Posts by Kevin Whiteford

Inflation Year over Year January

Annual inflation rate in the United States slowed for the third straight month to 1.6 percent in January of 2019 from 1.9 percent in December. It is the lowest rate since June of 2017, compared to market expectations of 1.5 percent, mainly due to a sharp fall in energy prices, namely gasoline. On a monthly basis, consumer prices were flat, the same as in both December and November. The energy index declined for the third consecutive month, offsetting increases in the indexes for all items less food and energy and for food. Inflation Rate in the United States averaged 3.27 percent from 1914 until 2019, reaching an all time high of 23.70 percent in June of 1920 and a record low of -15.80 percent in June of 1921.

Calendar GMT Actual Previous Consensus TEForecast
2018-11-14 01:30 PM Inflation Rate YoY 2.5% 2.3% 2.5% 2.4%
2018-12-12 01:30 PM Inflation Rate YoY 2.2% 2.5% 2.2% 2.4%
2019-01-11 01:30 PM Inflation Rate YoY 1.9% 2.2% 1.9% 2.2%
2019-02-13 01:30 PM Inflation Rate YoY 1.6% 1.9% 1.5% 1.9%
2019-03-12 12:30 PM Inflation Rate YoY 1.6% 1.8%
2019-04-10 12:30 PM Inflation Rate YoY 2%
2019-05-10 12:30 PM Inflation Rate YoY 1.9%
 

Annual inflation rate in the United States slowed for the third straight month to 1.6 percent in January of 2019 from 1.9 percent in December. It is the lowest rate since June of 2017, compared to market expectations of 1.5 percent, mainly due to a sharp fall in energy prices, namely gasoline. 

Year-on-year, prices fell for gasoline (-10.1 pecent compared to -2.1 percent in December); fuel oil (-8.1 percent compared to 1.9 percent); and medical care commodities (-0.3 percent compared to -0.5 percent); and were unchanged for new vehicles (0 percent compared to -0.3 percent). Also, inflation slowed for transportation services (2 percent compared to 2.8 percent); medical care services (2.4 percent compared to 2.6 percent); and was flat for food (1.6 percent); and shelter (3.2 percent). On the other hand, prices rebounded for apparel (0.1 percent compared to -0.1 percent) and went up faster for used cars and trucks (1.6 percent compared to 1.4 percent); electricity (1.3 percent compared to 1.1 percent); and utility piped gas service (4.3 percent compared to 2.3 percent).

Excluding food and energy, consumer prices increased 2.2 percent over a year earlier, the same as in December and slightly above forecasts of 2.1 percent.

On a monthly basis, consumer prices were flat for the third straight month, compared to forecasts of a 0.1 percent rise. The energy index declined for the third consecutive month, offsetting increases in the indexes for all items less food and energy and for food. All the major energy component indexes declined in January, with the gasoline index falling 5.5 percent. The food index increased 0.2 percent, with the index for food at home rising 0.1 percent and the food away from home index increasing 0.3 percent.

The index for all items less food and energy increased 0.2 percent in January for the fourth consecutive month, matching forecasts. The indexes for shelter, apparel, medical care, recreation, and household furnishings and operations were among the indexes that rose in January, while the indexes for airline fares and for motor vehicle insurance declined.

https://tradingeconomics.com/united-states/inflation-cpi

 

 

Nonfarm Payroll January 2019

Nonfarm payrolls in the US increased by 304 thousand in January of 2019, following a downwardly revised 222 thousand rise in December and easily beating market expectations of 165 thousand. Employment grew in several industries, including leisure and hospitality, construction, health care, and transportation and warehousing. There were no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings from the establishment survey. Instead, the impact of the shutdown contributed to the uptick in the unemployment rate to 4 percent from 3.9 percent as it included furloughed federal employees who were classified as unemployed on temporary layoff under the definitions used in the household survey. Non Farm Payrolls in the United States averaged 125.68 Thousand from 1939 until 2019, reaching an all time high of 1118 Thousand in September of 1983 and a record low of -1959 Thousand in September of 1945.

