by Calculated Risk on 4/15/2016 09:28:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.6 percent in March for a second month in a row. For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. A substantial portion of the overall decrease in March resulted from declines in the indexes for mining and utilities, which fell 2.9 percent and 1.2 percent, respectively; in addition, manufacturing output fell 0.3 percent. The sizable decrease in mining production continued the industry's recent downward trajectory; the index has fallen in each of the past seven months, at an average pace of 1.6 percent per month. At 103.4 percent of its 2012 average, total industrial production in March was 2.0 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.5 percentage point in March to 74.8 percent, a rate that is 5.2 percentage points below its long-run (1972–2015) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.2 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased 0.6% in March to 103.4. This is 18.3% above the recession low, and 2.0% below the pre-recession peak.

This was below expectations of a 0.1% decrease.  The decline was most related to mining and utilities.

by Calculated Risk on 4/15/2016 08:35:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity expanded for New York manufacturing firms for the first time in over a year, according to the April 2016 survey. After remaining in negative territory for seven months, the general business conditions index rose to a reading slightly above zero last month, and climbed nine more points to reach 9.6 in April.
...
The index for number of employees edged up to 2.0, indicating that employment levels remained fairly steady, and the average workweek index was unchanged at 2.0, a sign that hours worked remained largely the same.
...
Indexes for the six-month outlook indicated that conditions were expected to improve in the months ahead. The index for future business conditions moved up four points to 29.4—its third consecutive rise. The index for future new orders remained elevated at 36.6, and the index for future shipments climbed to 37.2. Future employment indexes conveyed an expectation that employment levels and the average workweek would rise modestly over the next six months.

This was above the consensus forecast of 3.0, and indicates manufacturing expanded in the NY region in April.

by Calculated Risk on 4/14/2016 05:30:00 PM

Friday:
• At 8:30 AM, NY Fed Empire State Manufacturing Survey for April. The consensus is for a reading of 3.0, up from 0.6.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for March. The consensus is for a 0.1% decrease in Industrial Production, and for Capacity Utilization to decrease to 75.4%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (preliminary for April). The consensus is for a reading of 91.8, up from 91.0 in March.

• Also at 10:00 AM, Regional and State Employment and Unemployment (Monthly) for March 2016 from BLS.

by Calculated Risk on 4/14/2016 01:44:00 PM

Note: There were some large swings in LA area port traffic early last year due to labor issues that were settled in late February 2015. Port traffic slowed in January and February last year, and then surged in March 2015 as the waiting ships were unloaded (the trade deficit increased in March too).  This has impacted the YoY changes for the first few months of 2016.

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 down 3.1% compared to the rolling 12 months ending in February.   Outbound traffic was up 0.4% compared to 12 months ending in February.

The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar.

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 down sharply year-over-year in March, but last year imports surged after the labor issues were resolved.  So the year-over-year data was negatively impacted.

by Calculated Risk on 4/14/2016 11:14:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.0% annualized rate) in March. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.1% annualized rate) in March. The CPI less food and energy rose 0.1% (0.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for March here. Motor fuel was up 29% annualized in March following several months of large declines.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy also rose 2.2%. Core PCE is for February and increased 1.7% year-over-year.

On a monthly basis, median CPI was at 2.0% annualized, trimmed-mean CPI was at 1.5% annualized, and core CPI was at 0.8% annualized.

On a year-over-year basis, three of these measures are at or above 2%.

Using these measures, inflation has been moving up, and most are close to the Fed's target (Core PCE is still below).

by Calculated Risk on 4/14/2016 08:34:00 AM

The DOL reported:

In the week ending April 9, the advance figure for seasonally adjusted initial claims was 253,000, a decrease of 13,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 267,000 to 266,000. The 4-week moving average was 265,000, a decrease of 1,500 from the previous week's revised average. The previous week's average was revised down by 250 from 266,750 to 266,500.

There were no special factors impacting this week's initial claims. This marks 58 consecutive weeks of initial claims below 300,000, the longest streak since 1973.

The previous week was revised down to 266,000.

Note: The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 265,000.

This was well below the consensus forecast of 270,000. The low level of the 4-week average suggests few layoffs.

by Calculated Risk on 4/13/2016 06:55:00 PM

In the CPI report tomorrow, one thing I'll be checking is CPI-W.

CPI-W is the index that is used to calculate Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

Since the highest Q3 average was in 2014 (Q3 2014), at 234.242, we will have to compare to 2014, not Q3 2015, to see if there will be an adjustment this next year (the Cost-Of-Living Adjustment was unchanged in 2015).

So far, through February, CPI-W is down slightly year-over-year. With rising oil and gasoline prices, there might be an increase this year (it is really early).

Thursday:
• At 8:30 AM, the initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, up from 267 thousand the previous week.

• Also at 8:30 AM, the Consumer Price Index for March from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 4/13/2016 02:04:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Chicago and based on information collected on or before April 7, 2016."

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts. Most Districts said that economic growth was in the modest to moderate range and that contacts expected growth would remain in that range going forward. Consumer spending increased modestly in most Districts and reports on tourism were mostly positive. Labor market conditions continued to strengthen and business spending generally expanded across most Districts. Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts. Construction and real estate activity also expanded. Credit conditions improved, on net, in most Districts. Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to ease.

And on real estate:

Construction and real estate activity generally expanded in late February and March, and contacts across Districts maintained a positive outlook for the rest of the year. Residential real estate activity strengthened, on balance, with robust growth in San Francisco, Cleveland, and Boston, but more mixed reports from Dallas, Kansas City, and Atlanta. Several Districts credited a mild winter for stronger home sales, and the pace of home price increases picked up in a number of Districts. Multi-family construction remained strong in most Districts. Chicago, Cleveland, and St. Louis also noted some improvement in demand for single-family home construction, and a contact in San Francisco reported backlogs of more than six months for new single-family units. Commercial real estate activity generally increased, with leasing activity and rents rising in many Districts: particularly strong leasing was noted in retailing in Chicago and in the industrial sector in Dallas. Vacancy rates either moved lower or were unchanged in most Districts. Most Districts reporting on nonresidential construction said that demand increased. Contacts in Boston said the education, health care, hospitality, retail, and office sectors all contributed to its recent construction boom. Nonresidential contractors in Cleveland cited broad-based demand, with particular strength in education and healthcare projects, where several builders expressed concern about their capacity to take on additional projects. In contrast, Chicago noted continued weak demand for industrial construction, and Philadelphia reported fewer starts of new nonresidential projects.
emphasis added

Decent Real Estate growth in most districts ...

by Calculated Risk on 4/13/2016 12:07:00 PM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand).

In 2015, even with the pickup in U.S. housing starts, prices were down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.  This decline in 2015 was also probably related to weakness in China.

Prices have just turn up year-over-year for the first time since late 2014.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through February 2016 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are up about 1% from a year ago, and CME futures are up about 7% year-over-year.

by Calculated Risk on 4/13/2016 08:42:00 AM

On a monthly basis, retail sales were down 0.3% from February to March (seasonally adjusted), and sales were up 1.7% from March 2015.

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 $446.9 billion, a decrease of 0.3 percent from the previous month, and 1.7 percent above March 2015. ... The January 2016 to February 2016 percent change was revised from down 0.1 percent to virtually unchanged.

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 were down 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 3.4% on a YoY basis.

The decrease in March was below expectations for the month, however retail sales for January and February were revised up.