It's The Economy Stupid: Income, Spending, Prices, Home Sales, Manufacturing

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Personal Income	MAR	0.4%	0.2%	1.1%
Personal Spending	MAR	0.0%	0.2%	0.7%
PCE Deflator MoM	MAR	-0.1%	-0.1%	0.4%
PCE Deflator YoY	MAR	1.0%	1.0%	1.3%
PCE Core MoM	MAR	0.1%	0.0%	0.1%
PCE Core YoY	MAR	1.2%	1.1%	1.3%
Pending Home Sales MoM	MAR	1.0%	1.5%	-0.4%	-1.0%
Pending Home Sales YoY	MAR	6.1%	5.8%	5.0%	4.3%
Dallas Fed Manufacturing Activity	APR	5.0%	-15.6%	7.4%

 

There’s a lot of stuff here to look at.

 

Personal Income & Personal Spending

The Commerce Department’s report showed Americans’ incomes increased 0.2 percent in March after climbing 1.1 percent the prior month. The Bloomberg survey median called for a 0.4 percent gain. Wages and salaries rose 0.2 percent after climbing 0.7 percent. Disposable income, or the money left over after taxes, rose 0.3 percent after adjusting for inflation. It advanced 0.7 percent in the prior month.

 

Personal Spending increased by 0.2 percent in March. The median estimate in a Bloomberg survey of 74 economists called for little change in March personal spending. Projections ranged from a -0.2 percent drop to gains of 0.4 percent.  The PCE Deflator YoY, an index of inflation tied to spending patterns, increased 1 percent from a year earlier, the smallest gain since October 2009.   Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, purchases rose 0.3 percent for a second month, today’s report showed.

 

Pending Home Sales

More Americans than forecast signed contracts in March to buy previously owned homes, another indication of progress in the housing market.  The index of pending home sales increased 1.5 percent after a revised 1 percent decline the prior month that was larger than initially reported, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1 percent increase, according to the median estimate in a Bloomberg survey.

    

Dallas Fed Manufacturing Activity

Business activity among Texas-area manufacturers fell sharply into contraction this month, according to a report released Monday by the Federal Reserve Bank of Dallas.  The bank said its general business activity index plunged to -15.6 in April after it increased to a year-high of 7.4 in March from 2.2 in February.  The April reading is the lowest since July 2012, the report said. Readings below 0 indicate contraction, and positive numbers indicate expanding activity.

 

The Dallas Fed survey joins other regional Fed reports that show the factory sector is struggling this month as the economy overall faces another spring slowdown. 

 

 

 

 

 

 

 

 

 

Bridgewater Daily Observations - "Friday's GDP report highlighted the ongoing recovery in private sector demand ..."

Subject: Bridgewater Daily Observations - "Friday's GDP report highlighted the ongoing recovery in private sector demand ..."

Friday's GDP report highlighted the ongoing recovery in private sector demand and investment despite the fiscal drag and was roughly consistent with our overall picture of US growth running at about 2.5% in the first quarter. The private sector was stronger than the headline number as both personal spending and housing expanded at a healthy pace, while the overall report was weighed down by significant military spending cuts. Of course, the GDP report is a bit stale at this point, and more recently we are seeing some signs of a slight moderation in US growth. This cooling may continue as households adjust to higher taxes, business investment continues to slow, and the sequestration cuts flow through. That being said, the Fed continues to run very accommodative monetary policy, and households are increasingly able to respond to this stimulation, which has helped cushion some of the impact of the fiscal tightening. So overall, we don't expect growth to slow materially, with the potential for stronger growth rates later in the year as the fiscal drag fades.

Over the last six months, the US private sector has been expanding at a 3-3.5% pace, and of course, growth would likely have been even stronger without the hit to incomes from the fiscal tightening (both higher taxes and lower expenditures).

The ongoing expansion in private sector spending has taken place despite the increasing pullback from fiscal policy. Tax increases early this year are reducing household incomes and thus spending, while the impact of sequestration cuts will increase over the next several months.

Overall, our estimate is that the total fiscal drag will account for about 1.5% of GDP over the course of the first nine months of 2013 but will then likely fade late in the year and into 2014.