Calendar GMT Actual Previous Consensus TEForecast
2018-11-02 12:30 PM Non Farm Payrolls 250K 118K 190K 180K
2018-12-07 01:30 PM Non Farm Payrolls 155K 237K 200K 189K
2019-01-04 01:30 PM Non Farm Payrolls 312K 176K 177K 165K
2019-02-01 01:30 PM Non Farm Payrolls 304K 222K 165K 170K
2019-03-08 01:30 PM Non Farm Payrolls 304K 190K
2019-04-05 12:30 PM Non Farm Payrolls 193K
2019-05-03 12:30 PM Non Farm Payrolls

https://tradingeconomics.com/united-states/non-farm-payrolls

 

Federal Reserve Rate Decision 1-30-19

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent during its first policy meeting of 2019 and reaffirmed its position to be patient about further policy firming in light of recent global economic and financial developments and muted inflation pressures. Interest Rate in the United States averaged 5.69 percent from 1971 until 2019, reaching an all time high of 20 percent in March of 1980 and a record low of 0.25 percent in December of 2008.

 

Fed Signals Hold on Rate Increases

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent during its first policy meeting of 2019 and reaffirmed its position to be patient about further policy firming in light of recent global economic and financial developments and muted inflation pressures.

FOMC Statement:

“Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

Meanwhile, the Fed revised its earlier guidance regarding the conditions under which it could adjust the details of its balance sheet normalization program:

“-The Committee intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve’s administered rates, and in which active management of the supply of reserves is not required.

-The Committee continues to view changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy. The Committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments. Moreover, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.”

https://tradingeconomics.com/united-states/interest-rate’

 

Core Inflation Year over Year- December 2018

US core consumer prices, excluding volatile items such as food and energy, rose 2.2 percent year-on-year in December 2018, unchanged from the previous month and in line with market expectations. Core Inflation Rate in the United States averaged 3.63 percent from 1957 until 2018, reaching an all time high of 13.60 percent in June of 1980 and a record low of 0 percent in May of 1957.

 

 

Calendar GMT Actual Previous Consensus TEForecast
2018-10-11 12:30 PM Core Inflation Rate YoY 2.2% 2.2% 2.3% 2.4%
2018-11-14 01:30 PM Core Inflation Rate YoY 2.1% 2.2% 2.2% 2.2%
2018-12-12 01:30 PM Core Inflation Rate YoY 2.2% 2.1% 2.2% 2.3%
2019-01-11 01:30 PM Core Inflation Rate YoY 2.2% 2.2% 2.2% 2.2%
2019-02-13 01:30 PM Core Inflation Rate YoY 2.2% 2.1%
2019-03-12 12:30 PM Core Inflation Rate YoY
2019-04-10 12:30 PM Core Inflation Rate YoY 2.2%

https://tradingeconomics.com/united-states/core-inflation-rate

Jobs Openings Revised November 2018

The number of job openings in the US declined by 243,000 to 6.888 million in November 2018 from an upwardly revised 7.131 million in the previous month and below market expectations of 7.063 million. The number of job openings decreased for total private (-237,000) and was little changed for government. The job openings level decreased in a number of industries, with the largest decreases in other services (-66,000) and construction (-45,000). Meanwhile, job openings increased in transportation, warehousing, and utilities (+40,000). Job openings fell mostly in the West region (-196,000). Job Offers in the United States averaged 4188.69 Thousand from 2000 until 2018, reaching an all time high of 7293 Thousand in August of 2018 and a record low of 2196 Thousand in July of 2009.

Calendar GMT Actual Previous Consensus TEForecast
2018-10-16 02:00 PM JOLTs Job Openings 7.136M 7.077M 6.945M 6.8M
2018-11-06 03:00 PM JOLTs Job Openings 7.009M 7.293M 7.1M 7.1M
2018-12-10 03:00 PM JOLTs Job Openings 7.079M 6.96M 6.995M 7.2M
2019-01-08 03:00 PM JOLTs Job Openings 6.888M 7.131M 7.063M 7.1M
2019-02-12 03:00 PM JOLTs Job Openings 6.888M 7.063M 5.8M
2019-03-15 02:00 PM JOLTs Job Openings
2019-04-09 02:00 PM JOLTs Job Openings

https://tradingeconomics.com/united-states/job-offers

 

4th Quarter 2018

Whiteford Wealth Management, Inc.

