Succinct Summation of Week’s Events (7/17/15)

Succinct Summation of Week’s Events:


1) Multi family housing starts jumped by 111k to 489k, the most since 1988 and permits rose to the highest since 1990. Single family starts though fell by 6k while permits were up by just 6k.

2) The July NAHB home builder sentiment index was 60, 1 pt more than expected, in line with June (which was revised up by 1) and is at the best level since November ’05. The present situation rose 1 pt while future expectations were higher by 2 pts. Prospective Buyers Traffic fell 1 pt but only after jumping by 5 pts in June.

3) Initial jobless claims totaled 281k, 4k less than expected and down from 296k last week which had the July 4th holiday influence. Smoothing this out, the 4 week average though did rise to 283k, the highest since late April from 279k last week. Continuing claims, delayed by a week and thus likely also distorted by the holiday, fell a sharp 112k after rising by 62k in the week prior.

4) The NY manufacturing index was 3.9, slightly above the estimate of 3.0 and up from -2.0 in June. The internals however were very mixed as new orders fell 1.4 pts to -3.5 and is negative now for the 4th month in the past 5. Backlogs were -7.5 vs -4.8 in June and -11.5 in May. Employment was down 5.5 pts to 3.2, the lowest since December ’13. The 6 month business conditions outlook was up by 1.2 pts to 27 which compares with the 6 month average of 29.3. Capital spending plans rebounded by 10 pts to 21.3 but that puts it back to the 6 month average of 20.7.

5) Refi applications rose by 3.7% and are up 4.9% y/o/y.

6) US industrial production in June rose .3% m/o/m, one tenth more than expected. The manufacturing production component though was flat for now two months in a row. Utility output helped to lift the headline figure. Capacity utilization rose to 78.4% from 78.2% but it was all utilities and mining which drove the increase. Manufacturing capacity fell one tenth to 77.2%, matching the lowest since May 2014.

7) Business Inventories rose .3% m/o/m, in line. Sales rose .4% and the I/S ratio held at 1.36, just off the highest since ’09.

8) Amazon and Walmart think inflation is too high and they provide relief to millions with discounts across the board.

9) Foreign purchases of US notes and bonds rebounded in May as there was net buying of $53.4b, the most since February ’14. For the year to date however, just $6.7b of notes and bonds have been bought. In 2014, a net $165.6b were bought vs $40.9b in 2013 and more than $400b purchased in each of 2011 and 2012.

10) Retail sales, industrial production, fixed asset investment and Q2 GDP in China all came in better than expected. GDP in particular hit on the head the 7% target of the Chinese government, above the estimate of 6.8%.

11) Chinese credit growth spiked in June with 1.86T yuan (about $300b) of new loans extended. That was 460b above expectations and up from 1.2T in May. It is though about 100b yuan below June of last year. Money supply growth as measured by M2 accelerated to 11.8% y/o/y growth vs 10.8% in May. That was above the estimate of 11% and the quickest since February.

12) China’s exports rose by 2.8% y/o/y in June, rebounding after a 2.5% drop in May. Imports were down by 6.1% but that is better than the forecasted drop of 15.5% helped by lower import duties.

13) Helped by a shift in a holiday that brought sales into June from May, EU car registrations in June rose 14.6% y/o/y. Smoothing out the May rise of 1.3% has the two month average of 7.95% y/o/y growth which compares with the 6 month average of 7.9% growth.

14) UK weekly earnings ex bonus for the 3 months ended May rose 2.8% y/o/y, up from 2.7% last month and it’s the quickest pace of wage growth since February ’09. While the estimate was up 3%, real wage growth is finally being celebrated by UK consumers.

15) UK CPI was zero y/o/y in June. The core rate though was higher by .8%. Mark Carney doesn’t like the low level but UK consumers do as real wage growth improves.

16) The July German ZEW economic expectations index (surveying investors) fell to 29.7, the lowest since November, from 31.5 in June but that was slightly better than the estimate of 29. The current situation component was up 1 pt after dropping by 3 pts in June.

17) Positive for markets in short term as Europeans punt again on Greece.



1) Stanley Fischer today said “inflation is too low, we must get it back up to 2%.” If he looked at core CPI instead of core PCE, he’s about there as core CPI in June rose 1.8% y/o/y, matching the highest since July ’14 as the cost of living for the 35% of households that rent continues to jump. Rent of a primary residence was up by .4% m/o/m and 3.5% y/o/y. OER was up by .4% too and 3% y/o/y. Overall services inflation ex energy was up by 2.5% y/o/y which has been a pretty consistent trend. Energy and food prices were both higher which led to the .3% m/o/m gain. Apparel and used car prices fell. Medical costs were down .2% but are still up 2.5% y/o/y. Core CPI is running at a 2.3% annualized pace in the 1st half of 2015.

