December 1, 2017

Obama-Era Cheerleader Liesman at CNBC Downplays Economy’s Third-Quarter Growth

At CNBC Wednesday morning, just after the release of the government’s GDP report, Squawk Box panelist Steve Liesman appeared to do everything he could to downplay the significance, and even the relevance, of the 3.3 percent annualized growth estimate. At the end of the segment, he gave away his ignorance when he expressed outrage that the tax bill currently under consideration in Congress, while eliminating or significantly curtailing individual taxpayers’ ability to deduct state and local taxes, leaves business deductions for state and local taxes intact. He, and show host Becky Quick, should know that it’s bogus to try to make such a comparison.

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November Auto Sales: A Slight 0.9 Pct. Increase of Nov. 2016, Beating Expectations of a Decline

Filed under: Economy — Tom @ 8:05 pm

Predictions were for a 0.2 percent decline.

Given this year’s year-to-date decline, this is about as much a relief as it is cause for celebration.

Per the Associated Press, “Some analysts initially predicted that November sales would drop as post-hurricane sales slowed in Texas and Florida. But Black Friday promotions – which began in early November – helped lure buyers to dealerships.”

The discounting and use of incentives has been extraordinarily aggressive, with AP predicting that “The trend will likely continue in 2018, when U.S. sales are expected to drop and automakers will be keen to hold on to their market share.” Well, November defied the expectations of a decline, so maybe the pessimism is unwarranted. A return to decent but not necessarily stellar unit sales growth in 2018 is probably a prerequisite for a return to the kind of long-term economic growth everyone would like to see return.

There is definitely good news for the top line in November’s overall results:

  • Car sales, at 487,000 declined by 44,000, or 8.2 percent, from last November.
  • Truck sales, at 906,000, beat the November 2016 total by 56,000, or 6.6 percent.
  • That combination not only nets out to a 0.9 percent unit sales gain, but it almost certainly means that total revenues increased by far more than that.

At the individual maker level:

  • General Motors’ slow-motion contraction continued (down 2.9 percent, down 1.2 percent for the year, with a YTD market share of only 17.2 percent).
  • Ford reversed its fortunes, with a 7.0 percent increase in November. It was the only one of the traditional Big Three to show increases in cars (2.0 percent) and trucks (8.4 percent). Still, Ford is down 1.1 percent for the year, and needs to show improvements similar to November’s for at least several more months.
  • Who let the air out of Chrysler’s tires? Not long ago, it was threatening Toyota for the number 3 spot, but now it’s trailing its Japanese competitor by over 20 percent. Its unit sales were down 4.2 percent in November, and are down 8.3 percent for the year. With only 13.3 thousand car sales in November (placing it 12th among all makers), it’s like they’re almost out of the car business. Unfortunately, truck sales, down over 5 percent YTD, aren’t picking up the slack.
  • Toyota had a rough month (down 3.0 percent overall, with a 10 percent decline in cars and only a 2.3 percent increase in trucks). Toyota’s mix has more cars than the market in general, which has to be a concern.
  • Honda (up 8.3 percent), Nissan (up 13.9 percent) both had very strong months.
  • Among the smaller makers, Hyundai (down 8.5 percent) and Kia (down 15.6 percent) took significant hits.

October Construction Spending: Up 1.4 Pct. From September; YTD Total Is 4.1 Percent Higher Than 2016

Filed under: Economy,Taxes & Government — Tom @ 10:31 am

From the Census Bureau:

Construction spending during October 2017 was estimated at a seasonally adjusted annual rate of $1,241.5 billion, 1.4 percent (±1.5 percent)* above the revised September estimate of $1,224.6 billion. The October figure is 2.9 percent (±1.6 percent) above the October 2016 estimate of $1,206.6 billion. During the first 10 months of this year, construction spending amounted to $1,029.6 billion, 4.1 percent (±1.2 percent) above the $988.8 billion for the same period in 2016.

4.1 percent is a decent cumulative year-over-year advance. October’s figure may be the beginning of a breakout from the relative doldrums of the past several months.

November 2017 ISM Manufacturing: 58.2 Percent, Down from 58.7 Percent in October

Filed under: Economy — Tom @ 10:18 am

We’re going to try to stay more current on economic reports from this point forward, and the first step is to look at this morning’s Manufacturing Index from the Institute for Supply Management.

Predictions are for 58.4 percent, down very slightly from 58.7 percent in October.

HERE’S THE REPORT just released (paragraph breaks added by me; bolds are mine:

Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 102nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The November PMI® registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. The New Orders Index registered 64 percent, an increase of 0.6 percentage point from the October reading of 63.4 percent. The Production Index registered 63.9 percent, a 2.9 percentage point increase compared to the October reading of 61 percent.

The Employment Index registered 59.7 percent, a decrease of 0.1 percentage point from the October reading of 59.8 percent. The Supplier Deliveries Index registered 56.5 percent, a 4.9 percentage point decrease from the October reading of 61.4 percent. The Inventories Index registered 47 percent, a decrease of 1 percentage point from the October reading of 48 percent.

The Prices Index registered 65.5 percent in November, a 3 percentage point decrease from the October level of 68.5, indicating higher raw materials prices for the 21st consecutive month.

Comments from the panel reflect expanding business conditions, with New Orders and Production leading gains, employment expanding at a slower rate, order backlogs stable and expanding, and export orders all continuing to grow in November. Supplier deliveries continued to slow (improving), but at slower rates, and inventories continued to contract during the period. Price increases continued, but at a slower rate. The Customers’ Inventories Index improved but remains at low levels.”

Of the 18 manufacturing industries, 14 reported growth in November, in the following order: Paper Products; Machinery; Transportation Equipment; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Primary Metals. Two industries reported contraction during the period: Wood Products; and Petroleum & Coal Products.

I’d say the good news clearly outweighs the bad news here, with New Orders and Production both at or almost touching 64 percent. The guess here is that this is the first time we’ve seen this combination of high values in at least 11 years. I’d start worrying about overheating and inflation if these 64 percent figures continue for several months. Backlog of Orders, the other GDP driver which is not mentioned in the ISM’s narrative, was unchanged at 55.0 percent, which is a decent enough level in historical context.

Recall that a year ago, the November ISM Manufacturing Index was at 53.2 percent, up from 51.9 percent in October, 51.5 percent in September, and a contracting 49.4 percent in September.

This recitation of ISM readings, especially given the survey’s likely positive selection bias, demonstrates the fallacy promoted by those who want to claim that Barack Obama gave Donald Trump an economy with meaningful momentum.

Friday Off-Topic (Moderated) Open Thread (120117)

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: Peru to withdraw controversial “gender ideology” curriculum

Filed under: Positivity — Tom @ 5:55 am

From Lima, Peru:

Dec 1, 2017 / 12:00 am

The Peruvian government will withdraw a 2016 national school curriculum that has been widely criticized for its “gender ideology.”

In a Nov. 24 statement, Peru’s Department of Education announced that a 2009 version of the National Curriculum will be reimplemented in Peruvian schools. The former curriculum does not include the gender ideology concepts addressed in the 2016 version.

The announcement was celebrated as a “new victory for parents” by a group using the hashtag #ConMisHijosNoTeMetas, which translates as “don’t you mess with my children.” In March 2017, the group organized marches in Peru, drawing more than 1.5 million people to demonstrate against a progressive gender ideology.

Go here for the rest of the story.