by Calculated Risk on 4/14/2015 01:52:00 PM

New long term projections from the EIA: Annual Energy Outlook 2015 and press release: EIA's AEO2015 projects that U.S. energy imports and exports come into balance, a first since the 1950s, because of continued oil and natural gas production growth and slow growth in energy demand

U.S. net energy imports decline and ultimately end in most AEO2015 cases, driven by growth in U.S. energy production—led by crude oil and natural gas—increased use of renewables, and only modest growth in demand. Net energy imports end before 2030 in the AEO2015 Reference case and before 2020 in the High Oil Price and High Oil and Gas Resource cases (Figure 1). Significant net energy imports persist only in the Low Oil Price and High Economic Growth cases, where U.S. supply is lower and demand is higher.

Continued strong growth in domestic production of crude oil from tight formations reduces net imports of petroleum and other liquids. Through 2020, strong growth in domestic crude oil production from tight formations leads to a decline in net petroleum imports and growth in product exports in all AEO2015 cases. The net import share of petroleum and other liquids product supplied falls from 26% in 2014 to 15% in 2025 and then rises slightly to 17% in 2040 in the Reference case. With greater U.S. crude oil production in the High Oil Price and High Oil and Gas Resource cases, the United States becomes a net petroleum exporter after 2020.

Click on graph for larger image.

More from the EIA:

In the AEO2015 Reference case, the price of global marker Brent crude oil is $56/barrel (bbl) (in 2013 dollars) in 2015 (Figure 4). Prices rise steadily after 2015 in response to growth in demand; however, downward price pressure from rising U.S. crude oil production keeps the Brent price below $80/bbl through 2020. U.S. crude oil production starts to decline after 2020, but increased output from non-OECD and OPEC producers helps to keep the Brent price below $100/bbl through most of the next decade and limits price increases through 2040, when Brent reaches roughly $140/bbl. There is significant variation in the alternative cases. In the Low Oil Price case, the Brent price is $52/bbl in 2015 and reaches $76/bbl in 2040. In the High Oil Price case, the Brent price reaches $252/bbl in 2040. In the High Oil and Gas Resource case, with significantly more U.S. production than the Reference case, Brent is under $130/bbl in 2040, more than $10/bbl below its Reference case price.

by Calculated Risk on 4/14/2015 10:07:00 AM

From the National Federation of Independent Business (NFIB): In Rare Occurrence, All Ten Components of NFIB Small Business Optimism Index weakened

The Small Business Optimism Index fell 2.8 points to 95.2, declining in sympathy with the rather weak stream of reports on the economy.

... The net percent of owners reporting an increase in employment fell 5 percentage points to a net negative 1 percent of owners, down substantially from the recent high of 9 percent in December 2014.
emphasis added

A little good news: Only 11 percent of companies reported "poor sales" as the most important problem, down from 14% a year ago, and a recession high of 34%.

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index decreased to 95.2 in March from 98.0 in February.

by Calculated Risk on 4/14/2015 08:40:00 AM

On a monthly basis, retail sales increased 0.9% from February to March (seasonally adjusted), and sales were up 1.3% from March 2014.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $441.4 billion, an increase of 0.9 percent from the previous month, and 1.3 percent above March 2014. ... The January 2015 to February 2015 percent change was revised from -0.6 percent to -0.5 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline increased 1.0%.

Retail sales ex-autos increased 0.4%. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales ex-gasoline increased by 4.3% on a YoY basis (1.3% for all retail sales).

The increase in March was below consensus expectations of a 1.0% increase.

by Calculated Risk on 4/13/2015 07:52:00 PM

Excerpts from a research note from BofA on March retail sales: "Farewell winter blues"

There is finally good news to report on the US consumer. Spending on BAC credit and debit cards was up sharply in March, following a string of weak reports. Our measure of core retail sales - ex-autos and gasoline sales - increased 0.9% mom on a seasonally adjusted basis in March. This is a notable improvement from the past three months of essentially no growth. If we include gasoline station sales, the swing is even more dramatic given the significant adjustment in gasoline prices. ...

As always when analyzing economic data, we have to be careful not to overreact to just one report. The gain in March follows several months of weak data, making the comparisons more favorable. Moreover, the early Easter holiday might have sent people shopping in late March. The weather is also an important factor; ... the regions with the harshest winter weather showed the largest declines in February and strongest gains in March.

We are hopeful that the gain in March is the beginning of a healthier trajectory for consumer spending. As we have been arguing, all signs point to a solid consumer backdrop. ... Households have repaired their balance sheets and animal spirits have improved with consumer confidence trending higher. We are therefore holding to our core view that consumer spending will accelerate into 2Q, providing much-need support to GDP tracking.

