Central Perk: 23 dec. 2015

miercuri, 23 decembrie 2015

Mish's Global Economic Trend Analysis

UPS Delivers 36 Million Packages Tuesday, Double Normal; Sign of Huge Holiday Sales?
Positive Side of Negativity
4th Quarter GDPNow Forecast Plunges to 1.3% Following Housing and Other Data; What's Next?
New Home Sales Rise Less Than Expected From Revised Sharply Lower October

UPS Delivers 36 Million Packages Tuesday, Double Normal; Sign of Huge Holiday Sales?

Posted: 23 Dec 2015 04:24 PM PST

Double Normal

Christmas is just over a day away. Package delivery is at record volumes. Does that portend a huge Christmas shopping season?

Before addressing that question please consider the Supply Chain article UPS Delivers 36 Million Packages - Double Normal.

UPS expected to deliver 36 million packages yesterday, double its normal volume, as online retail sales continue to grow during the Christmas season.

The parcel service has hired an extra 95,000 seasonal workers to help with the expected onslaught of packages, said Fortune magazine.

The company said it expects to deliver some 630 million packages between Thanksgiving and the end of December, up 10.3 percent from 2014.

Sign of Huge Holiday Sales?

A huge surge in overall sales remains to be seen.

The Supply Chain headline "UPS Delivers 36 Million Packages - Double Normal" sounds exciting, but that is for a single day, not the entire season. The hype is not apparent until one dives into the details.

Overall package delivery is up a very healthy 10.3% but is that at the expense of in-store sales?

To be sure, there was a splurge of last minute shopping, including some by me.

I can point out some gross inefficiencies at the micro-level.

I ordered four items a few days ago, of the exact same undisclosed nature (because my wife might be reading this and the presents are for her), all from the same store, and all in the same online order. I received not one package, but four packages, in four different deliveries (morning and afternoon over two days). The deliveries were all rushed, with no delivery charge.

Somewhere in this supply chain, there appears to be some gross inefficiencies.

Personal anecdotes aside, until we see actual retail sales reports, I am sticking with my forecast that increased online sales will not hugely overpower an otherwise lackluster holiday shopping season.

Mike "Mish" Shedlock

Positive Side of Negativity

Posted: 23 Dec 2015 12:52 PM PST

Being the persistent optimist, I try to look on the bright side of things. Today, lets investigate the "positive side of negativity" as pertains to Spain.

In the wake of fragmented Spanish elections that left no political party or coalition with an outright majority, the Socialists Rejected a Deal with Spanish PM.

The arduous task of assembling a new government for Spain got off to a bad start on Wednesday after the leader of the Socialist party flatly ruled out any deal with the Popular party of prime minister Mariano Rajoy.

[Mish: Facing reality is a positive, not negative event. If new elections are coming, as seem likely, it's best to admit that now, rather than give false hope to something that cannot possibly work. In this light, rejection of something that cannot work is a good thing.]

Pedro Sánchez, the leader of the Socialists, held a brief meeting with Mr Rajoy in the prime ministerial compound outside Madrid — but apparently only to reiterate his opposition to any accord.

"We will vote against the Popular party and against Mariano Rajoy as prime minister. Voters have asked for change," he told a news conference after the meeting.

[Mish: Change is good. Voters asked for a change. So why shouldn't they get change?]

Officials close to Mr Rajoy signalled their disappointment with the Socialists' stance but declined to read the rejection as final. "It was not the best of starts but it was the start of the process, not the end," Fernando Martinez Maíllo, one of the PP's deputy leaders, said.

[Mish: Note the denial by Rajoy. That's a bad thing. It's best to get rid of bad things. I am optimistic that Rajoy won't last.]

Rajoy accused Mr Sánchez of arriving at the meeting "carrying a No in front of him" and for "not having a positive attitude". Echoing earlier statements by Mr Rajoy himself, Mr Martínez Maíllo urged the centre-left to commit to a stable government for Spain and to show "responsibility".

[Mish: Sánchez remains absolutely positive he will not work with Rajoy. I see positives in this outcome except from the self-serving point of view of a corrupt politician hoping to cling to power.]

Mr Rajoy and his Socialist counterpart are not known to have a good personal relationship. The two clashed bitterly in a televised debate shortly before the elections, with Mr Sánchez describing his opponent as "indecent" and Mr Rajoy castigating his opponent as "mean" and "miserable".

[Mish: Please look on the bright side. The mudslinging from both sides was likely accurate each way. Moreover, it provided much-needed entertainment value just as Donald Trump provides in the US.]

But the PSOE has little chance of leading a government alliance itself, especially since it is unlikely it could win over Podemos for such a deal. An early election is also undesirable, given the apparent resurgence of its upstart competitor on the left.

