Central Perk: 28 oct. 2014

marți, 28 octombrie 2014

Mish's Global Economic Trend Analysis

Durable Goods Decline Second Month; Key Take-Aways
El-Erian: "Europe Is One or Two Rounds of Sanctions From Recession"; El-Erian Far Too Optimistic
Most Expensive Housing Markets in US are Liberal: Correlation or Cause?

Durable Goods Decline Second Month; Key Take-Aways

Posted: 28 Oct 2014 01:25 PM PDT

Inquiring minds are digging into the Census Bureau Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders for September 2014 for hints at 4th quarter GDP.

The headline data shows new orders for manufactured durable goods in September decreased $3.2 billion or 1.3 percent. This follows an 18.3 percent decline in August.

However, transportation (especially commercial and military plane orders) are so large and volatile, the overall results are nearly useless.

For example: In June, new orders were up 22.5% with transportation orders up 73.3%. Nondefense aircraft and parts orders were up a whopping 315.6%. Last month, nondefense aircraft and parts was down 74% and this month another 16%.

Key Components

Instead of focusing on the headline numbers, let's dive into the report to isolate key components.

The report itemizes all the categories, but it's not easy to scroll through. This table I put together should help.

Item	Sep	Aug	Jul	Aug-Sep %Chg	Jul-Aug % Chg	Jun-Jul % Chg
Total New Orders	241,633	244,864	299,862	-1.3	-18.3	22.5
Ex-Transportation Orders	168,186	168,603	167,491	-0.2	0.7	-0.6
Ex-Defense Orders	230,654	234,273	289,442	-1.5	-19.1	24.9
Transportation Orders	73,447	76,261	132,271	-3.7	-42.4	73.3
Capital Goods Orders	91,353	95,345	144,635	-4.2	-34.1	52.5
Non-Defense Capital Goods Orders	81,985	86,625	136,323	-5.4	-36.5	60.9
Defense Capital Goods Orders	9,368	8,720	8,312	7.4	4.9	-17.9
Core Capital Goods Orders	71,824	73,078	72,836	-1.7	0.3	-0.1
Core Capital Goods Shipments	70,238	70,390	70,307	-0.2	0.1	2.0

Line items (except the last line which shows shipments) are new orders, in millions of dollars, seasonally adjusted.

Key Take-Aways

The last two lines are the ones to watch.

Core Capital Goods are non-defense capital goods excluding aircraft. It's a measure of business investment and business sentiment. The 1.7% decline in orders is the largest since January.

Shipments factor into GDP estimates. Core capital goods shipments were down 0.2% this month. Core capital shipments and orders suggest that 4th quarter GDP is not off to a flying start.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

El-Erian: "Europe Is One or Two Rounds of Sanctions From Recession"; El-Erian Far Too Optimistic

Posted: 28 Oct 2014 10:51 AM PDT

In a speech on BRICs at the Peterson International Institute of Economics former PIMCO co-head El-Erian made the claim Europe Is One or Two Rounds of Sanctions From Recession.

The West, and Europe in particular, is one or two rounds of sanctions and counter-sanctions away from entering into a new recession, chairman of President Barack Obama's Global Development Council Mohamed El-Erian stated Monday.

"We are one or two rounds of sanctions and counter-sanctions away from the European politics over the Ukraine tipping Europe into a recession," El-Erian said in a speech on the BRICS economies at the Peterson International Institute of Economics.

He noted that the impact of level three sectoral sanctions against Russia is "taking the West into a recession through sanctions to the energy sector."

Arguing against the notion that Western economies are managing to keep pace after the crisis and despite the sanctions against Russia, El-Erian stated, "It may be chugging along in the United States, but Europe is looking at flat growth."

According to Obama's global development adviser, Ukraine continues to be a problem. El-Erian concluded, "The current state of play in Ukraine is lose, lose, lose" for Ukraine, Russia, and the West.

El-Erian Far Too Optimistic

It is not going to take another round or two of sanctions to tip Europe into recession.

France, Italy, and Spain are already there by any realistic set of measures, and Germany is in serious decline.

Unless one uses the strict definition of two consecutive quarters of declining growth, Europe is arguably in recession right now. Greece, Spain, and Italy are actually in economic depressions.

El-Erian is far behind the curve, especially if he thought he was making a dramatic statement.

But yes, sanctions are inane and they will make matters worse. And no, the US will not decouple from the global economy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Most Expensive Housing Markets in US are Liberal: Correlation or Cause?

Posted: 28 Oct 2014 12:47 AM PDT

Here's an interesting article thanks to Jed Kolko, Chief Economist at Trulia Trends via Washington Post Wonkblog: The most expensive housing markets in the U.S. are also the most liberal.

The relationship between housing affordability and politics in the US is startlingly strong as these charts by Jed Kolko shows.

