.5% in September. Imports’ share of the light truck market rose to 25.1% last month, up from a recent low of 20.7% in August 2020.
So, almost 80% of vehicles Americans bought last months were trucks, amazing in itself. And 25%, one in four, was imported, up from 20% just 2 years ago and from 15% just 7 years ago. MAGA?
Eurozone Composite PMI: Growth slows further in September as demand pressures cool and supply issues constrain business activity
Euro area economic growth moderated for a second month running in September, marking a further retreat from the 15-year peak recorded in July as shortages of inputs impeded both manufacturing and service sector output. There were also softer rates of expansion in both new orders and employment, while businesses’ output expectations were the least optimistic since February.
Meanwhile, inflationary trends moved higher in September, with input prices rising at the joint-fastest rate on record (since July 1998). Output prices subsequently rose at a pace which was only surpassed by those seen in June and July.
After accounting for seasonal factors, the IHS Markit Eurozone PMI® Composite Output Index fell to 56.2 in September, down from 59.0 in August and the lowest reading since April. Although indicative of a strong expansion in business activity, it marked a considerable slowdown from the expansions seen between June and August, which were among the fastest in 23 years of data collection.
At the sector level, data showed services activity growing at a faster rate than manufacturing production for the first time since the COVID-19 pandemic started in early-2020, reflecting the latter’s sensitivity to ongoing supply-related issues. Regardless, rates of growth were considerably slower than in August in both sectors.
The country split revealed a broad-based loss of growth momentum during September. Of the economies monitored, it was Ireland which expanded at the fastest rate, while the softest expansions were seen in the bloc’s two largest economies – France and Germany.
Demand for euro area goods and services rose for a seventh month running in September, but there was a further easing in the pace of expansion, which slumped to a five-month low. Again, as was the case with output, the slowdown was broad-based by sector and more pronounced at manufacturers. Nevertheless, goods producers still recorded a stronger rise in sales than their service-providing counterparts, partly due to resilient export demand.
At service sector firms, international sales only rose at a marginal pace in September.
Euro area employment growth rose at a marked rate in September, despite easing from August. This trend was apparent across all monitored member states, with jobs growth was particularly sharp in Ireland. Signs of capacity constraints were still evident, however, as backlogs of work across the eurozone increased sharply and for a seventh month in succession.
Businesses retained an elevated level of confidence towards the 12-month outlook in September, despite the level of optimism dipping to its lowest since February.
Lastly, having cooled slightly in August, rates of inflation re-accelerated during the latest survey period. In fact, input costs increased at the joint-fastest rate on record (since July 1998), while output prices were increased at a rate that was only surpassed by those seen in June and July. The faster overall rise in input costs was driven by services firms, although selling prices increased at a faster extent in both sectors.
The IHS Markit Eurozone PMI® Services Business Activity Index fell to 56.4 in September, the lowest since April and a marked drop from 59.0 in August. That said, the index was still indicative of a strong expansion in service sector business activity.
Demand for euro area services increased for a fifth consecutive month in September, although the expansion was the weakest seen over this period. New business from overseas grew only marginally during the latest survey period following relatively solid increases in the three months prior.
Firms continued to hire additional staff at a strong pace in September, although the rate of jobs growth slowed to a four-month low. A further rise in recruitment came amid an increase in the level of work-in-hand (i.e. orders received but not yet completed).
Service providers remained strongly optimistic that activity levels would rise over the coming 12 months as global economies recover from the pandemic. However, the degree of positivity slid to a six-month low.
Prices data showed stronger inflationary trends for both input costs and selling charges in September. The former rose at the fastest rate since mid-2008, while output price inflation remained among the highest in over 20 years.
Commodities Index Hits Record as World Rebound Meets Shortages
The Bloomberg Commodity Spot Index, which tracks 23 energy, metals and crop futures contracts, rose 1.1% on Monday, topping a 2011 record. The index has surged more than 90% since reaching a four-year low in March of last year. (…)
- OPEC Opts Against Big Output Boost; Oil Hits 7-Year High OPEC and a Russia-led group of oil producers agreed to continue increasing production in measured steps, deciding against opening the taps more widely, and driving crude prices to their highest levels since 2014.
(…) the Organization of the Petroleum Exporting Countries and Russia said the group, which calls itself OPEC+, would lift its collective output by 400,000 barrels a day in monthly installments, part of a previously agreed plan to return output to pre-Covid-19 levels.
In the U.S., oil drilling and output have been ticking higher, though they are yet to return to pre-pandemic levels. The last time that domestic crude prices were so high, there were roughly 1,100 more rigs drilling for oil than the 428 at work last week, according to oil-field-services firm Baker Hughes Inc. (…)
Average daily crude production in the U.S. has been 6.7% lower than a year earlier while commercial stockpiles of crude, excluding the government’s Strategic Petroleum Reserve, are 15% lower, according to the U.S. Energy Information Administration. (…)
Saudi Arabia privately signaled to some delegates it is seeking higher prices now to make up for lost revenue last year, according to delegates.