404 Broadway Street, South Haven, MI 49090

Tel: (269) 637-4400 Fax: (269) 637-4407

 

January 2, 2018

Market Update

Happy New Year and welcome to our 4th Quarter Update for 2018! In the last three months, we saw one of the worst quarters that we have seen in nearly a decade. In this update, we’d like to shine some light on several of the key issues that we think contributed to this and what our 2019 outlook is. Here is an outline of this update:

  1. United States Economy;
  2. European Economy;
  3. Asian Economy;
  4. Global Economy; and
  5. Our Short-Term/Long-Term Goals.
Name of Index Jan. 2, 2018 (close) Jan. 2, 2019 (close) Percentage Change
Dow Jones Ind. Avg. 24,824.01 23,346.24 -5.95%
NASDAQ (IXIC) 7,006.90 6,665.94 -4.87%
S&P 500 2,695.81 2,510.03 -6.89%
CBOE 10-Yr (^TNX) 2.480% 2.661% 7.30%

 

Please be advised that the percentage change in yields in bonds do not necessarily represent a similar increase in value, it only serves to show you that a substantial change in interest rates has occurred—although it does in fact affect the values of outstanding bonds. Generally speaking, when interest rates rise, bond values fall. Also, many stocks of the DJIA and the S&P500 have dividends which are not included in the NAV’s percentage change on the associated index. Most NASDAQ companies have historically lower dividends but they are also not quantified here.

Let’s compare these figures to our foreign counterparts around the globe. We’ll do so by comparing the major indexes of Germany, China, UK, & Japan.

Name of Index Jan. 2, 2018 (close) Jan. 2, 2019 Percentage Change
DAX (Germany) 12,871.39 10,580.19 -17.80%
SSE Comp. (China) 3,348.33 2,465.29 -26.37%
FTSE 100 (UK) 7,648.10 6,734.23 -11.95%
Nikkei 225 (Japan) 23,506.33 (Jan. 4) 19,561.96 (Jan. 4) -16.78%
German Bund (DE10Y:DE) 0.426% (Jan. 1) 0.170% -60.09%

 

Like before, the percentage change in Bund value is not necessarily reflective of a similar change in value. Also, when interest rates rise, bond values generally fall. We still think that the European landscape is economically too risky for a very large proportion of any of our clients’ savings because of what these rates imply.

As illustrated in the next chart, we had a great couple of years when considering where we started just over two years ago. It is extraordinarily important, with increases in volatility, to take a step back and look what has happened since the beginning of 2016 and the rocky start that we had that year.

Name of Index Dec. 31, 2015 (close) Jan. 2, 2019 (close) Percentage Change
DJIA 17,405.03 23,346.24 34.14%
NASDAQ 5,007.41 6,665.94 33.12%
S&P 500 2,043.94 2,510.03 22.80%

 

Source: Google Finance

Please also look to the following website for MCSI data on all countries listed (click the country tab about 1/3-way down). Look at the YTD and the rolling 1, 5, and 10 year periods.

https://www.msci.com/end-of-day-data-search

Clearly, the best country to be invested in since the close of 2015 and even earlier continues to be the United States. There have been and always will be short-lived opportunities within specialized markets overseas; however, we will always continue to invest our clients’ savings with a long-term view. The US market at this point still seems to us to be the best place to do so, so no changes are recommended at this time aside from small inter-account changes that we have discussed with many clients recently.

United States Economy

The fourth quarter of 2018 was the worst single quarter that we have seen in nearly ten years. So why did this happen now? Are US companies really worth 15%+ less than they were just three months ago? This section will be divided into several subsections:

  1. Financial Fundamentals
  2. Political Landscape
  3. The Federal Reserve/Interest Rates
  4. International Trading
  1. Financial Fundamentals. 2018 brought upon us the most comprehensive change in the Internal Revenue Code that we have seen since 1986. Reagan was still President at that time! This brought about a slew of changes across the domestic markets in very meaningful and positive ways. We don’t want to belabor the discussion as to how and why it has been beneficial as we have done so in prior updates; rather, it’s just important to note that it had an extremely positive effect on net income for the average American company.