Median asking price in dollars per square foot is on the vertical axis. Margin for Obama over Romney in the 2012 election is on the horizontal axis.

With the exception of Orange County California, all of the high priced counties voted for Obama.

The Washington Post notes ....

Nine of the 10 bluest markets had median home asking prices above $130 per square foot. All of the 10 reddest markets had prices below that. In the dark blue markets, housing cost almost twice as much ($227 per square foot) as in the red ones ($119). In metro Washington — this is not just the District — the average home asking price was about $177.

Trulia notes ...

Households in blue markets tend to have higher incomes. But those higher incomes are not enough to offset higher home prices. Our middle-class affordability measure, which reflects the share of homes for sale within reach of a median-income household, is significantly lower in bluer markets. Furthermore, blue markets have lower homeownership and greater income inequality than red markets.

Sorted Data

Trulia made the data available. I sorted by price per square foot high to low. Here are the results.

U.S. Metro	Vote margin: Obama vs Romney, 2012 (positive #s = blue markets; negative #s = red markets)	Price decline in housing bust, peak to trough (FHFA)	Year-over-year price change, Sept. 2014 (Trulia)	Median asking price per square foot, $, Oct. 2014 (Trulia)
San Francisco, CA	58%	-23%	9.9%	613
Honolulu, HI	39%	-11%	4.1%	439
San Jose, CA	42%	-26%	8.6%	430
Orange County, CA	-6%	-33%	4.8%	363
Long Island, NY	6%	-20%	2.9%	350
Oakland, CA	50%	-39%	11.9%	342
Los Angeles, CA	42%	-35%	6.9%	334
New York, NY-NJ	49%	-18%	4.3%	320
Ventura County, CA	7%	-39%	12.4%	305
San Diego, CA	8%	-35%	1.8%	296
Fairfield County, CT	11%	-21%	-0.5%	237
Middlesex County, MA	27%	-13%	7.8%	236
Boston, MA	25%	-17%	4.5%	229
Peabody, MA	16%	-18%	4.0%	212
Seattle, WA	35%	-26%	8.9%	197
Bethesda-Rockville-Frederick, MD	34%	-22%	2.6%	189
Sacramento, CA	9%	-48%	10.1%	188
Edison-New Brunswick, NJ	3%	-22%	6.2%	180
Miami, FL	24%	-47%	14.0%	180
Washington, DC-VA-MD-WV	37%	-25%	3.2%	177
Riverside-San Bernardino, CA	4%	-50%	10.6%	164
Providence, RI-MA	25%	-26%	2.8%	162
Baltimore, MD	18%	-22%	-1.1%	161
Portland, OR-WA	23%	-25%	7.5%	157
Denver, CO	13%	-8%	9.4%	152
North Port-Bradenton-Sarasota, FL	-10%	-50%	9.6%	150
New Haven, CT	22%	-21%	-0.6%	146
Worcester, MA	9%	-23%	4.9%	146
Philadelphia, PA	31%	-11%	4.3%	146
Fort Lauderdale, FL	35%	-48%	6.9%	143
Hartford, CT	23%	-14%	-0.4%	143
West Palm Beach, FL	17%	-49%	11.7%	138
Springfield, MA	32%	-14%	2.5%	137
Albany, NY	16%	-6%	-0.7%	135
Tacoma, WA	11%	-32%	7.5%	134
Charleston, SC	-5%	-21%	7.7%	134
Cape Coral-Fort Myers, FL	-17%	-56%	9.8%	133
Newark, NJ-PA	21%	-20%	1.9%	133
Fresno, CA	2%	-49%	8.5%	133
Austin, TX	7%	-4%	9.9%	130
Lake County-Kenosha County, IL-WI	9%	-27%	11.3%	130
Chicago, IL	32%	-28%	10.0%	129
Salt Lake City, UT	-21%	-22%	4.7%	129
Virginia Beach-Norfolk, VA-NC	11%	-19%	4.4%	129
Bakersfield, CA	-17%	-52%	8.2%	126
Minneapolis-St. Paul, MN-WI	12%	-26%	10.0%	125
Phoenix, AZ	-11%	-51%	3.8%	123
Wilmington, DE-MD-NJ	24%	-20%	3.8%	123
Warren-Troy-Farmington Hills, MI	3%	-37%	7.8%	117
Camden, NJ	24%	-23%	0.6%	116
Richmond, VA	5%	-20%	2.7%	116
Milwaukee, WI	5%	-15%	5.8%	116
Pittsburgh, PA	-1%	-2%	6.9%	116
Allentown, PA-NJ	2%	-21%	2.6%	114
Las Vegas, NV	15%	-61%	9.0%	113
Raleigh, NC	6%	-9%	4.2%	113
Dallas, TX	-10%	-6%	7.7%	112
Tucson, AZ	7%	-38%	1.4%	111
Orlando, FL	8%	-48%	7.7%	110
Albuquerque, NM	13%	-17%	0.6%	110
Nashville, TN	-16%	-9%	5.6%	109
Jacksonville, FL	-19%	-38%	7.0%	109
Colorado Springs, CO	-21%	-12%	4.0%	107
San Antonio, TX	-8%	-4%	4.5%	107
Tampa-St. Petersburg, FL	3%	-43%	5.0%	106
Houston, TX	-12%	-4%	10.7%	106
New Orleans, LA	0%	-11%	7.5%	102
Palm Bay-Melbourne-Titusville, FL	-13%	-50%	13.1%	100
Cincinnati, OH-KY-IN	-16%	-10%	9.0%	100
Baton Rouge, LA	-12%	-3%	1.3%	100
Charlotte, NC-SC	2%	-16%	7.0%	99
Oklahoma City, OK	-27%	-3%	4.0%	98
St. Louis, MO-IL	7%	-12%	4.3%	98
Knoxville, TN	-34%	-8%	2.1%	98
Birmingham, AL	-20%	-13%	11.5%	96
Buffalo, NY	14%	-2%	3.1%	96
Atlanta, GA	1%	-26%	11.1%	95
Louisville, KY-IN	-3%	-6%	11.0%	94
Fort Worth, TX	-23%	-6%	6.4%	94
Columbus, OH	7%	-10%	6.5%	94
Omaha, NE-IA	-10%	-5%	5.4%	93
Greenville, SC	-30%	-8%	5.9%	92
Kansas City, MO-KS	-3%	-12%	6.6%	92
Lakeland-Winter Haven, FL	-7%	-46%	11.1%	92
Gary, IN	21%	-11%	6.8%	91
Little Rock, AR	-11%	-4%	-6.0%	90
Tulsa, OK	-32%	-4%	7.3%	90
Syracuse, NY	17%	-3%	4.1%	90
Memphis, TN-MS-AR	12%	-14%	4.6%	89
Greensboro, NC	1%	-10%	2.6%	89
El Paso, TX	32%	-8%	-0.9%	88
Rochester, NY	11%	-2%	2.0%	87
Grand Rapids, MI	-9%	-22%	9.1%	87
Cleveland, OH	24%	-18%	4.1%	86
Akron, OH	13%	-16%	6.9%	84
Columbia, SC	2%	-11%	-0.9%	83
Toledo, OH	21%	-20%	12.5%	81
Indianapolis, IN	-8%	-7%	7.8%	80
Detroit, MI	47%	-40%	11.4%	75
Dayton, OH	-7%	-13%	8.8%	74

