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Highlights Business investment wasn’t the major star as it has been in prior quarters but still was in the plus column at 0.8 percent growth. Yet the slowing, following growth rates of 8.7 and 11.5 percent in the second and first quarters, may hint at a quick fade for the stimulative effects of this year’s corporate tax cut. Residential investment extended its dismal run, falling at a 4.0 percent rate for the fifth contraction of the last six quarters which underscores housing as a problem sector. Another problem that may be unfolding for the economy is trade. The deficit in net exports widened by a very steep $99.0 billion in the quarter and, by itself, pulled the quarter’s GDP down by 1.8 percentage points. Whatever tariff effects there are in the quarter, whether on metals or agriculture, they didn’t hold down imports which surged at a 9.1 percent growth rate. Also negative for GDP is exports which posted their first contraction in 2-1/2 years at minus 3.5 percent. Coming to the rescue and outmatching the trade effect, however, is a constructive $76.3 billion build in inventories which, when measured against the prior quarter, contributed 2.1 percentage points to GDP. Inventories were a major negative in the second quarter, having been drawn down sharply and positioning the third-quarter for what proved to be a major build. Government purchases round out the components, rising at a 3.3 percent clip and adding 0.6 percentage points to the quarter for one of the strongest showings of the expansion. But stimulus from government purchases is no surprise given the government’s massive $4.1 trillion in annual outlays. Another impact the government has on the economy is monetary policy where interest rates, given the perceived need at the Federal Reserve to cool demand, are going up to fight the risk of inflation. Yet inflation didn’t show much life at all in the third-quarter as the GDP price index came in at only 1.7 percent. This misses the consensus by 3 tenths and is the most subdued result since the second-quarter last year. But the real surprise in the report is the strength of consumer spending where the outlook, given the enormous level of demand for labor, looks very positive. Not positive, however, is the weakness in housing and also trade where the unfolding effects of tariffs and counter-tariffs are a major risk to future quarters. Uncertain in the outlook are inventories which may, however, continue to build given the underlying strength of consumer demand. But inventories, whose effects are abstract, added disproportionately to the quarter’s results, without which GDP would have come in no better than 1.4 percent. |
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Consensus Outlook
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All posts in Uncategorized
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Highlights Total retail sales inched only 0.1 percent higher which is below Econoday’s low estimate. Auto sales, perhaps boosted by replacement demand following Hurricane Florence’s strike on the Carolinas, jumped 0.8 percent following a long run of poor results. Contracting sharply, however, were sales at gasoline stations, down 0.8 percent following a strong gain in August, and also restaurants which had been very strong in prior months but plunged 1.8 percent in what may be another hurricane effect. When excluding restaurants and gasoline stations and also autos and building materials, control group sales actually rose 0.5 percent which is at the high end of expectations. Some of this strength is offset by a 1 tenth downward revision to August to no change but, with July holding at a very strong 0.8 percent gain, still keeps consumer spending alive for the third quarter. Building materials were neutral in the report with only a 0.1 percent rise. Losers in the month were health & personal care stores, down 0.3 percent, and department stores at minus 0.8 percent. Gainers included nonstore retailers, up 1.1 percent and again reflecting strength for e-commerce, and also furniture stores which also rose 1.1 percent. This is a mixed report but is probably best assessed by the year-on-year rate for control sales, which is unchanged at a strong 4.9 percent. Special factors and unusual swings aside, the consumer continues to contribute solidly to economic growth. |
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Consensus Outlook
https://us.econoday.com/byshoweventfull.asp?fid=485756&cust=us&year=2018&lid=0&prev=/byweek.asp#top
