September 1, 2016

Three’s a Charm: US Auto Sales Fell 4.1 Percent in August

Filed under: Economy,Taxes & Government — Tom @ 10:32 pm

Thw Wall Street Journal’s rudown is here.

There is a silver lining, in that cars were down 12.6 percent but higher-priced and far more profitable trucks, which were 60 percent of the August market (up from 57 percent in August of last year), were up 2.5 percent. Although year-to-date sales are only up 0.6 percent, the revenue loss from the 8.4 decline in cars is far less than the revenue gain from the 8.1 percent increase in light truck sales.

But that silver lining isn’t present at General Motors or Ford, where both car (-5.2% and -8.8%, respectively) and truck (-9.4 and -1.7) sales fell. Obviously, GM dealers were hit much harder than Ford’s dealers on the revenue line. Year-to-date, Ford is still showing a 7.8 percent gain in trucks; GM is showing a 2.2 percent decline.

Every other major maker except VW, which has been declining across the board for over a year, and Mitsubishi, which probably shouldn’t be considered a major maker anyway, saw gains in truck sales.

Combine this with July’s continued flat construction spending and ISM’s August manufacturing survey moving into contraction, and all of a sudden there’s a great deal of pressure on the August employment report being released by Uncle Sam tomorrow to show a strong number.

And even if it’s strong, the fact remains that the workforce has become less productive over the past three quarters.

And Now For the Big News: August ISM Manufacturing, at 49.4 Pct., Falls into Contraction

Filed under: Economy — Tom @ 10:41 am

I’d call it recognizing something closer to reality after several months during which most regional reports have been showing contraction.

From the Institute for Supply Management (bolds and paragraph breaks added by me):

PMI® at 49.4%

New Orders, Production and Employment Contracting
Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

… The August PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent.

The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from the July reading of 56.9 percent. The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent.

The Employment Index registered 48.3 percent, a decrease of 1.1 percentage points from the July reading of 49.4 percent.

Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage point from the July reading of 49.5 percent. The Prices Index registered 53 percent, a decrease of 2 percentage points from the July reading of 55 percent, indicating higher raw materials prices for the sixth consecutive month.

Manufacturing contracted in August for the first time since February of this year, as only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July).

Of the 18 manufacturing industries, six are reporting growth in August in the following order: Printing & Related Support Activities; Nonmetallic Mineral Products; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products.

The 11 industries reporting contraction in August — listed in order — are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Transportation Equipment; Machinery; Textile Mills; Paper Products; Petroleum & Coal Products; Primary Metals; and Fabricated Metal Products.

Predictions were for an overall reading from 52.0 percent to 52.6 percent. Another bad result has occurred — “unexpectedly,” of course.

It’s hard to see how two of the three key GDP drivers, Orders and Production, can fall from explosive expansion into contraction by 7.8 points and 5.8 points, respectively, in just one month. If things have started heading south in that much of a hurry, look out below. Backlog of Orders, which was already in contraction last month at 48.0 percent, went into a deeper contraction, coming in at 45.5 percent.

Since ISM’s Manufacturing Survey, as explained earlier this year, is in my view affected by positive selection bias, imagine how bad things really are.

(The press blaming this on manufacturers nervous about a possible Trump presidency will begin in 3 … 2 … 1 …).

July Construction Spending: No Seasonally Adjusted Change From June, Barely Higher Than July 2015

Filed under: Economy,Taxes & Government — Tom @ 10:19 am

From the Census Bureau:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2016 was estimated at a seasonally adjusted annual rate of $1,153.2 billion, nearly the same as (±1.5%)* the revised June estimate of $1,153.5 billion. The July figure is 1.5 percent (±2.3%)* above the July 2015 estimate of $1,135.9 billion.

During the first 7 months of this year, construction spending amounted to $647.7 billion, 5.6 percent (±1.3%) above the $613.1 billion for the same period in 2015.

The year-to-date number is nice, but almost all of the improvement came during the first three months of the year.

July’s seasonally adjusted annualized figure of $1.1535 trillion is 1.95 percent below March’s $1.1764 trillion — during one of the usually busiest months for construction activity.

In raw numbers, July 2016, at $105.67 million, was only 0.7 percent higher than the $104.96 million seen in July 2015.

Construction, once a leader, is now clearly a laggard.


UPDATE: Zero Hedge, concerning the leveling-off — “The Last 7 Times (Since 1970) This Happened, The US Economy Entered Recession.”

Productivity Is Still Declining: 2nd Quarter Revised Down to 0.6 Percent; Third Consecutive Quarterly Decline

Filed under: Economy,Taxes & Government — Tom @ 8:58 am

But somehow, annualized hourly compensation was revised up from a dismal 1.5 percent to a pretty decent 3.7 percent.

Anyone betting that this 3.7 percent won’t get revised down when the initial third-quarter productivity report is released in early November is probably holding a losing hand, based on what happened to the first quarter in the initial second-quarter release a month ago:


The first quarter’s negative numbers barely changed today.

The initial third-quarter release is November 3, though. So those downward revisions may wait until early December’s revision to the third quarter. If the revisions are small in November and large in December, it will be evidence that bad news was held until after the November 8 elections.


UPDATE: As seen at Zero Hedge, this is the first instance of three consecutive quarters of productivity decline since 1993.

Initial Unemployment Claims (090116): 263K SA; Raw Claims (215K) 6 Pct. Below Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 8:46 am

No big news here.

Thursday Off-Topic (Moderated) Open Thread (090116)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

Positivity: FSU football player joins autistic child for lunch

Filed under: Positivity — Tom @ 5:55 am

From Tallahassee, Florida (paragraph breaks added by me; HT Hot Air):

August 30, 1:47 p.m.

Several times lately I have tried to remember my time in middle school, did I like all my teachers, do I even remember them? Did I have many friends? Did I sit with anyone at lunch? Just how mean were kids really?

I remember one kid on the bus called me “Tammy Fay Baker” bc I started awkwardly wearing eye liner in the sixth grade, I remember being tough and calling him a silly name back, but when he couldn’t see me anymore I cried.

I do remember middle school being scary, and hard. Now that I have a child starting middle school, I have feelings of anxiety for him, and they can be overwhelming if I let them. Sometimes I’m grateful for his autism. That may sound like a terrible thing to say, but in some ways I think, I hope, it shields him.

He doesn’t seem to notice when people stare at him when he flaps his hands. He doesn’t seem to notice that he doesn’t get invited to birthday parties anymore. And he doesn’t seem to mind if he eats lunch alone. It’s one of my daily questions for him. Was there a time today you felt sad? Who did you eat lunch with today? Sometimes the answer is a classmate, but most days it’s nobody. Those are the days I feel sad for him, but he doesn’t seem to mind. He is a super sweet child, who always has a smile and hug for everyone he meets.

A friend of mine sent this beautiful picture to me today and when I saw it with the caption “Travis Rudolph is eating lunch with your son” I replied “who is that?” He said “FSU football player,” then I had tears streaming down my face.

Travis Rudolph, a wide receiver at Florida State, and several other FSU players visited my son’s school today. I’m not sure what exactly made this incredibly kind man share a lunch table with my son, but I’m happy to say that it will not soon be forgotten.

This is one day I didn’t have to worry if my sweet boy ate lunch alone, because he sat across from someone who is a hero in many eyes. Travis Rudolph thank you so much, you made this momma exceedingly happy, and have made us fans for life!

Go here to see the original Facebook post and comments.