Congratulations to California

California has seven of the top-ten least-affordable metro areas.
New York managed two top-ten least affordable spots.
Massachusetts garnered three top-fifteen slots.

Congratulations (of sorts) go to California.

Top 10 Cities by Population in 2013

City Rank	City	Population	Cost per Sq Foot	Cost Ranking
1	New York, New York	8,405,837	320	8
2	Los Angeles, California	3,884,307	334	7
3	Chicago, Illinois	2,718,782	129	42
4	Houston, Texas	2,195,914	106	66
5	Philadelphia, Pennsylvania	1,553,165	146	29
6	Phoenix, Arizona	1,513,367	123	47
7	San Antonio, Texas	1,409,019	107	64
8	San Diego, California	1,355,896	296	10
9	Dallas, Texas	1,257,676	112	57
10	San Jose, California	998,537	430	3

I created the above table by combining City Size data with Trulia data.

Top 10 Red vs. Blue

Of the 10 largest Metro Areas in the US, five voted for Obama and five for Romney. Note: The above table shows city population not metro area.

The Texas Metro Areas (Houston, San Antonio, Dallas) and the Arizona Metro Areas (Phoenix and San Antonio) voted for Romney.

The highest ranking red Metro Area in the list was Phoenix. It placed 47 out of 100 in cost, with a median cost per square foot of $123 vs. San Jose, California with a median cost of $430 per square foot.

Correlation or cause? Union work rules, land availability, and building restrictions (or lack thereof) are all likely in play.

Correction

I stated 5 of the top 10 cities voted for Romney. The Trulia data is for Metro Areas. The above paragraphs modified accordingly.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

The Cast of 'Back to the Future' Then and Now
Amusing Photoshop Trolls from Russia
50 Unusual Animals You Won't Believe Aren't Photoshopped

The Cast of 'Back to the Future' Then and Now

Posted: 28 Oct 2014 02:46 PM PDT

It's been almost 30 years since the original "Back to the Future" was released and some of these actors are looking like the could definitely use a time machine.