U.S. business inventories rose +.1% MoM (consensus +.2%) in August following a +.5% gain in July. Sales fell -.4% MoM. Both sales and inventories are up +3% YoY. The inventory to sales ratio was 1.27 in August, unchanged from the level a year earlier, but up from 1.26 months of supply in July.
Reduced sales raised concerns about weakening demand causing restrained stockpiling of inventories. The +.1% gain in inventories was the smallest since last March, when companies were last working out of excess inventory positions. Retail stockpiles grew +.5% MoM in August, a slowdown from the 1% growth pace the previous month. Most of the increase was due to larger auto (+1.5% MoM) and grocery store inventories. Excluding autos, inventories were unchanged last month.
Retail inventories account for about 33% of all business inventories, with factory inventories accounting for around 35%, and wholesalers accounting for the balance. Factory inventories fell -.1% MoM, the largest drop in a year and a half. Manufacturers were the only category to see the inventory to sales ratio rise last month.
Credit tightening and the housing slump are keeping producers cautious on production growth. Inventories added about +.22% to second quarter GDP growth.
Friday, October 12, 2007
Consumer Confidence Slips Again in October
The University of Michigan consumer confidence survey showed further erosion, falling to 82 in October, the lowest level in over a year. The index finished September at 83.4. Expectations, which are used as a proxy for future spending, fell to 71.6, as concerns about the economy weigh on consumers. But a bright spot was the view of current conditions, which actually rose slightly to 98.2. This question is based on peoples' perceptions of the current financial situation and whether it is a good time to buy expensive items, such as a car.
One year inflation expectations eased to 3% versus 3.1% last month. Longer-term inflation expectations also eased by a tenth to 2.8% over the next five years.
This preliminary look at Octobers' figures includes about 60% of the final survey responses.
One year inflation expectations eased to 3% versus 3.1% last month. Longer-term inflation expectations also eased by a tenth to 2.8% over the next five years.
This preliminary look at Octobers' figures includes about 60% of the final survey responses.
Higher Food and Energy Costs Boosting Retail Sales Figures
Retail sales picked up in September, rising +.6% MoM (consensus +.2%) versus +.3% MoM in August, as consumers remain active. Consumer spending accounts for around 70% of U.S. economic activity.
Increased purchases of autos, electronics and groceries supported the gain. The auto sales (+1.2% MoM) though appear to contrast with industry figures showing purchases slowed in September. Excluding autos, retail sales rose +.4% MoM. Sales of electronics and appliances rose +.9% MoM on continued good demand for flat panel TVs. Rising commodity prices are probably causing food spending to increase by +.8% MoM, and gasoline station sales to rise by +2% MoM in September. As would be expected in the housing slump, furniture sales dropped by -.6% MoM and building materials declined by -.1% MoM. Clothing sales fell -.4% MoM.
Excluding autos, gasoline and building materials, which are gathered from other data sources for GDP, retail GDP consumer spending grew +.3% MoM, a pick-up from the prior month.
Most major retailers are indicating that retail sales are slowing. Wal-Mart said same-store sales only grew +1.4% MoM in September. The continued housing recession, and tighter lending standards, are causing many economists to reduce holiday sales forecasts. Early signs of belt-tightening by consumers may be observed in the flat sales for restaurants over the past two months, as discretionary spending growth subsides.
This data raises third quarter consumption and GDP estimates over 3%.
Increased purchases of autos, electronics and groceries supported the gain. The auto sales (+1.2% MoM) though appear to contrast with industry figures showing purchases slowed in September. Excluding autos, retail sales rose +.4% MoM. Sales of electronics and appliances rose +.9% MoM on continued good demand for flat panel TVs. Rising commodity prices are probably causing food spending to increase by +.8% MoM, and gasoline station sales to rise by +2% MoM in September. As would be expected in the housing slump, furniture sales dropped by -.6% MoM and building materials declined by -.1% MoM. Clothing sales fell -.4% MoM.
Excluding autos, gasoline and building materials, which are gathered from other data sources for GDP, retail GDP consumer spending grew +.3% MoM, a pick-up from the prior month.
Most major retailers are indicating that retail sales are slowing. Wal-Mart said same-store sales only grew +1.4% MoM in September. The continued housing recession, and tighter lending standards, are causing many economists to reduce holiday sales forecasts. Early signs of belt-tightening by consumers may be observed in the flat sales for restaurants over the past two months, as discretionary spending growth subsides.
This data raises third quarter consumption and GDP estimates over 3%.
Oil Pushes PPI Inflation Rate to +4.4% YoY - Fastest Pace in Over a Year
September headline producer prices rose at twice the rate anticipated by economists, growing +1.1% MoM (consensus +.5%), and at +4.4% YoY (consensus +3.7%) versus only +2.2% YoY in August. In contrast, core producer prices, excluding food and energy, rose more slowly than expected at +.1% MoM (consensus +.2%) and +2% YoY (consensus +2.2%).
Rising oil prices were responsible for the surge higher in producer prices. Wholesale energy costs rose +4.1% MoM in September, which was the largest monthly gain in almost a year. Food prices remain in an uptrend, rising +1.5% MoM. Rising commodity prices continue to keep a floor under inflation, and many companies are passing on the rising costs rather than cut profit margins. Consumer goods also rose +1.5% MoM while capital goods prices fell -.1% MoM.
Intermediate goods costs rose +.4% MoM (+4.2% YoY), a rebound from the -1.2% MoM decline in August. Core intermediate goods rose +.1% MoM and +1.7% YoY. Core intermediate prices gains have cooled substantially versus a year ago when they were running around 8%. Raw material prices rose +.1% MoM.