The GDP Report
The details of the GDP report corroborate our picture of the broader dynamics we've seen in other indications of US conditions:

* Household demand expanded at a healthy clip in the first quarter. This acceleration in spending has taken place even as pre-tax income growth rates remain mediocre, and despite a broad-based increase in taxes. Gradually healing balance sheets combined with ongoing significant monetary stimulation and rising asset prices have allowed households to absorb some of the fiscal hit via declining savings rates. That being said, household spending along with consumer confidence did slow some in March, as some
of the tax effects are now likely flowing through.

* Housing is now a moderate support to growth both through direct and indirect channels. Residential fixed investment has been expanding at an annualized pace of almost 15% for a year and a half now, and it was only a bit below that in the first quarter. However, housing construction only makes up about 2.5% of GOP now, so the overall impact on GOP was modest, at about 0.3%. Home sales and prices are also rising at a reasonable pace, so the indirect effects from housing are becoming increasingly supportive.

* Business investment was mediocre, expanding at a 2% annual pace in the first quarter, which is significantly slower than earlier in the expansion. The catch-up phase in business fixed investment is now behind us as spending levels are no longer depressed,
and at this point investment is likely to more closely track demand. While domestic sources of demand are relatively healthy, external sources have slowed in recent quarters.

* Government direct spending and investment is only one way in which fiscal policy impacts growth in the short term, but it has been a significant negative drag on the economy over the last three years. State and local governments were forced to cut back aggressively, military expenditures were pared back and federal spending growth stagnated. Government expenditures make up 18% of GOP and have contracted by 7% since peaking in late 2009. The pace of contraction was high in the first quarter, driven primarily by military cuts. All pieces of government expenditures have been weak in recent years, though state and local governments have been getting less weak while the federal government has become a larger direct drag.

* An increase in inventories created a modest +1 % boost to growth in the first quarter. This was an offset to the drop last quarter. At this point in the business cycle inventories should not have much of an impact over time.

* Trade was a drag on growth this quarter (-0.5%), consistent with US demand being healthier than external demand. Import growth was relatively strong at 5.4% while exports expanded by 2.9%. Of course, the strength in imports is reflective of healthy domestic demand even if it counts as a negative in GOP accounting.

It's The Economy Stupid: Market Close

Description	Ticker	Last	CHANGE	% Chg Today	Pct Chg 1Yr
STOCK MARKETS
Dow Jones Industrial Average	INDU Index	14712.550	11.7500	0.0799	11.4197
S&P 500 Index	SPX Index	1582.300	-2.8600	-0.1804	13.0773
S&P 400 Mid Cap Index	MID Index	1141.170	-5.1700	-0.4510	14.7363
S&P 600 Small Cap Index	SML Index	466.570	-2.3100	-0.4900	15.0517
NASDAQ 100 Index	NDX Index	2840.546	-8.1090	-0.2847	4.2314
NASDAQ Composite Index	CCMP Index	3279.263	-10.7230	-0.3259	7.4953
Russell 3000 Index	RAY Index	940.050	-2.1100	-0.2240	13.4039
Russell 1000 Index (Large Cap)	RIY Index	877.950	-1.7500	-0.1989	13.3336
Russell 2000 Index (Small Cap)	RTY Index	935.250	-5.0300	-0.5349	14.2876
Wilshire 5000 Total Market	W5000 Index	16695.790	-37.4400	-0.2237	13.5393
TREASURIES	% Yield
3 Month Treasury	0.0558		0.0000	0.0000
6 Month Treasury	0.0862		0.0000	0.0000
2 Year Treasury	0.2112	99.828	0.0273	0.0274
5 Year Treasury	0.6807	99.727	0.1484	0.1491
10 Year Treasury	1.6633	103.039	0.4141	0.4035
30 Year Treasury	2.8611	105.281	0.9063	0.8683
ENERGY
Crude Oil, Brent Index	Brent Crude	102.860	-0.5500	-0.5319	-9.3279
Crude Oil, Louisiana Lt. Sweet	LA Lt Sweet	104.190	-0.8500	-0.8092	-14.0000
Natural Gas, Henry Hub Index	Nat Gas	4.152	-0.0150	-0.3600	28.4653
PRECIOUS METALS
Spot Gold $/oz	GOLD	1457.850	-10.0300	-0.6833	-12.0234
Spot Silver $/oz	SILVER	23.933	-0.4660	-1.9100	-23.0248
CURRENCIES
Euro	EUR Curncy	1.303	0.0017	0.1307	-1.4147
Japanese Yen	JPY Curncy	98.010	-1.2400	-1.2494	-17.3403
British Pound	GBP Curncy	1.548	0.0048	0.3110	-4.3373
Swiss Franc	CHF Curncy	0.943	-0.0019	-0.2011	-3.5748
Canadian Dollar	CAD Curncy	1.017	-0.0031	-0.3040	-3.1674
Chinese Yuan	CNY Curncy	6.165	-0.0057	-0.0924	2.0357
FOREIGN INDICIES
FTSE 100 INDEX	UK	6426.420	-16.1700	-0.2510	11.7887
CAC 40 INDEX	FRANCE	3810.050	-30.4200	-0.7921	17.9830
DAX INDEX	GERMANY	7814.760	-18.1000	-0.2311	15.9477
NIKKEI 225 INDEX	JAPAN	13884.130	-41.9500	-0.3012	45.8281
HANG SENG INDEX	HONG KONG	22547.710	146.4700	0.6538	8.7085