As 2018 unfolded, an extraordinary number of US companies reported greater than the already optimistic earnings that were expected by investors. Even so, many of those companies’ share prices fell as a result of the global market’s downturn. Because of that, valuations are more attractive than they have been in quite some time in our opinion. According to the financial fundamentals that we see, it certainly seems like the time to buy.

  1. Political Landscape. This should shape up to have a great outcome for investors. The political landscape in this country, according to many new outlets, is in a state of dire emergency. President Trump’s appointees are an ever-revolving door of terminations and new hires. The House and Senate cannot agree on a single thing among themselves, let alone with the President. The Supreme Court was at the forefront of the “me too” movement in the wake of Kavanaugh’s appointment. The trade war that we predicted years ago is unfolding before our eyes. From the average bystander’s point of view, Washington DC is engulfed in chaos and no one seems to know what they are doing.

Even further, the two major political parties have become increasingly polarized, inefficient, and ultimately ineffective. Neither side is ever willing to compromise even in the slightest on their deeply-held beliefs. This has furthered the divide in Congress and DC as a whole. It even led to the most recent Federal Government partial shutdown before the end of the year.

However, there is an underlying factor that nobody seems to discuss in any meaningful way: when the government isn’t working, the private markets are! When DC has stalled and fails to issue new regulations on the private markets, the uncertainty that comes with those regulations also lies stagnant. More certainty in the private markets results in more confident investing of corporate resources. More confident investing typically results in efficient investing thereby leading to greater profits at the end of the day. In an era of decreased tax liabilities and record profits, the future seems bright for the equity markets—especially at currently depressed share prices.

  1. The Federal Reserve/Interest Rates. The Federal Reserve Chairman, Jerome Powell, recently stated that despite the sluggish US economy—which we are unsure where he finds his evidence—interest rates should be rapidly increased in the coming months and years. President Trump lashed out at these statements publicly. He is certainly not the first President to do so and we tend to agree with his sentiment. Raising interest rates too quickly could shock the markets. It almost certainly will shock retirees and their bond portfolios which will quickly evaporate in the rising rate environment. The broader implications involve corporate balance sheets and the devaluations of their debt holdings—not debt issuances, but corporate debt of one company that is held by another. This asset devaluation could filter into less borrowing power and compound the problem more rapidly over time. However, as corporations pay down debt with increased earnings—which they should—this problem will hopefully solve itself. We are keeping a very close eye on this issue in particular. Rating agencies failed to do their jobs leading up to 2008 but they have been shown to be more effective since then.

Taking a step back, interest rates are still a good deal below their historic averages. Corporations were making money decades ago at much higher borrowing costs. It’s good to keep this in mind going forward as the sticker shock begins to scare some investors. We have simply gotten too comfortable in the last 9 years as corporations and individuals both were able to borrow at historically low rates.

  1. International Trading. Because we will be discussing the international markets with more specificity in the following sections, we will keep this brief: many news outlets have been reporting that a slowing of the international economy has had detrimental effects on the US economy. This is true. However, what is also true is that those same international economies have been in the gutters for 9 years! Europe began emerging from their gutter in 2017. However, they slumped right back into it recently primarily because of their absolutely awful political environment. Their politics are just as divisive if not worse than our own. The US economy is the largest in the world. California alone accounts for the 6th largest economy globally. We have plenty of economic activity going on at home and that is precisely what brought us out of the 2008 financial debacle. Times were much worse then—this recent downturn should be a piece of cake once investors let it happen.

European Economy

The rise in nationalism globally has splintered the economic and political union that was established at the beginning of the century. Trade wars, migration crises, and the resulting economic stagnation run amok on the continent. The UK is looking to complete its Brexit this year. France’s yellow vest movement also demands its removal from the EU. Italy’s protests have demanded the same. Spanish protests came to similar conclusions. Poland and Hungary have elected far right political parties to coincide with populist nationalistic rhetoric. Germany is failing to keep the Union afloat as its largest economy. The German people are beginning to get tired of picking up the slack produced by all of its neighbors. The always popular Merkel has begun to lose favor with her constituents.