2) PPI ran hotter than expected with a .4% m/o/m gain at the headline level, the core rate was up by .3% and also taking out trade saw a .3% rise. Wholesale services inflation was higher by .3% too.

3) US Retail sales in June were soft. Sales ex gasoline stations fell .4% m/o/m. Sales ex auto’s and gasoline stations fell .2% m/o/m, six tenths weaker than expected and May was revised down by two tenths. Also taking out building materials to get to the so called ‘control group,’ sales were down by .1%, four tenths less than estimated.

4) After rising to 98.3 in May, the highest of 2015 and the 2nd best level in the recovery, the NFIB small business optimism index fell to 94.1 in June. It’s the biggest m/o/m drop since November ’12. The NFIB chief economist, said “June terminated a promising string of improvements in owner optimism during the first months of the year. While it is not a disaster or a signal of a looming recession, it is a disappointing sign that economic growth on Main Street is not set for a strong 2nd half of growth. The weakness was substantial across the board, showing no signs of a growth spurt in the near future.

5) The Philly manufacturing index for July fell to 5.7 from 15.2 and that was about half the expectation. It gives back the 8.5 pt jump in June and puts it more in line with the mediocre trend seen this year. The year to date average is 7.4 vs 18.6 in 2014.  Optimism for the coming 6 months where rose almost 2 pts to the highest since January. On the flip side, capital spending plans for the next 6 months were down slightly to the lowest level since December ’13.

6) After jumping by 6.6% last week, the MBA said purchase applications to buy a home fell by 7.5% w/o/w. While this is still up 17% y/o/y, the index is at a 6 week low.

7) The preliminary UoM confidence index fell to 93.3 from 96.1 in May and vs the estimate of 96. The average year to date is now 94.6 but that remains well above the average last year of 84.1. Both current conditions and future expectations were down m/o/m. One year inflation expectations ticked up by one tenth to 2.8%.

8) There was an unexpected drop in the number of employed in the UK for the 3 months ended May of 67k vs a forecasted rise of 35k. The unemployment rate was higher by one tenth to 5.6% off the lowest level since 2008. The fall in those employed was the first time since March ’13. Also, jobless claims in June rose by 7k instead of falling another 9k as expected. This is the first rise since October ’12.

9) EU industrial production in May fell .4% m/o/m, worse than the estimate of up .2% with a 3.2% drop in energy production being the main reason for the miss.


Peter Boockvar
Chief Market Analyst, The Lindsey Group LLC


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  1. ottnott commented on Jul 17

    “1) Multi family housing starts jumped by 111k to 489k”

    Marketplace, the financial show on public radio, said that the increase was largely due to expiring incentives in New York for construction of large multi-family buildings. The reporting said that other numbers in the report were clearly positive overall.

  2. constantnormal commented on Jul 18

    “11) Chinese credit growth spiked in June with 1.86T yuan (about $300b) of new loans extended. That was 460b above expectations and up from 1.2T in May. It is though about 100b yuan below June of last year. Money supply growth as measured by M2 accelerated to 11.8% y/o/y growth vs 10.8% in May. That was above the estimate of 11% and the quickest since February.”

    And this was listed among the week’s Positives? Really? Since when is pouring gasoline on an outa control debt explosion a positive?

    If there were a modest trending downward in the soaring Chinese debt, that might be a sign of hope (feeble hope, as I know of no similar debt explosion that has EVER been wound down gracefully) … but further increases in Chinese debt strike me as boding ill in the extreme for China, the foreign companies that are manufacturing there, foreign companies that are selling into China, and anyone doing any sort of trade with China. Their lives are likely to get incredibly complicated, and not in a good way.

    I suppose that when the explosion reaches its climax, and the Chinese economy (which is a pretty large part of the global economy) implodes inward, THAT would reside among the negatives. Timing is everything, but I prefer to look upon the explosion and its accompanying inevitable implosion as two sides of the same event. Once you blow up an economy, you are certainly going to incur the resultant implosion. It just doesn’t happen any other way. I would have thought that such an event belonged entirely on the negative side of the ledger, that coin/event being unsplittable.

    But I guess it’s a difference of opinion that makes for markets.

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