Sunday, April 12, 2009

The tax refunds have gotten to people in a timely fashion. Once that feeds through, then we’re left with the major negative of the labor market

TO BE NOTED: From Bloomberg:

"Retail Sales Probably Rose, Output Fell: U.S. Economy Preview

By Bob Willis

April 12 (Bloomberg) -- U.S. retail sales probably rose in March even as a drop in factory production and slower inflation signal the recession is far from over, economists said before reports this week.

Purchases increased 0.3 percent, the second gain in the last three months, according to the median estimate in a Bloomberg survey before the Commerce Department’s April 14 retail report. Industrial production dropped 0.9 percent, the 14th decline in the last 15 months, figures from the Federal Reserve may show.

Tax refunds and money from President Barack Obama’s stimulus plan are giving American consumers a temporary lift, easing the pain caused by the highest unemployment rate in a quarter century, plunging wealth and a lack of credit. Companies from General Motors Corp. to Gap Inc. are relying on incentives and promotions to move merchandise, keeping inflation in check.

“We’re seeing a little bit of a bounce from the consumer after a horrendous holiday season,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The tax refunds have gotten to people in a timely fashion. Once that feeds through, then we’re left with the major negative of the labor market.”

Autos sold at a 9.9 million annual pace in March, up from 9.1 million the previous month that was the lowest since 1981, according to industry figures. Incentive spending by automakers on each sale jumped 30 percent from a year earlier to a record $3,169, according to research firm

‘Sign of Hope’

“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on an April 2 call with reporters about the automaker’s results. “But if you look at the trends out there, there’s a lot of concern.”

Sales at clothing retailers including Gap and Limited Brands Inc. fell less in March than analysts projected as promotions lured shoppers. Still, large discounters like Wal- Mart Stores Inc. and department stores didn’t fare as well.

Consumer spending, which accounts for 70 percent of the economy, probably rose at a 0.5 percent rate in the first quarter, according to economists surveyed by Bloomberg last week. Purchases fell by an average 4 percent rate in the second half of 2008, the longest slide since 1991.

The gain will help slow the decline in growth. The world’s largest economy shrank at a 5 percent pace in the first three months of the year, following a 6.3 percent rate of contraction in the previous quarter that was the worst performance since 1982, according to the survey last week.

Trimming Stockpiles

Manufacturers cut output to trim the glut of stockpiles that piled up as spending sank at the end of 2008, contributing to the drop in gross domestic product. The projected drop in industrial production follows a 1.5 percent decrease a month earlier, economists said the Fed may report on April 15.

The first simultaneous global recession since World War II has caused prices to soften. The cost of living probably fell 0.1 percent in the 12 months ended March, according to economists surveyed ahead of the Labor Department’s consumer- price report on April 15. It would be the first year-over-year drop since 1955.

“Inflation will remain subdued,” the Fed said in its March 18 policy statement. The central bank has lowered its key rate to near zero and is flooding the market with cash to spur borrowing and spending.

Prices Soften

Prices at the wholesale level, due from the Labor Department a day earlier, were probably down 2.2 percent in March from the same time last year, according to the survey.

Other reports this week are projected to show home construction and consumer confidence held above recent lows. Commerce Department figures on April 16 may should housing starts dropped last month after surging in February. Still, the estimated 540,000 homes at an annual pace would be higher than the record low 477,000 reached in January.

The Reuters/University of Michigan preliminary consumer sentiment index for April, due on the 17th, rose to 58 from 57.3 last month, according to economists surveyed. The measure was at a three-decade low of 55.3 in November.

“All these indicators are still at extremely low levels,” Paul Dales, an economist at Capital Economics Ltd. in London, said in a note to clients. “So rather than being consistent with a recovery, they are simply showing that activity is no longer in freefall as it was at the end of last year.”

                        Bloomberg Survey

Release Period Prior Median
Indicator Date Value Forecast
PPI MOM% 4/14 March 0.1% 0.0%
Core PPI MOM% 4/14 March 0.2% 0.1%
PPI YOY% 4/14 March -1.3% -2.2%
Core PPI YOY% 4/14 March 4.0% 4.0%
Retail Sales MOM% 4/14 March -0.1% 0.3%
Retail ex-autos MOM% 4/14 March 0.7% 0.1%
Business Inv. MOM% 4/14 Feb. -1.3% -1.2%
CPI MOM% 4/15 March 0.4% 0.1%
Core CPI MOM% 4/15 March 0.2% 0.1%
CPI YOY% 4/15 March 0.2% -0.1%
Core CPI YOY% 4/15 March 1.8% 1.7%
Empire Manu. Index 4/15 April -38.2 -35.0
Net Long Term TICS $ Bl 4/15 Feb. -43.0 17.5
Total TICS $ Blns 4/15 Feb. -148.9 70.0
Ind. Prod. MOM% 4/15 March -1.5% -0.9%
Cap. Util. % 4/15 March 70.2% 69.7%
NAHB Housing Index 4/15 April 9 10
Initial Claims ,000’s 4/16 11-Apr 654 660
Cont. Claims ,000’s 4/16 4-Apr 5840 5858
Housing Starts ,000’s 4/16 March 583 540
Building Permits ,000’s 4/16 March 564 549
Philly Fed Index 4/16 April -35.0 -32.3
U of Mich Conf. Index 4/17 March F 57.3 58.0

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