Europe’s political landscape is a complete mess. There’s infighting between neighbors and even within the constituent countries themselves. On top of that, European powers are not getting along with their Asian counterparts and in furtherance of this the US has begun to use Europe as a bargaining chip in its tariff talks with China and Russia. Times are not looking good in Europe. We predicted that the rise of nationalism would bring about these changes and we have kept away from any investment aside from carefully selected assets there. We will continue to do so.

Asian Economy

The Asian economy doesn’t seem to be faring much better than Europe’s. Chinese and Japanese stock indexes are looking feeble to put it mildly. The increasing trade war has hurt both nations for different reasons. Japan is primarily impacted because of its relationship with the US. To remain in good favor, Japan must neglect trade with many of its neighboring countries because the US essentially tells it to do so. China was set back directly by these tariffs and now Chinese companies are scrambling to establish relationships with companies in US-friendly countries so that they may continue trading their goods and services. Involving at least one “middleman” thereby increases costs and decreases profits. Small and medium-sized businesses simply cannot compete. They are being purchased for pennies on the dollar by larger companies so that the newly established out-of-country relationships can be further leveraged. The state of the European economy has also significantly diminished corporate profits in the Mainland.

Further, the People’s Republic of China has been shoring up loose geopolitical ends. These can be easily seen in the cases of Hong Kong, Taiwan, Macau, Xinjiang, and the South China Sea with the many relationships at stake in this critical trading region. Chinese neighbors are also feeling the rise of nationalism. Southeast Asian countries such as Myanmar (Burma), Vietnam, Thailand, and Cambodia are all experiencing quite a lot of political upheaval in their respective governments. Response to such events can be seen in Chinese relations with Taiwan. Taiwanese people have increasingly been fighting back at the Chinese assimilation of their cultural, financial, and political heritage. This has been met with extreme prejudice. Bookstores and other information outlets continue to be closed by authorities. Owners subsequently go missing.

As far as the trade war is concerned, we see some light at the end of the tunnel. There was recently an agreement made in regards to automobile manufacturing. The Chinese New Year is coming up in the first week of February. Just like our own politicians in DC seem to enjoy passing legislation at the end of the fiscal year because of simple, practical rationale, the Chinese people enjoy starting their own New Year off with many accomplishments behind them. We hope that January will show our hypothesis to be correct in a positive way.

At the end of the day, the uncertainty accompanied by an investment into China, Japan, or the rest of Asia as a whole seems to be unwarranted. We will continue to stay away.

Global Economy

The overall global economy is dealing with the rise of nationalism in many respects. We see it in Europe, we see it in Asia, we see it in Latin America, and we see it here in our own backyard. There are many negative repercussions for such movements but history has shown us that there are always opportunities. The last 9 years have made it easy to be an investor. Volatility was extremely low. Interest rates were extremely low. 2008’s crash led to increased productivity among US corporations. Increased efficiencies resulted in increased profits and our companies have essentially taken over the world’s economy like they never have before.

Going forward, we simply must be more astute investors like prior decades necessitated. We must continue to select only the highest quality investments in the highest quality markets. Right now, there is no rationale that we see investing in overseas assets—aside from a few key companies. The only thing scarier than investing overseas seems to be investing in mid and long-term debt markets during a rising rate environment, especially if Powell and the Fed want to scale up the hikes. Cash has not and never will be a good long-term investment so long as the global economy continues to utilize the central banking system.

So, the only investment at this time seems to be the US equity market. With the rise in nationalism comes the rise of corporatism—meaning that larger companies outperform with lower-than-usual risk because of their close ties to government legislators and regulators. We will continue to follow history’s advice.

Our Short-Term & Long-Term Outlook—Conclusion

So what’s next for our clients? Many of these points come straight from the last Market Update, as our long-term goals have not changed.