[Mish: The Financial Times is looking on the dark side of things. An early election could also lead to a stable outcome instead of an impossibly fragmented coalition that cannot last. Why assume the worst?]

At the same time, there is growing clamour from Spain's business and media establishment for some kind of three-way alliance between the PP, the PSOE and Ciudadanos.

Albert Rivera, the leader of Ciudadanos, also threw his weight behind such a link-up on Wednesday, pointing in particular to the risk posed by the Catalan independence movement. Spain, he said, needed a pact between the three parties "to guarantee the unity of Spain".

Mr Rajoy has invited Mr Rivera as well as Pablo Iglesias, the Podemos leader, for talks next Monday.

[Mish: Should the talks fail, accentuate the positives.]

Accentuate the Positives

Rajoy will be gone. 72% of voters wanted someone else!
A splintered coalition would have failed anyway.
Catalonia deserves the chance to self-govern if it so desires.
Talk of Spanish exit from the eurozone will be back in play.

Of course, if PP were to win the next election, Rajoy would be back in office, with points 1-4 negated. Some would view that as positive, others negative.

Positivity is in the eyes of the beholder.

Mike "Mish" Shedlock

4th Quarter GDPNow Forecast Plunges to 1.3% Following Housing and Other Data; What's Next?

Posted: 23 Dec 2015 10:41 AM PST

In the wake of recent data, the 4th quarter GDPNow Forecast dipped to 1.3% from 1.9% on December 16.

From the Atlanta Fed: "After yesterday's third-quarter GDP revision and this morning's personal income and outlays release, both from the U.S. Bureau of Economic Analysis, the nowcast for fourth-quarter real consumer spending growth fell from 2.6 percent to 2.1 percent. The nowcast for real residential investment growth fell from 8.0 percent to 0.9 percent after yesterday's existing-home sales release from the National Association of Realtors."

I took one look at recent housing data and concluded GDP would take a big hit vs. prior expectations. And that's precisely what transpired given the oversized plunge in residential growth from 8% to 0.9%.

But sometimes things do not turn out as appears intuitively obvious.

Such was the case following strong a construction report on December 1 in which the GDPNow model forecast took a dive only to recover on other data later, then plunge as we have seen today.

For an explanation as to how this happens, please see Why Does GDPNow Model Sometimes Move Counter to Economic Releases?

If Christmas sales are weak, 4th quarter GDP will be flirting with zero.

Mike "Mish" Shedlock

New Home Sales Rise Less Than Expected From Revised Sharply Lower October

Posted: 23 Dec 2015 10:06 AM PST

November new home sales came at a seasonally adjusted annualized rate (SAAR) of 490,000 vs. an economic consensus of 503,000. Worse yet, October's big gain was revised sharply lower from 495,000 to 470,000.

This is going to take a hit out of GDP estimates. Nonetheless Bloomberg manages to spin this as a big positive.

Rising construction is bringing supply into the housing sector and helping to lift new home sales, which rose 4.3 percent in November to what is still however a lower-than-expected annualized rate of 490,000. The month-to-month gain follows a very strong 6.3 percent rise in October which, however, has been revised sharply lower to 470,000 from an initial 495,000. Houses for sale rose 5,000 in the month to 232,000 which is up from 210,000 in November last year. At the current sales rate, supply is at 5.7 months which, because of the rise in sales, is down slightly from October. Still, rising permit data point to more homes coming into the market.

Price data are also constructive, up 6.3 percent in the month to a median $305,000 with the year-on-year, which had been negative, up 0.8 percent. Still, this is a modest year-on-year rate and, relative to the very strong 9.1 percent year-on-year sales gain, points to discounting. Prices in this report appear to have room to move higher.

Regional sales data have the West up more than 20 percent in the month with the year-on-year rate at plus 4.7 percent. Sales in the South, which is by far the largest region, rose 4.5 percent in the month for an outstanding year-on-year gain of 19.4 percent. The Midwest and Northeast both show monthly and yearly declines.

Sales of existing homes have been limping along but sales of new home sales, despite all the monthly volatility which is routine for this report, are solid and look to remain solid.

Synopsis

October's gains were revised to+6.3% from an initial reported gain of 10.7%. That would sound good except for the 12.9% plunge in September.

Bloomberg claims "new home sales are solid and look to remain solid" but that's puts a bright coat of paint on an a rather dull-looking reality.

New Home Sales

Volatility makes it hard to precisely determine the trend, but I took a stab in purple.

From May 2014 through February of 2015 home sales were generally strengthening. As with manufacturing, the trend has been generally weakening since then.

New One Family Homes Sold