by Calculated Risk on 9/14/2015 06:17:00 PM

From Reuters: Credibility, 'gradual' approach at stake as Fed weighs rate rise

A broad group of economists polled by Reuters last week bet on a September move by a slim margin; economists at banks that deal directly with the Fed, known as primary dealers, picked December as more likely; and traders of short term interest rate futures were giving a rate rise this week only a one-in-four chance.
...
As recently as July, Yellen, who took over the Fed's reins in early 2014, appeared to make the case for a September move, telling a congressional hearing that waiting longer could mean the need to hike more rapidly later. "An advantage to beginning a little bit earlier is that we might have a more gradual path," she said.
emphasis added

This will be an interesting announcement!

Tuesday:
• At 8:30 AM ET, Retail sales for August will be released. The consensus is for retail sales to increase 0.3% in August, and to increase 0.2% ex-autos.

• Also at 8:30 AM, NY Fed Empire State Manufacturing Survey for September. The consensus is for a reading of -0.5, up from -14.9.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for August. The consensus is for a 0.2% decrease in Industrial Production, and for Capacity Utilization to decrease to 77.8%.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for July. The consensus is for a 0.1% increase in inventories

by Calculated Risk on 9/14/2015 04:31:00 PM

Some random thoughts ... Based on the data, I noted that a rate hike this week is possible, even likely.  However the consensus of economists is no rate hike at the FOMC meeting this week.

Economists at Goldman Sachs, Deutsche Bank, J.P. Morgan, Nomura, and many others see December as more likely than September (some see the Fed waiting until 2016). Economics professor Tim Duy also thinks a September rate hike is unlikely.   Duy and Goldman Sachs chief economist Jan Hatzius have probably been as accurate as anyone in forecasting Fed actions - and neither expects a rate hike this week.

The arguments against a rate hike are low inflation, low inflation expectations, market based financial tightening (stronger dollar, wider credit spreads), global economic weaknesses, recent stock market volatility, slack in the labor market, and asymmetrical risks (hiking too soon poses much larger risks than waiting too long).

Those arguing the FOMC will probably raise rates this week point to "some further improvement" in the labor market since June, and that the forces holding down inflation are dissipating.  The revisions to the FOMC projections will be mostly supportive of a rate hike - and it wasn't long ago that FOMC members were hinting they'd hike rates in September if the economy evolved as expected.

In a WSJ article yesterday, Harriet Torry and Jon Hilsenrath pointed out that every central bank that has raised rates over the last seven years had had to reverse course. See: Lesson for Fed: Higher Interest Rates Haven’t Been Sticking. Of course that will be true for the FOMC meetings in October and December too!

A rate hike this week still seems possible to me (just focusing on the data), but it seems every research piece I read says "no".

by Calculated Risk on 9/14/2015 02:18:00 PM

Another update ... during the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then Las Vegas visitor traffic recovered to a new record high in 2014.

We only have data through July 2015, but visitor traffic is 2% above the record 2014 pace so far.

However convention attendance is only returning slowly. Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale). 

Through July, visitor traffic in 2015 is running 2.0% above 2014.

Convention traffic is up 0.6% from last year, and is still way below the pre-recession peak.  In general, the gamblers are back - and the conventions are slowly returning.

It seemed like there were many housing related conventions during the housing bubble, so it may be some time before convention attendance hits a new high.

by Calculated Risk on 9/14/2015 10:14:00 AM

Note: There were some large swings in LA area port traffic earlier this year due to labor issues that were settled on February 21st. Port traffic surged in March as the waiting ships were unloaded (the trade deficit increased in March too), and port traffic declined in April.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 1.1% compared to the rolling 12 months ending in July.   Outbound traffic was down 0.4% compared to 12 months ending in July.

The recent downturn in exports might be due to the strong dollar and weakness in China.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

Imports were up 12% year-over-year in August; exports were down 4% year-over-year.

On a monthly basis, imports were at an all time high.

This data suggests a larger trade deficit with Asia in August, and that U.S. retailers are optimistic about the holiday shopping season.

by Calculated Risk on 9/13/2015 08:33:00 PM

From Harriet Torry and Jon Hilsenrath at the WSJ: Lesson for Fed: Higher Interest Rates Haven’t Been Sticking

In the seven years since the world’s central banks responded to the financial crisis by slashing interest rates, more than a dozen banks in the advanced world have tried to raise them again. All have been forced to retreat.
...
Central banks in the eurozone, Sweden, Israel, Canada, South Korea, Australia, Chile and beyond have tried to raise rates in recent years, only to reduce them again as their economies stumbled.

My guess is Fed Chair Yellen would say she is aware of the actions of the other central banks, and this one of the reasons the Fed has been so patient in waiting to raise rates.

Weekend:
• Schedule for Week of September 13, 2015

Monday:
• No economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 10 and DOW futures are up 180 (fair value).

Oil prices were down slightly over the last week with WTI futures at $44.84 per barrel and Brent at $48.22 per barrel.  A year ago, WTI was at $93, and Brent was at $99 - so prices are down over 50% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.33 per gallon (down over $1.00 per gallon from a year ago).