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Highlights A 0.5 percent monthly decline in energy, reflecting drops for gasoline and electricity, held down the overall rate as did food which was unchanged in the month (throwing in beverages, the result is plus 0.1 percent). Year-on-year, energy is up 4.8 percent which, though far from severe, is the highest of any major component. The yearly rate for food is up only 1.4 percent and is reminder of how low prices are right now in the farm sector. Transportation held down September’s core, falling 0.3 percent as used vehicles dropped a sharp 3.0 percent in the month with new vehicle prices down 0.1 percent. Housing is the CPI’s largest component and is very soft, at only a 0.1 percent gain. The closely watched owners’ equivalent rent subcomponent managed a 0.2 percent gain, again subdued. Apparel was the strongest component in September, jumping 0.9 percent after, however, three straight months of declines. This year-on-year rate is the only major component in the outright negative column, at minus 0.6 percent. Wages may be tilting higher this year but they have yet, to say the least, to spillover into overall prices which remain remarkably flat given the strength of the economy and especially the labor market. Unless inflation does begin to show life, either perhaps in tomorrow’s import and export price report or coming CPI reports, expectations for a Fed rate hike at the December FOMC could begin to fade. |
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Consensus Outlook https://us.econoday.com/byshoweventfull.asp?fid=485636&cust=us&year=2018&lid=0&prev=/byweek.asp#top
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ADP Employment Report | |||||||||||||||
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Definition The national employment report from Automated Data Processing Inc. is computed from ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors. ADP contracted with Moody’s Analytics to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic’s employment situation. The ADP report only covers private (excluding government) payrolls. https://us.econoday.com/byshoweventfull.asp?fid=485672&cust=us&year=2018&lid=0&prev=/byweek.asp#top |
Highlights
Released On 9/27/2018 8:30:00 AM For Q2(r):18 | ||||||
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After-tax corporate profits rose a year-on-year 6.4 percent in the second quarter to $1.962 trillion without inventory valuation and capital consumption adjustments. This is revised from an initial estimate of 6.7 percent. Pretax profits on this basis were $2.197 trillion for an outright year-on-year decline of 0.1 percent that, in comparison to the strong gain for after-tax profits, underscores the significant effect of this year’s corporate tax cut.
When including inventory valuation and capital consumption adjustments, pre-tax corporate profits rose a year-on-year 7.3 percent to $2.242 trillion with after-tax profits at $2.008 trillion for a 15.8 percent gain. Taxes on corporate income, at $234.8 billion and which are calculated on this basis, fell 34.0 percent from the second quarter of 2017 which is a decisive measurement of this year’s corporate tax cut.
http://mam.econoday.com/byshoweventfull.asp?fid=485763&cust=mam&year=2018&lid=0&prev=/byweek.asp#top
Highlights
Existing home sales miss Econoday’s consensus for a fifth month in a row, coming in at a 5.340 million annualized rate in August which is unchanged from July and compared with expectations for 5.360 million. In what could be considered good news in today’s report, the zero change marks an end to four prior months of slowing.
Both single-family homes, at a 4.750 million rate, and condos at 590,000 are unchanged in August’s data. Year-on-year total sales are down 1.5 percent with single-family homes down 1.0 percent and condos 4.8 percent lower.
Zeros are wild in today’s report with supply on the market also unchanged, at 1.920 million. On a sales basis, supply is unchanged at 4.3 months for a third month in a row.
Sellers were offering discounts in the month with the median price down 1.7 percent to $264,000. Year-on-year, the median is up 4.7 percent which looks rich compared to the yearly decline in sales.
Regional sales data show another bad month for the West, down 5.9 percent in August, and a 7.6 percent gain for the Northeast. On the year, the West brings up the rear at minus 7.4 percent with the South in front but at only a 1.8 percent gain.
However strong the economy and stock market are, the nation’s housing sector is not participating which is a negative for household wealth. New home sales for August, to be released Wednesday, will be a highlight of next week’s calendar.
http://mam.econoday.com/byshoweventfull.asp?fid=485934&cust=mam&year=2018&lid=0&prev=/byweek.asp#top
Highlights
Job openings are absolutely surging while hiring is falling further behind. Openings jumped 1.7 percent in July to 6.939 million to easily top Econoday’s consensus range. Hires, after posting a 1.2 percent decline in June, came in unchanged in July at 5.679 million.
Year-on-year, openings are up 11.9 percent with hirings up only 3.3 percent with the latter now having fallen for three months in a row. The widening gap between openings and hires strongly suggests that employers are having a hard time finding employees with the right qualifications.
The number of openings, for the first time on record, moved past the number of people actively looking for work in March this year. This gap also keeps widening and stood at 659,000 in July and raises the risk of wage pressures as slack disappears in the available workforce.