Tuesday:
• At 8:30 AM ET, the Producer Price Index for March from the BLS. The consensus is for a 0.2% increase in prices, and a 0.1% increase in core PPI.

• Also at 8:30 AM, Retail sales for March will be released. The consensus is for retail sales to increase 1.0% in March, and to increase 0.7% ex-autos

• At 9:00 AM, NFIB Small Business Optimism Index for March.

• 10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for February. The consensus is for a 0.2% increase in inventories.

by Calculated Risk on 4/13/2015 04:52:00 PM

An interesting piece from Josh Lehner at the Oregon Office of Economic Analysis Economic Drags and the Outlook. The introduction:

So far in early 2015, the U.S. economic data flow has been relatively lackluster, including the disappointing March jobs report. As such, now is a good time to take a step back and mark one’s economic beliefs to market, to borrow a phrase from Brad DeLong. As detailed below, there are clear reasons for both near-term economic optimism over the next year or two and longer-term pessimism over the extended horizon.

First the good news. The biggest weights on the recovery were household debt and the nature of the cycle with housing and government being the largest drags. While these issues were holding back the recovery in recent years, these weights have clearly lifted. Household debt, relative to personal income, has declined considerably since 2007 and is effectively flat the past 2+ years. These trends are widespread across states, with few still deleveraging in 2013 according to the latest NY Fed data. One can argue whether or not this is the appropriate amount of household debt, but progress has clearly been made and the deleveraging cycle appears to be over, at least in aggregate. This bodes well for near-term growth.

There is much more in the post (Note: I'm more optimistic than Josh for the longer term - I'll write why soon).

by Calculated Risk on 4/13/2015 11:59:00 AM

Some excerpts from a quarterly report from CBRE: U.S. Commercial Real Estate Sees Positive Start to 2015

The U.S. commercial real estate market showed continued strength across all property types in the first quarter of 2015 (Q1 2015), according to the latest analysis from CBRE Group, Inc.
...
Office Market
Q1 2015 marked the 12th consecutive quarter of office vacancy rate declines. The trend remains broad-based across U.S. office markets. Vacancy fell in 41 of the 62 markets, rose in 18, and remained unchanged in three. Absorption of office space in the quarter was 9.5 million sq. ft. Suburban markets drove the overall improvement with a decline of 20 bps to 15.4%. Performance in downtown markets was mixed; vacancy increases in several large metros pushed the downtown rate up 10 bps during the quarter, to 11.2%.
...
Industrial Market
The industrial real estate recovery has now continued for 19 quarters, the longest uninterrupted stretch of declining availability since CBRE began tracking industrial market activity in 1980. The start of 2015 saw the vast majority of markets continue to improve—41 reported declines in availability, while four remained unchanged and 12 recorded increases.
...
Retail Market
Retail availability remained unchanged between Q4 2014 and Q1 2015. However, availability at year end 2014 was 50 bps below its year-earlier rate and is now 180 bps below the post-recession peak of 13.3%. 34 of the 62 markets tracked had availability decline in Q1 2015, while 28 recorded flat or increasing rates. Forty-three markets have improved upon their rates from one year ago.
...
Apartment Market
Preliminary data shows that apartment demand continued to grow in Q1 2015, with the multifamily housing vacancy rate declining to 4.5%, a 40 bps drop from a year earlier. This represents a continuation of a persistent downward trend in national vacancy rates that began several years ago. The market is very tight and apartment demand remains strong as the vacancy rate pushes closer to its 20-year vacancy low of 3.7%.

by Calculated Risk on 4/13/2015 10:03:00 AM

Another update:

This is the fourth year in a row with little rain or snow in the mountains. California is the largest agricultural state, and an ongoing drought could have an impact on food prices - and on the economy.


This graphic shows the National Weather Service 7 day precipitation forecast for the U.S.

California will be dry for at least another week.

Here are a few resources to track the drought. These tables show the snowpack in the North, Central and South Sierra. Currently the snowpack is about 8% of normal for this date.

And here are some plots comparing the current and previous years to the average, a very dry year ('76-'77) and a wet year ('82-'83). 2014-2015 is the driest year on record.

For Pacific Crest Trail and John Muir Trail hikers, I recommend using the Upper Tyndall Creek sensor to track the snow conditions. This is the fourth dry year in a row along the JMT, and the concern this year is lack of water - not too much snow on the passes.

by Calculated Risk on 4/12/2015 08:15:00 PM

Monday:
• No economic releases scheduled.

Weekend:
• Schedule for Week of April 12, 2015

• An update on oil prices

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P and DOW futures are up slightly (fair value).

Oil prices were up over the last week with WTI futures at $51.55 per barrel and Brent at $57.89 per barrel.  A year ago, WTI was at $102, and Brent was at $107 - so prices are down close to 50% year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are up to $2.39 per gallon (down about $1.20 per gallon from a year ago).