 

 

 

 

 

 

 

 

 

 

 

 

 

FW: Bridgewater Daily Observations - "Is a US Manufacturing Renaissance Beginning?"

Dang! Bridgewater almost sounds optimistic!

Bridgewater Daily Observations - "Is a US Manufacturing Renaissance Beginning?"

Is a US Manufacturing Renaissance Beginning?

US competitiveness is stronger than it has been in years. For a while now, there have been anecdotal suggestions that global manufacturers might be relocating to the US to take advantage of the lowest relative US wages in over a decade and the cheap energy costs created by the recent US energy boom. We are starting to see evidence that improving US competitiveness is flowing through. The US has begun to reverse a decade of losses in global export markets and is now gaining global market share faster than any country other than China. It has been gaining share in industries like autos, machinery, and electronics for the first time in decades, and these competitiveness gains have been a moderate support to growth. Additionally, there are signs that investment is ramping up in manufacturing industries most sensitive to energy costs. Chemical manufacturing, where production costs are dominated by energy, is seeing the strongest new investment and employment growth in decades. There are also hints of increasing investment in industries where there is an advantage created by proximity to chemical production or from cheap electricity. All of these impacts, taken together, are now adding up to something like 0.50% to US growth and will be a positive support to the US balance of payments.

So here are their pertinent points

U.S. relative wages are the lowest they have been in over a decade

U.S. manufacturing unit labor costs have decreased relative to our piers

Natural Gas prices and electricity prices in the U.S. have decreased relative to our piers

t's The Economy Stupid: Gross Domestic Product Growth Rate

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
GDP QoQ Annualized	1Q A	3.0%	2.5%	0.4%
Personal Consuption	1Q A	2.8%	3.2%	1.8%
GDP Price Index	1Q A	1.3%	1.2%	1.0%
Core PCE QoQ	1Q A	1.1%	1.2%	1.0%

 

Advance Q1 GDP Shows 2.5% Growth

 

Real gross domestic product (GDP) — the output of goods and services produced by labor and property located in the U.S. — increased at an annual rate  of 2.5% in the first quarter of 2013, according to the advance estimate released by the Commerce Department Friday.

 

The GDP growth was short of the 3% increase projected by economists polled by Thomson Reuters, but was much stronger than the 0.4% increase reported in the final quarter of 2012.

 

The advance estimate is an early picture based on incomplete data, and will be revised twice in the coming the months.

 

Personal consumption expenditures increased at an annual rate of 3.2% in the first quarter, after rising at a 1.8% annual rate in the fourth quarter of 2012. That represents the largest quarterly PCE upturn since a 4.1% increase in the final quarter of 2010.

 

The core PCE deflator was up 1.2% in the quarter after a 1.0% gain in the final quarter of 2012. Economists expected a 1.3% rise.

 

Final sales of domestic product grew 1.5% in the period, after 1.9% growth in the prior three months. Economists expected a 2.3% increase.

Exports of goods and services rose 2.9%. Imports, which are a subtraction from GDP, increased 5.4% in the first quarter of 2013. The last time imports increased that much in a quarter was the third quarter of 2010, when imports jumped 13.9%.

 

The overall GDP increase reflected a rise in private inventory investment, the acceleration of PCE, increased exports, and a smaller decline in federal spending, the Commerce Department said.

 

Those factors were partly offset by the increase in imports and a deceleration in nonresidential fixed investment. Decreased levels of state and local government spending, which fell 1.2%, were also negative factors for the GDP.

 

The preliminary estimate of GDP growth in the first quarter of 2013, based on more complete data, is scheduled for release May 30.