Oil-export revenue in Saudi Arabia almost halved to $119 billion in 2020 compared with the previous year, according to OPEC’s statistical report issued last week. (…)
Saudi Arabian officials believe, pressure from U.S. investors has kept many [shale producers] on the sidelines, according to delegates. (…)
- Cotton Prices Surge to Highest Level in a Decade China is buying up U.S. cotton, despite Trump-era trade tensions between the two countries.
(…) Prices have risen 18% higher over the past 10 sessions. Higher clothing prices could eventually follow. (…)
Last year, President Donald Trump banned U.S. imports of clothing and other products made of cotton from the Xinjiang region, China’s largest cotton-producing area. The administration said at the time that there was evidence that the products were made with forced labor by the Uyghur ethnic group.
U.S. companies still can import cotton products made in China if the cotton itself is from somewhere else. So China is importing cotton—much of it from the U. S.—to make goods and ship them back.
China’s appetite for cotton imports is, in part, being fulfilled by cotton produced in the U.S. According to the U.S. Department of Agriculture, the pace of U.S. export sales of cotton to China since the start of the new marketing year on Aug. 1 is 83% higher than this time last year. (…)
- German Power Hits Record Price for November on Tight Fuel Supply
- Global Energy Crisis Is the First of Many in the Clean-Power Era
Central banks differ on dispelling nightmare of stagflation With global forces slowing growth while increasing inflation, policymakers are struggling to find a path forward
Japan stocks suffer ‘Kishida shock’ as new leader suggests tax rise Prime minister’s suggestion of increased levy on capital gains spooks investors
Chinese cockroaches
When you see one, you know there are more…
Chinese Developer Fantasia Fails to Repay $206 Million Dollar Bond Fantasia Holdings, a developer of luxury apartments in China, said it didn’t make a U.S. dollar bond payment that was due Oct. 4, adding to the malaise surrounding the country’s indebted property companies.
(…) Just days earlier, a Fantasia representative told investors that it would make the payment, according to a note from Chuanyi Zhou, a credit analyst at Lucror Analytics. In late September, Fantasia said a company owned by its founder bought a small portion of the same bond issue. (…)
[Fitch] said the developer reportedly recently missed another payment on a private bond—which Fitch was previously unaware of—and said the incident “casts doubt on the transparency of the company’s financial disclosures.” (…)
Fantasia, in its recent first-half report, listed around $4.3 billion in outstanding dollar bonds as of June, including some issued earlier this year with double-digit percentage coupons. (…)
Fantasia has dozens of ongoing real-estate projects in major metropolitan areas across China, in cities including Beijing, Wuhan, Tianjin and Ningbo. (…)
Reuters adds this:
Chinese developer Sinic Holdings (2103.HK) became the latest to suffer a ratings downgrade as stocks in the sector came under pressure.
Fitch cut Sinic’s long-term issuer default rating to ‘C’ from ‘CCC’, after the company announced that certain subsidiaries have missed interest payments on onshore financing arrangements, Fitch said in its report on Tuesday.
China Steps Up Efforts to Ring-Fence Evergrande, Not Save It
As China Evergrande Group edges closer to a massive restructuring, Beijing has stepped up efforts to limit the fallout, signaling it’s willing to prop up healthy developers, homeowners and the real estate market at the expense of global bondholders.
In the last week alone, Chinese authorities have dispatched top financial regulators to nudge the country’s massive banks to ease credit for homebuyers and support the property sector. They also bought out part of Evergrande’s stake in a struggling bank to limit contagion. The central bank meanwhile has pumped 790 billion yuan ($123 billion) into the financial system over 10 days to ease liquidity. (…)
For China, the risk of contagion far outweighs any potential damage from an Evergrande collapse on its own. Though Evergrande is one of the largest developers in China, it accounts for just 4% of sales in the country. A run on property firms in the wake of an Evergrande failure threatens to destabilize an industry that accounts for 29% of China’s economy, according to new research from Harvard University economist Ken Rogoff. (…)
Some 12 real estate companies have reported bond defaults in the first half of this year, amounting to 19 billion yuan, according to Moody’s Investors Service. (…)
The regulators asked banks to refrain from cutting off funding to developers all at once, according to a person familiar with the matter. Lenders should continue supporting projects under construction and approve mortgages for buyers qualified for pre-sales, the person said. (…)
Standard & Poor’s said it sees little evidence of a broader spillover into other parts of the financial markets, with impact confined to single-B rated developers. Citigroup expects some fallout from Evergrande, prompting a cut in its 2022 economic growth forecast to 4.9% from 5.5%. (…)
Almost Daily Grant points out that
Evergrande had 132 million square meters worth of projects under construction as of year-end, The Wall Street Journal notes. For context, the Empire State Building spans 257,000 square meters of total floor area. (…) Evergrande is currently undertaking 146 shanty town reconstruction projects across the Chinese mainland, with an order book pegged at RMB 100 billion ($15.5 billion) by analysts at Kaiyuan Securities.
The aggregate interest coverage ratio of 21 big Hong Kong-listed Chinese real estate developers fell to 0.94:1 as of June 30 according to data from Refinitiv, down from 1.47:1 six months earlier.
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Hollywood Production Workers Authorize Union to Strike Union members gave their leadership the ultimate authority to call a strike should negotiations over working conditions and pay with studios and the streaming services break down.