  1. Realize that the near-term is going to be a bumpy one as investors all around the world get used to the idea of average returns paired with average volatility. Hopefully the recent increase in volatility rattled everyone back into a normal investor mindset. The last 9 years have made us all spoiled!
  2. Realize that we have had an extraordinary period of growth. Until things normalize, we must make prudent investment decisions. We have given quite a bit back to the market. Now it should normalize in the other direction but we don’t have a crystal ball.
  3. Keep a primary large-caps and international mega-caps.
  4. Begin moving toward a more traditional model of investing. Increasing interest rates means increasing yields on debt instruments. This will offset the expected increases in volatility.
    1. This should account for 10-20% of the model portfolio at least.
  5. Continue to stay away from international investments aside from very specific purchases.
  6. Continue to watch geopolitical tensions and their ugly offspring. If something dramatic happens and we need to make a dramatic move accordingly, we will do so to the best of our abilities diligently, efficiently, and involve our clients in the process as much as humanly possible. Fortunately, the history books have laid out effective strategies for when times like that occur. Unfortunately, they are imperfect in their application to current events.
    1. Trade wars potentially lead to real wars. We want to be as proactive as humanely possible in this regard. Thankfully, it seems as if more trade deals will continue to occur in the short-term so tensions should die down for now.

Should this brief synopsis of our opinions—and these are purely opinions based on our own analysis of the data—stir any questions about the markets, about our service, or anything else for that matter, please feel free to reach out to us. It takes a great deal of trust to allow someone to manage your life’s savings. The fiduciary duty that we voluntarily assume because of our relationship is nothing compared to the ethical duty that we have to you and your family. It’s not something that we take lightly; so, until the next time we speak, we will be in the boat with you.

Thank you for your continued trust.

/SIGNED

Kevin S. Whiteford
President
Whiteford Wealth Management, Inc.

 

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, Inc., a Registered Investment Advisor. Whiteford Wealth Management, Inc. and Cambridge are not affiliated.

This letter is not meant to solicit the purchasing of any equities, bonds, mutual funds, or any investment of any kind. Any direct mention of any investment is meant purely as a reference point in the analysis of the issues discussed in this letter.

These are the opinions of Kevin S. Whiteford and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.

ISM Manufacturing

The ISM Manufacturing PMI in the US fell to 54.1 in December, the weakest since November 2016, from 59.3 in November and missing market expectations of 57.9. It was the largest monthly drop since October 2008 as growth in new orders, production and employment slowed sharply. 

The New Orders Index posted the biggest monthly decline since January 2014, dropping to its lowest level since August 2016 (51.1 vs 62.1 in November). In addition, a slowdown was recorded in output growth (54.3 vs 60.6) and the pace of job creation (56.2 vs 58.4). Other indexes also fell: supplier deliveries (57.5 vs 62.5); inventories (51.2 vs 52.9); and prices (54.9 vs 60.7).

“Comments from the panel reflect continued expanding business strength, but at much lower levels. Demand softened, with the New Orders Index retreating to recent low levels, the Customers’ Inventories Index remaining too low — a positive heading into the first quarter of 2019 — and the Backlog of Orders declining to a zero-expansion level. Consumption continued to strengthen, with production and employment still expanding, but at much lower levels compared to prior periods. Inputs — expressed as supplier deliveries, inventories and imports — softened as well, with suppliers improving delivery performance, and inventories and imports declining.

Exports continue to expand, but at low levels consistent with November. Price increases relaxed to levels not seen since June 2017, when the index registered 53 percent. The manufacturing community continues to expand, but at much lower levels and at a sharp decline from November,” says Fiore.

Of the 18 manufacturing industries, 11 reported growth in December, in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Primary Metals. The six industries reporting contraction in December — in the following order — are: Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; and Plastics & Rubber Products.

https://tradingeconomics.com/united-states/business-confidence

 

Durable Good Orders Month over Month

New orders for US manufactured durable goods surged 0.8 percent from a month earlier in November 2018, following a downwardly revised 4.3 percent plunge in October and missing market expectations of a 1.6 percent advance. Transportation equipment drove the increase. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.6 percent in November, after a 0.5 percent gain in the previous month. Durable Goods Orders in the United States averaged 0.33 percent from 1992 until 2018, reaching an all time high of 23.50 percent in July of 2014 and a record low of -19 percent in August of 2014.

https://tradingeconomics.com/united-states/durable-goods-orders

 

Retail Sales

The numbers: Most U.S. retailers posted healthy increases in sales in November as the holiday season kicked off with Black Friday specials after Thanksgiving.