If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 4/12/2015 10:44:00 AM

Demand for gasoline has picked up significantly recently. In January, U.S. vehicle miles driven hit a new all time high.  However inventories are still at record levels (see first graph) and there is the possibility of significantly more global supply from Iran (see EIA discussion below).

Also note that oil imports have increase recently (the U.S. is a large oil importer).

Here is an excerpt from the Weekly Petroleum Status Report

U.S. crude oil refinery inputs averaged over 15.9 million barrels per day during the week ending April 3, 2015, 201,000 barrels per day more than the previous week’s average. Refineries operated at 90.1% of their operable capacity last week. ...

U.S. crude oil imports averaged over 8.2 million barrels per day last week, up by 869,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 4.8% above the same four-week period last year. ...

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 10.9 million barrels from the previous week. At 482.4 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years.
emphasis added

It is difficult to forecast oil and gasoline prices due to world events - and the response of producers to price changes, but currently the EIA expects gasoline prices to average $2.40/gal in 2015 according to the Short Term Energy Outlook released last week:

• On April 2, Iran and the five permanent members of the United Nations Security Council plus Germany (P5+1) reached a framework agreement that could result in the lifting of oil-related sanctions against Iran. Lifting sanctions could substantially change the STEO forecast for oil supply, demand, and prices by allowing a significantly increased volume of Iranian barrels to enter the market. If and when sanctions are lifted, the baseline forecast for world crude oil prices in 2016 could be reduced $5-$15/barrel (bbl) from the level presented in this STEO. ...

• Iran is believed to hold at least 30 million barrels in storage, and EIA believes Iran has the technical capability to ramp up crude oil production by at least 700,000 bbl/day (bbl/d) by the end of 2016. The pace and magnitude at which those volumes would reach the market would depend on the terms of a final agreement. For additional analysis of the possible oil market effects of a lifting of sanctions against Iran, please see analysis box for further discussion.
...
• During the 2015 April-through-September summer driving season, regular gasoline retail prices are forecast to average $2.45/gallon (gal) compared with $3.59/gal last summer. Based on EIA's gasoline price forecast, the average U.S. household is expected to spend about $700 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years.
emphasis added

Click on graph for larger image

This graph shows WTI and Brent spot oil prices from the EIA. (Prices Friday added).

According to Bloomberg, WTI was at $51.64 per barrel on Friday, and Brent at $57.87.

WTI oil prices are off  about 50% year-over-year.

by Calculated Risk on 4/11/2015 10:31:00 AM

The key economic reports this week are March Retail sales on Tuesday, and March Housing Starts on Thursday.

For manufacturing, the March Industrial Production and Capacity Utilization report, and the April NY Fed (Empire State), and Philly Fed surveys, will be released this week. 

For prices, March CPI will be released on Friday.

----- Monday, April 13th -----
No economic releases scheduled.

----- Tuesday, April 14th -----
8:30 AM ET: The Producer Price Index for March from the BLS. The consensus is for a 0.2% increase in prices, and a 0.1% increase in core PPI.

8:30 AM ET: Retail sales for March will be released.

This graph shows retail sales since 1992 through February 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales decreased 0.6% from January to February (seasonally adjusted), and sales were up 1.7% from February 2014.

The consensus is for retail sales to increase 1.0% in March, and to increase 0.7% ex-autos.

9:00 AM: NFIB Small Business Optimism Index for March.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for February.  The consensus is for a 0.2% increase in inventories.

----- Wednesday, April 15th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: NY Fed Empire State Manufacturing Survey for April. The consensus is for a reading of 7.0, up from 6.9 last month (above zero is expansion).

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for March.

This graph shows industrial production since 1967.

The consensus is for a 0.3% decrease in Industrial Production, and for Capacity Utilization to decrease to 78.7%.

10:00 AM: The April NAHB homebuilder survey. The consensus is for a reading of 55, up from 53 last month.  Any number above 50 indicates that more builders view sales conditions as good than poor.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, April 16th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 280 thousand from 281 thousand.

8:30 AM: Housing Starts for March.

Total housing starts decreased to 897 thousand (SAAR) in February. Single family starts declined to 593 thousand SAAR in February.

The consensus is for total housing starts to increase to 1.040 million (SAAR) in March.

10:00 AM: the Philly Fed manufacturing survey for March. The consensus is for a reading of 5.0, unchanged from 5.0 last month (above zero indicates expansion).

10:00 AM: the New York Fed to Host Press Briefing on Student Loans

----- Friday, April 17th -----
8:30 AM: The Consumer Price Index for March from the BLS. The consensus is for a 0.3% increase in prices, and a 0.2% increase in core CPI.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for April). The consensus is for a reading of 93.7, up from 93.0 in March.