Economic Reports 05/17/07
Summary: BOJ holding as GDP slows... HP revenue growing, but net income was down and EPS up on stock buybacks...
Benny & The Feds, don't worry about subprime spillover, be happy...
Initial Claims improving but the spillover from housing continues... Leading Indicators falling for Q107... Philly Fed, soft for 9th straight month, but, improving slightly...
Manufacturer's ability to pass increased input costs on to the consumer is dwindling as inventories keep backing up.
Carry On My Wayward Son... BOJ held interest rates at 0.50% as quarterly GDP came in lower than expected +2.4% vs +2.7%.
And the carry trade continues unabated, but traders should be wary of a BOC raise on the yuan...
Smoke and Mirrors... #1 PC manufacturer Hewlett Packard (HPQ) posted its strongest revenue growth since 2000 +13% and raised fiscal year profit forecasts.
However, net income was down -7% Yoy and HPQ repurchased $2.2 B shares during Q2...
providing more validation that numerous buybacks are making the most recent quarterly results, appear much better than they actually were.
Pay no heed to the man behind the curtain.... Fed Head Bennie Bernanke...
"We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."
"Although a leveling-off of sales late last year suggested some stabilization of housing demand, the latest readings indicate a further stepdown in the first quarter."
We scoffed at the so-called "stabilization" and remind that the avalanche has yet to gain exponential mass, and it will as it keeps rolling down the hill...
Initial Claims 05/12 down 5K to 293K vs prior 298K Full Report
Inside the number: prior revised up from 297K. 4 week MA -12K to 305.5K. Continuing claims -78K to 2.47M; 4 week MA -14K to 2.53M.
Less layoffs but the spillover from housing, automotive and manufacturing continues into construction, service, trade and finance:
STATES WITH AN INCREASE OF MORE THAN 1,000
State Change State Supplied Comment
TX +1,040 service, manufacturing
MO +1,099 trade, service
TN +1,151 computer, electronics, industrial machinery, primary metals, furniture, service
KS +1,764 construction, service, finance, information
KY +4,053 automobile, manufacturing
Leading Indicators Apr -0.5% vs prior +0.6% Full Report
Inside the number: prior revised up from +0.1%. 3rd decline in 4 months with index declining or remaining the same 3 of 6 months. The leading index is 0.7% below April 2006.
7 of 10 components falling and Q107 average was the first quarterly decline since Q301, the last recession. A quarterly decline in the leading indicators index has presaged 6 of the last 9 recessions.
Housing permits with the largest negative impact. Weaknesses among the leading indicators have been somewhat more widespread than the strengths over the past few months.
Only 2 components increased this month, stock prices and money supply. Manufacturers' new orders for consumer goods and materials was flat.
Declining: building permits, average weekly initial claims for unemployment, manufacturers' new orders for nondefense capital goods, consumer expectations, vendor performance, average weekly manufacturing hours, and interest rate spread.
Under the sheets, key indicators of a slowing economy falling sequentially (figures in millions of 1982 dollars to lessen the shock):
Manufacturers new orders for consumer goods down 3%; Dec $140,571 to Apr $136,417
Manufacturers new orders non defense capital goods down 7%; Dec $55,270 to Apr $51,384
Vendor performance (slower deliveries) slowing 5.8%; Dec 53.3 to Apr 50.2
Philadelphia Fed May +4.2 vs prior +0.2 Full Report
Inside the number: new orders up from 2.8 to 8.7; shipments up to 9.3 from 4.3; employment up to 12.9 from 2.5.
Improvements in unfilled orders up to (-9.1) from (-13.7); and delivery times up to (-8.2) from (-11.9).
Price pressure remains as inputs rise and inventories are still backing up...
prices paid up to 32.3 from 24.3; prices received down to 2.2 from 5.2; inventories down to (-6.9) from (-3.1).
Benny & The Feds, don't worry about subprime spillover, be happy...
Initial Claims improving but the spillover from housing continues... Leading Indicators falling for Q107... Philly Fed, soft for 9th straight month, but, improving slightly...
Manufacturer's ability to pass increased input costs on to the consumer is dwindling as inventories keep backing up.
Carry On My Wayward Son... BOJ held interest rates at 0.50% as quarterly GDP came in lower than expected +2.4% vs +2.7%.
And the carry trade continues unabated, but traders should be wary of a BOC raise on the yuan...
Smoke and Mirrors... #1 PC manufacturer Hewlett Packard (HPQ) posted its strongest revenue growth since 2000 +13% and raised fiscal year profit forecasts.
However, net income was down -7% Yoy and HPQ repurchased $2.2 B shares during Q2...
providing more validation that numerous buybacks are making the most recent quarterly results, appear much better than they actually were.
Pay no heed to the man behind the curtain.... Fed Head Bennie Bernanke...
"We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."
"Although a leveling-off of sales late last year suggested some stabilization of housing demand, the latest readings indicate a further stepdown in the first quarter."
We scoffed at the so-called "stabilization" and remind that the avalanche has yet to gain exponential mass, and it will as it keeps rolling down the hill...
Initial Claims 05/12 down 5K to 293K vs prior 298K Full Report
Inside the number: prior revised up from 297K. 4 week MA -12K to 305.5K. Continuing claims -78K to 2.47M; 4 week MA -14K to 2.53M.
Less layoffs but the spillover from housing, automotive and manufacturing continues into construction, service, trade and finance:
STATES WITH AN INCREASE OF MORE THAN 1,000
State Change State Supplied Comment
TX +1,040 service, manufacturing
MO +1,099 trade, service
TN +1,151 computer, electronics, industrial machinery, primary metals, furniture, service
KS +1,764 construction, service, finance, information
KY +4,053 automobile, manufacturing
Leading Indicators Apr -0.5% vs prior +0.6% Full Report
Inside the number: prior revised up from +0.1%. 3rd decline in 4 months with index declining or remaining the same 3 of 6 months. The leading index is 0.7% below April 2006.
7 of 10 components falling and Q107 average was the first quarterly decline since Q301, the last recession. A quarterly decline in the leading indicators index has presaged 6 of the last 9 recessions.
Housing permits with the largest negative impact. Weaknesses among the leading indicators have been somewhat more widespread than the strengths over the past few months.
Only 2 components increased this month, stock prices and money supply. Manufacturers' new orders for consumer goods and materials was flat.
Declining: building permits, average weekly initial claims for unemployment, manufacturers' new orders for nondefense capital goods, consumer expectations, vendor performance, average weekly manufacturing hours, and interest rate spread.
Under the sheets, key indicators of a slowing economy falling sequentially (figures in millions of 1982 dollars to lessen the shock):
Manufacturers new orders for consumer goods down 3%; Dec $140,571 to Apr $136,417
Manufacturers new orders non defense capital goods down 7%; Dec $55,270 to Apr $51,384
Vendor performance (slower deliveries) slowing 5.8%; Dec 53.3 to Apr 50.2
Philadelphia Fed May +4.2 vs prior +0.2 Full Report
Inside the number: new orders up from 2.8 to 8.7; shipments up to 9.3 from 4.3; employment up to 12.9 from 2.5.
Improvements in unfilled orders up to (-9.1) from (-13.7); and delivery times up to (-8.2) from (-11.9).
Price pressure remains as inputs rise and inventories are still backing up...
prices paid up to 32.3 from 24.3; prices received down to 2.2 from 5.2; inventories down to (-6.9) from (-3.1).
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