Retail sales increased 0.2% last month, led by online stores such as AmazonAMZN, +1.47%  and big-box stores like Best Buy BBY, +2.64% the Commerce Department said.

Economists polled by MarketWatch had forecast a 0.1% gain.

If a big drop at gas stations is stripped out, retail sales rose a stronger 0.5%, the government said Friday.

What’s more, the increase in sales in October was raised to 1.1% from 0.8%, suggesting the U.S. economy got off to a somewhat better start in the fourth quarter than it initially seemed.

What happened: After surging in October, sales at gas stations slumped 2.3% November.

The price of gas fell almost 30 cents a gallon to a nationwide average of about $2.54 at the end of month. In many areas the cost was even less.

That’s good news for consumers, though. They took some of the savings and spent more online. The category that’s mostly online sales recorded a robust 2.3% increase in sales last month. Department store sales rose a smaller 0.4%.

Sales also rose at stores that sell groceries electronics, appliances, home furnishings, sporting goods and health and personal care items.

Auto sales edged up 0.2%. They account for about one-fifth of all retail sales.

Sales fell at home centers, clothing stores and restaurants. All three segments have done well so far this year, however, especially restaurants.

Big picture: Strong hiring and the lowest unemployment rate since 1969 has lifted the confidence of Americans and encouraged them to spend more. The U.S. economy in 2018 could top 3% growth for the first time since 2005.

Although most economists think U.S. growth will slow in 2019, they also expect consumers to keep spending at a healthy level and prolong an expansion that will set a record for the longest ever by next summer.

What they are saying? “Today’s report appears to point toward somewhat faster growth in the fourth quarter than we have been forecasting,” said chief economist Joshua Shapiro of MFR Inc.

“Gas prices are down roughly 50 cents since early October, from around $2.90 to $2.40 per gallon, which if maintained through 2019 could represent more than $700 in savings in each household’s pocket,” wrote Lydia Boussour and Gregory Daco of Oxford Economics.

Market reaction: The Dow Jones Industrial Average DJIA, +1.16% and S&P 500SPX, +1.07% fell in Friday trades on fresh worries about the global economy. Some indications suggest the Chinese economy is slowing, hindered in part by a festering trade spat with the U.S.

Also Read: Bridge to nowhere? Some doubts on economy justified, doom and gloom is not

The 10-year Treasury yield TMUBMUSD10Y, -0.13% was little changed at 2.90%. Yields have tumbled from a seven-year high of almost 3.25% a month ago, a shift that makes stocks somewhat more favorable.

 

https://www.marketwatch.com/story/us-retail-sales-off-to-good-start-as-the-holiday-season-gets-underway-2018-12-14

 

Vehicle Sales

U.S. Total Vehicle Sales

 

Latest Release

Dec 03, 2018

Actual

17.49M

Forecast

17.30M

Previous

17.57M

Total Vehicle Sales measures the annualized number of new vehicles sold domestically in the reported month. It is an important indicator of consumer spending and is also correlated to consumer confidence.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Importance:

Country:

Currency:USD

Source:Autodata Corp.

U.S. Total Vehicle Sales

 

 

20142016201820152017201968101214161820201020142018

03/01/2014

Actual15.40M

Forecast16.00M

Release Date Time Actual Forecast Previous
Dec 03, 2018 15:30 17.49M 17.30M 17.57M
Nov 01, 2018 14:30 17.57M 17.10M 17.44M
Oct 02, 2018 14:30 17.44M 16.78M 16.72M
Sep 04, 2018 14:30 16.72M 16.70M 16.77M
Aug 01, 2018 14:30 16.77M 17.10M 17.47M
Jul 03, 2018 14:30 17.47M 17.00M 16.91M
Jun 01, 2018 14:30 16.91M 17.00M 17.15M
May 01, 2018 14:30 17.15M 17.10M 17.48M
Apr 03, 2018 14:30 17.48M 16.90M 17.08M
Mar 01, 2018 15:00 17.08M 17.20M 17.16M
Feb 01, 2018 15:00 17.16M 17.20M 17.85M
Jan 03, 2018 15:30 17.85M 17.50M 17.48M

https://www.investing.com/economic-calendar/total-vehicle-sales-85

 

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