Rising oil prices were responsible for the surge higher in producer prices. Wholesale energy costs rose +4.1% MoM in September, which was the largest monthly gain in almost a year. Food prices remain in an uptrend, rising +1.5% MoM. Rising commodity prices continue to keep a floor under inflation, and many companies are passing on the rising costs rather than cut profit margins. Consumer goods also rose +1.5% MoM while capital goods prices fell -.1% MoM.
Intermediate goods costs rose +.4% MoM (+4.2% YoY), a rebound from the -1.2% MoM decline in August. Core intermediate goods rose +.1% MoM and +1.7% YoY. Core intermediate prices gains have cooled substantially versus a year ago when they were running around 8%. Raw material prices rose +.1% MoM.
Thursday, October 11, 2007
Jobless Claims Decline to 308k Last Week
First-time claims for unemployment benefits unexpectedly fell ot 308K (consensus 315k), after being revised higher the previous week to 320k. The four week average has now fallen to 310k, and the weekly average for the year-to-date is 317k. Continuing claims fell to the lowest level since June at 2.536 million.
U.S. Trade Deficit Unexpectedly Narrows in August as Exports Rise and Imports Decline
Rising exports helped the trade deficit decline to -$57.6B (consensus -$59B) in August. This was a 2.4% decline from July's deficit, and the lowest level since January. A weaker dollar and robust foreign economic growth allowed U.S. exports to increase for the fifth month in a row (+.5% MoM). This is helping support the U.S. economy, especially for durable goods such as aircraft, and capital goods. Demand remains high for U.S. agricultural products as well as industrial supplies. Imports into the U.S. fell in August, as the U.S. economy slowed and domestic demand weakened.
A risk to continued improvement in the trade deficit will be rising oil prices. Oil prices rose to a record high in September.
When only volumes of goods are compared, ignoring prices, the trade deficit fell to the lowest level since 2004. This figure is used for calculating the impact of trade on economic growth.
The weaker dollar is helping encourage foreign tourism to the U.S. Increased travel helped boost the surplus in services to a new record high of $9B in August. New records were also seen in demand for U.S. goods from Central and South America as well as OPEC countries. American companies exported a record $5.9B of goods to China in August, helping narrow the trade deficit with China by 5.4% to $22.5B in August. China is now the U.S.'s second largest trading partner after Canada.
Net, this report indicates that GDP could be revised higher. But weaker domestic demand is partially offsetting the improving export demand.
A risk to continued improvement in the trade deficit will be rising oil prices. Oil prices rose to a record high in September.
When only volumes of goods are compared, ignoring prices, the trade deficit fell to the lowest level since 2004. This figure is used for calculating the impact of trade on economic growth.
The weaker dollar is helping encourage foreign tourism to the U.S. Increased travel helped boost the surplus in services to a new record high of $9B in August. New records were also seen in demand for U.S. goods from Central and South America as well as OPEC countries. American companies exported a record $5.9B of goods to China in August, helping narrow the trade deficit with China by 5.4% to $22.5B in August. China is now the U.S.'s second largest trading partner after Canada.
Net, this report indicates that GDP could be revised higher. But weaker domestic demand is partially offsetting the improving export demand.
Higher Oil Prices Raise Import Costs in September
As expected, import prices rebounded in September to rise +1% MoM after falling-.3% MoM in August. Petroleum prices rose +5.4% MoM in September. Excluding petroleum, import prices rose +.2% MoM in September. Over the past year, import prices have risen 5.2% YoY with ex-petroleum prices rising by a more restrained +2% YoY. Petroleum prices have risen 20% since September 2006. Natural gas prices fell -4.2% MoM. If all energy costs are excluded, import prices fell -.1% MoM, the first decline since February.
After petroleum products, industrial supplies rose the most at +2.2% MoM (+12% YoY), followed by foods and beverages at +1.2% MoM and +8.9% YoY. Autos and consumer goods rose +.2% MoM and are both up between +1.1-1.5% YoY. Capital goods prices remain subdued. They were unchanged in September, and rose only +.5% over the past year.
Canada, a major trade partner, had price gains of +.4% MoM (+5.3% YoY) after the Canadian dollar reached parity with the US dollar for the first time in 30 years. Mexican prices rose +2.8% MoM and are up +9.8% YoY. Both Canada and Mexico are big exporters of oil and natural gas to the US. Chinese import prices rose +.2% MoM (+1.6% YoY), with most of the increase occurring in the past five months. Japanese prices rose +.1% MoM (-.5% YoY).
Export prices rose +.3% MoM in September, and are up +4.5%YoY mainly due to 23% price rises in agricultural and processed food prices.
After petroleum products, industrial supplies rose the most at +2.2% MoM (+12% YoY), followed by foods and beverages at +1.2% MoM and +8.9% YoY. Autos and consumer goods rose +.2% MoM and are both up between +1.1-1.5% YoY. Capital goods prices remain subdued. They were unchanged in September, and rose only +.5% over the past year.
Canada, a major trade partner, had price gains of +.4% MoM (+5.3% YoY) after the Canadian dollar reached parity with the US dollar for the first time in 30 years. Mexican prices rose +2.8% MoM and are up +9.8% YoY. Both Canada and Mexico are big exporters of oil and natural gas to the US. Chinese import prices rose +.2% MoM (+1.6% YoY), with most of the increase occurring in the past five months. Japanese prices rose +.1% MoM (-.5% YoY).
Export prices rose +.3% MoM in September, and are up +4.5%YoY mainly due to 23% price rises in agricultural and processed food prices.
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