Another sign of pressure, one watched by Jerome Powell, is the quits rate in this report which, up 1 tenth to 2.4 percent, is on the rise and what points to increasing willingness of those with jobs to look for better work.
http://mam.econoday.com/byshoweventfull.asp?fid=486201&cust=mam&year=2018&lid=0&prev=/byweek.asp#top
Highlights
A solid rise in residential spending offset a mixed showing for non-housing components and made for a 0.1 percent July rise in overall construction spending to barely come within Econoday’s consensus range. Residential spending rose 0.6 percent but July’s gain was entirely centered in home improvements which jumped 2.1 percent to offset outright declines of 0.3 percent in single-family homes and 0.4 percent for multi-families.
Private non-residential spending fell 1.0 percent in the month, pulled down by a sharp fall in commercial projects, where spending has been uneven in recent months, that offset a fourth straight sharp gain in transportation. Public spending on educational building and highways & streets posted gains following declines in June.
Year-on-year rates help underline what is a healthy rate of growth in construction spending, up 5.8 percent overall with residential spending up 6.7 percent and both private nonresidential and public categories showing low to mid single digit gains. Nevertheless, reports out of housing have been uneven and are clouded further by the declines in single- and multi-family homes in this report.
http://mam.econoday.com/byshoweventfull.asp?fid=485898&cust=mam&year=2018&lid=0&prev=/byweek.asp#top
Highlights
Strength in consumer spending was shaved slightly while contraction in residential investment deepened slightly, factors however outweighed by upward revisions to both nonresidential fixed investment and government purchases with revisions to inventories and net exports also slightly favorable. The net result is a 2 tenths upward revision to second-quarter GDP to a 4.2 percent annualized rate.
Consumer spending is now at a 3.8 percent growth rate vs 4.0 percent in the first estimate. Spending on both durables and non-durables was lowered, to a still enormously strong 8.6 percent for the former and to 3.7 percent for the latter, with spending on services unchanged at 3.1 percent.
Residential investment was at minus 1.1 percent in the first estimate and is now at minus 1.6 percent in the second estimate. Nonresidential fixed investment gets a sizable 1.2 percentage point upgrade to an enormously strong 8.5 percent with components for equipment, now at 4.4 percent, and intellectual property, at 11.0 percent, both revised higher.
Inventories subtracted a little less while net exports added a little more. Government purchases are upgraded 2 tenths to a 2.3 percent growth rate.
Price readings are little changed with the overall index steady at an elevated 3.0 percent with the core 1 tenth higher at 2.8 percent. These readings had been subdued before shifting higher in the second quarter underscoring the risk of overshooting by the Fed.
The second quarter, in fact, was very strong led by consumer spending, where gains reflected strong demand for labor and also this year’s tax cut, and also by business spending which has been getting a lift from this year’s corporate tax cut. Exports were also very strong in the quarter.
The early outlook right now for the third quarter is mixed as goods exports sunk back in July in a negative offset by what looks to be a sharp rise in July inventories. Initial indications on consumer spending from the July retail sales report are positive. Watch for more third-quarter GDP inputs, including for inflation, in Thursday’s personal income & outlays report for July.
Highlights
The headline shows a decline but the message from the July new home sales report is nevertheless mostly positive. New home sales slipped 1.7 percent in the month to a 627,000 annualized rate that misses Econoday’s consensus by 22,000 and the Econoday’s low estimate by 3,000. Revisions are neutral with June revised 7,000 higher to 638,000 but with May revised 12,000 lower to 654,000.
Now the good news. Supply moved into the market, up 2.0 percent to 309,000 new homes for sale which is the best showing since 2009. More homes for sale gives buyers more choices in what will be a likely positive for sales in the coming months. Relative to sales, supply is at 5.9 months vs 5.7 and 5.5 in the two prior months.
Another positive is a rise in prices, up a sharp 6.0 percent on the month to a median $328,700 for what is still, however, a modest 1.8 percent year-on-year increase.
Regional data show both the West and Midwest posting strong monthly gains with yearly rates at 18.5 percent and 18.2 percent respectively. The yearly rate for the South is at 17.2 percent with, however, the Northeast, which is by far the smallest region for new housing, down nearly 50 percent.
The overall year-on-year rate of growth is at 12.8 percent which if sustained would point to a badly needed uplift for the housing sector in general going into the second-half of what has been a very subdued 2018.
Sales are still up Year over Year July 2017 roughly 550,000.
http://mam.econoday.com/byshoweventfull.asp?fid=485957&cust=mam&year=2018&lid=0&prev=/byweek.asp#top