by Calculated Risk on 5/13/2018 07:16:00 PM

Weekend:
• Schedule for Week of May 13, 2018

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7, and DOW futures are up 71 (fair value).

Oil prices were up over the last week with WTI futures at $70.65 per barrel and Brent at $77.07 per barrel.  A year ago, WTI was at $46, and Brent was at $47 - so oil prices are up about 50%+ year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.87 per gallon. A year ago prices were at $2.32 per gallon - so gasoline prices are up 55 cents per gallon year-over-year.

by Calculated Risk on 5/13/2018 08:01:00 AM

A brief excerpts from a research note by Goldman Sachs chief economist Jan Hatzius:

"The environment for investors is less pleasant than last year. Although growth is strong, corporate earnings have been on a tear, and both inflation and interest rates remain historically low, all of these tailwinds are abating at the margin. Perhaps more fundamentally, if financial conditions need to tighten to limit the overshoot of full employment, this is likely to mean a downward price adjustment for a weighted average of government bonds, corporate credit, and equities. Effectively, the overall size of the pie is set to shrink, and in that environment it will get harder to generate good risk-adjusted returns for all but the savviest investors."
emphasis added

by Calculated Risk on 5/12/2018 08:11:00 AM

The key economic reports this week are April Housing Starts and Retail Sales.

For manufacturing, April industrial production, and the May New York, and Philly Fed manufacturing surveys, will be released this week.

----- Monday, May 14th -----
No major economic releases scheduled.

----- Tuesday, May 15th -----
8:30 AM ET: Retail sales for April will be released.  The consensus is for a 0.3% increase in retail sales.

This 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 4.2% on a YoY basis.

8:30 AM ET: The New York Fed Empire State manufacturing survey for May. The consensus is for a reading of 15.5, down from 15.8.

10:00 AM: The May NAHB homebuilder survey. The consensus is for a reading of  70, up from 69 in April. Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Wednesday, May 16th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Housing Starts for April.

This graph shows single and total housing starts since 1968.

The consensus is for 1.325 million SAAR, up from 1.319 million SAAR in March.

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

This graph shows industrial production since 1967.

The consensus is for a 0.6% increase in Industrial Production, and for Capacity Utilization to decrease to 78.4%.

----- Thursday, May 17th -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 217 thousand initial claims, up from 211 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for May. The consensus is for a reading of 22.0, down from 23.2.

11:00 AM: The New York Fed will release their Q1 2018 Household Debt and Credit Report

----- Friday, May 18th -----
10:00 AM: State Employment and Unemployment (Monthly) for April 2018

by Calculated Risk on 5/11/2018 06:32:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on May 11, 2018:

• Total US oil rigs were up, +10 to 844

• Horizontal oil rigs, however, were only up +2 at 745
...
• Oil rig additions came in the neglected ‘directional’ category, but only represented the recovery off rigs taken off line last week

• With the Brent spread over $6 / barrel, the end of the Iran deal, and a general sense of bullishness around oil markets, expect rig count additions to accelerate

Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 5/11/2018 04:07:00 PM

Here is something different, but it is important when looking at demographics ...

The following data is from the CDC United States Life Tables, 2014 by Elizabeth Arias.

In 2014, the overall expectation of life at birth was 78.9 years, a 0.1-year increase from 2013. Between 2013 and 2014, life expectancy at birth increased by 0.1 year for both males (76.4 to 76.5) and females (81.2 to 81.3) and for the black (75.5 to 75.6) and white (79.0 to 79.1) populations. Life expectancy at birth increased by 0.2 years for the Hispanic (81.9 to 82.1) and non-Hispanic black (75.1 to 75.3) populations. Life expectancy at birth remained unchanged for the non-Hispanic white population (78.8).
...
[The following] summarizes the number of survivors out of 100,000 persons born alive by age, race, Hispanic origin, and sex for 2014. ... In 2014, 99.4% of all infants born in the United States survived the first year of life. In contrast, only 87.6% of infants born in 1900 survived the first year. Of the 2014 period life table cohort, 58.1% survived to age 80 and 2.1% survived to age 100. In 1900, 13.5% of the life table cohort survived to age 80 and only 0.03% survived to age 100
emphasis added

Instead of look at life expectancy, here is a graph of survivors out of 100,000 born alive, by age for three groups: those born in 1900-1902, born in 1949-1951 (baby boomers), and born in 2014.

Click on graph for larger image.

There was a dramatic change between those born in 1900 (blue) and those born mid-century (orange). The risk of infant and early childhood deaths dropped sharply, and the risk of death in the prime working years also declined significantly.

The CDC is projecting further improvement for childhood and prime working age for those born in 2014, but they are also projecting that people will live longer.

The second graph uses the same data but looks at the number of people who die before a certain age, but after the previous age. As an example, for those born in 1900 (blue), 12,448 of the 100,000 born alive died before age 1, and another 5,748 died between age 1 and age 5.

