November 16, 2017

Econ Catchup; ISM Indices, Cars, Construction, Unemployment Claims, Production, and Latest GDP Estimates

Filed under: Economy,Taxes & Government — Tom @ 2:28 pm

It’s taken about a month to genuinely get back in gear, during which time, with the exception of the ADP Employment Report and the government’s monthly jobs report, I’ve mostly ignored the economy.

This is a good time to catch up, because I’m not in the mood to get lost in the he-said, she-said the avalanche of sexual harassment and sexual assault-related allegations out there against politicians and celebrities, and there’s plenty of other people covering them. (Not saying they’re unimportant or that the ones which are true don’t need to be sorted out from the ones which aren’t, because they are, and they do.)

So let’s go back to the first of November, and catch up on where the economy is going a year after Donald Trump’s election:

November 1: October ISM Manufacturing — October’s result was 58.7 percent, down from September’s 60.8 percent. September and October were probably the two best consecutive months in many years. The GDP drivers of New Orders, Production, and Backlog have all been very positive. Recall that in the September 2016, this index briefly fell below 50 percent, i.e., manufacturing was in contraction. Now every industry except two is expanding, and the ones that aren’t were at the same level of activity in October as they were in September.

The reports here are so strong that I’m concerned that they presage inflation and supply or labor bottlenecks. Though that’s obviously a nice problem compared to the alternative, it’s still a problem.

November 1: October Vehicle SalesSales were down 1.3 percent in October, and are down 1.7 percent year-to-date. Through October, GM and Ford are down slightly, while Chrysler is down a whopping 8.7 percent. GM and Ford’s mixes have gravitated towards light trucks, so their dealers’ revenues are probably higher, but over half of Chrysler’s unit sales decline is in trucks, so their dealers have to be struggling. Meanwhile, Toyota, Honda, and Nissan are all slightly up from last year through October; Toyota’s and Nissan’s mixes have all moved towards light trucks, but Honda’s has not, which has to be worrying the folks in Marysville, Ohio. In the lower tiers, Subaru and VW are having good years, while Kia and BMw are not.

November 1: September Construction Spending — Seasonally adjusted construction spending increased 0.3 percent in September, but since July, this area has performed weakly, and is down about 1 percent from the January-June average.

November 3: October ISM Non-Manufacturing — September and October were both strong, with readings of 59.8 percent and 60.1 percent, respectively. Though the Non-Manufacturing Index is on a nearly eight-year winning streak, these readings near the top of what we’ve seen during that time. The GDP drivers of New Orders and Business Activity have been well into the 60s, while Backlog of Orders is expanding more slowly (53.5 percent in October). 16 of 18 industries are expanding, while only two are in contraction.

November 15: October Retail Sales — The seasonally adjusted October advance was 0.2 percent; ex-autos increased 0.1 percent. That doesn’t seem impressive, until you remember that September’s increase was 1.9 percent, largely as a result of hurricane recovery spending. One would have expected an overall October pullback, but it didn’t happen. Year-over-year monthly increases have generally been 4 percent or higher, which, even after considering inflation, is an improvement over previous years.

November 1, 8 and 15: Weekly Unemployment Claims — As of today’s report, the three weekly figures published in November have all been below 250,000 (229K, 239K, and 249K, respectively). I wouldn’t want to see claims get above 275K consistently, so these figures reflect a strong labor market without huge disruptions.

November 15: October Industrial Production — The Federal Reserve’s report yesterday showed a 0.9 percent increase after an upwardly revised 0.4 percent increase in September Three prior-month results were also revised up. There’s probably some hurricane recover in these figures, but this is very good news compared to what we were seeing until about six months ago.

GDP growth: Meanwhile, in the bigger picture, it looks like third-quarter GDP, which came in with an annualized 3.0 percent in the first estimate, is headed towards an upward revision in this month’s update. Moody’s is currently predicting an upward revision to 3.3 percent. As to the fourth quarter, Moody’s is currently predicting 2.7 percent, while the Atlanta Fed is predicting 3.2 percent. If the economy really turns in three consecutive quarters of 3 percent or more, it would be the first time that’s happened since 3Q2004 through 1Q2005.


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