The peak age for deaths didn't change much for those born in 1900 and 1950 (between 76 and 80, but many more people born in 1950 will make it).

Now the CDC is projection the peak age for deaths - for those born in 2014 - will increase to 86 to 90!  Using these stats - for those born this year (in 2018) - more than two-thirds will make it to the next century.

Also the number of deaths for those younger than 20 will be very small (down to mostly accidents, guns, and drugs).  Self-driving cars might reduce the accident components of young deaths.

An amazing statistic: for those born in 1900, about 13 out of 100,000 made it to 100.  For those born in 1950, 199 are projected to make to 100 - a significant increase.   Now the CDC is projecting that 2,111 out of 100,000 born in 2014 will make it to 100.  Stunning!

Some people look at this data and worry about supporting all these old people.  To me, this is all great news - the vast majority of people can look forward to a long life - with fewer people dying in childhood or during their prime working years.

by Calculated Risk on 5/11/2018 11:19:00 AM

From Merrill Lynch:

Downward revisions to inventories this week leaves 1Q GDP tracking a tenth lower to 2.2% for 1Q GDP. We are tracking 3.2% for 2Q. [May 11 estimate].
emphasis added

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 4.0 percent on May 9, unchanged from May 3. [May 9 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 3.0% for 2018:Q2. [May 11 estimate]

CR Note: These early estimates suggest real annualized GDP in the 3% to 4% in Q2.

by Calculated Risk on 5/11/2018 09:25:00 AM

A few excerpts from a Merrill Lynch research note: Retail spending stalls again

According to BAC aggregated credit and debit card data, retail sales ex-autos declined 0.1% mom seasonally adjusted in April. This suggests that the better momentum in consumer spending seen in March failed to carry over to start the second quarter. We saw two headwinds for the consumer in April: weather and higher gasoline prices.

We find evidence that unseasonably cold weather conditions likely played a role in holding back consumer activity. Specifically, the Midwest and the Northeast experienced below average temperatures ...

Higher gasoline prices also likely dampened overall consumer spending. According to the Energy Information Administration, retail gasoline prices jumped 6.4% mom in April as crude oil prices rose on negative supply shock and solid global demand. This led to a surge in spend at gasoline stations and a shift away from other categories. ...
...
Bottom line: Retail spending softened in April. The weather impact should prove temporary but rising gasoline prices is likely to persist, eating away some of the positive impact from higher after-tax wages seen post tax reform.

CR Note: Retail sales for April are scheduled to be released on Tuesday, May 15th. The consensus is retail sales increased 0.3% in April.

by Calculated Risk on 5/10/2018 06:58:00 PM

From SacRealtor.org: April 2018 Statistics – Sacramento Housing Market – Single Family Homes

April closed with 1,587 sales, a 13.8% increase from March’s 1,395. Compared April 2017 (1,512) the current figure is up 5%. Of the 1,587 sales this month, 227 (14.3%) used cash financing, 958 (60.4%) used conventional, 274 (17.3%) used FHA, 64 (4%) used VA and 64 (4%) used Other† types of financing.
...
Active Listing Inventory increased 14.6% from 1,817 to 2,082 units, but the Months of Inventory remained at 1.3 Months. This figure represents the amount of time (in months) it would take for the current rate of sales to deplete the total active listing inventory.  [CR Note: Active inventory is up 17.6% year-over-year]

The Average DOM (days on market) dropped from 25 to 23 month to month and the Median DOM dropped from 11 to 10. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” Of the 1,587 sales this month, 78.8% (1,251) were on the market for 30 days or less and 90.2% (1,431) were on the market for 60 days or less.
emphasis added

CR Note: Inventory is still low, but now increasing year-over-year in Sacramento.

The statistics for April are here.

by Calculated Risk on 5/10/2018 02:12:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 5 May

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 29 April through 5 May 2018, according to data from STR.

In comparison with the week of 30 April through 6 May 2017, the industry recorded the following:

• Occupancy: +0.5% to 68.2%
• Average daily rate (ADR): +2.7% to US$130.14
• Revenue per available room (RevPAR): +3.3% to US$88.77
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2018, dash light blue is 2017 (record year due to hurricanes), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

The occupancy rate, to date, is slightly ahead of the record year in 2017 (2017 finished strong due to the impact of the hurricanes).

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 5/10/2018 11:09:00 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% (2.9% annualized rate) in April. The 16% trimmed-mean Consumer Price Index also rose 0.2% (1.9% 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 0.2% (2.7% annualized rate) in April. The CPI less food and energy rose 0.1% (1.2% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for April here.  Motor fuel was up 43% annualized in April.

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 2.6%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy rose 2.1%. Core PCE is for February and increased 1.9% year-over-year.

On a monthly basis, median CPI was at 2.9% annualized, trimmed-mean CPI was at 1.9% annualized, and core CPI was at 1.2% annualized.

Using these measures, inflation increased year-over-year in April.  Overall, these measures are close to the Fed's 2% target.