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Friday, August 12, 2022

Demand remain strongs as economy hums along

Welcome to the FTR “Monday Morning Coffee” blog. The following article is intended to update busy executives with the latest economic data releases. This blog, which is published every Monday, promises to update our clientele with the latest weekly news and economic developments, highlighting its impact on the transportation, transportation and equipment markets. Hopefully this will be an informative addition to the fine workforce associated with FTR.

Overview

Wall Street ended on a higher note on Wednesday, raised by gains in technology stocks, while consumer names like Gap and Nordstrom fell after weaker quarterly results, warning of supply chain problems. The Dow Jones Industrial Average was down 0.03% to 35,804.38, while the S&P 500 was up 0.23% to 4,701.46 and the Nasdaq Composite was up 0.44% to 15,845.23. Consumer incomes and expenditures came in better than expected. Investors are worried about rising COVID cases in Europe. Also, various sources in the Federal Reserve said they are open to speeding up the liquidation of their bond purchase plan and moving faster to raise interest rates, the minutes of the last meeting were revealed.

Inflation is undoubtedly a counter-wind, but in October, at least, it was not strong enough to prevent consumers from spending. Price increases are not slowing, as the PCE depletor rose 0.6%, up 5.0% year-on-year and the core index rose 4.1%, the biggest jump since 1990. Real spending rose 0.7% in October. The fact that spending is holding up despite the highest price increases in 30 years is a testament to the power of the consumer. Another show of strength is the initial unemployment claims of 199,000, the lowest since the year Neil Armstrong went on the moon. The fact that the consumer is holding up against inflation is only one item, the consumer remains strong in housing as well. Existing home sales rose 0.8 percent in October. Sales reached a seasonally adjusted annual rate of 6.34 million. In other housing news, sales of new homes climbed 0.4% to a seasonally adjusted rate of 745,000.

The industrial sector is successful, despite supply chain problems and higher input prices. Durable product orders fell 0.5% in October, but this decline has been attributed to more than 20% in civil aircraft orders. There were signs of hope as orders for vehicles and spare parts rose by 4.8%, causing a two-month losing streak. Core product orders were up 0.6%, after rising 1.35 in September. Orders in October were broadly based, with advances in both primary and fabricated metals and computers and electrical equipment. The machines have fallen, but this sector has been very strong recently. The ordering trend indicates that demand is still exceeding supply.

Next week will be packed with economic data. The ISM production index, construction expenses, factory orders and wage bills will be released.

US Economy:

Durable U.S. products fell in October, but headlines were brighter. Durable product orders fell 0.5 percent in October, following a 0.4 percent decline in September. The decline in October was mainly due to a drop in airline bookings. To date, they have risen by 22.1% and easily rise above the pre-epidemic level. Core orders rose by 0.6% in October. Shipments rose by 1.5%, after rising 0.5% in September. Fulfilled orders rose by 0.2%, after rising. 0.7% in September. Inventory rose 0.76%, after a 1.0% increase in September. With low inventory, and supported by a strong consumer, demand for durable goods soared. Problems in the supply chain are expected to ease in 2022, but the pace of improvement is a big question.

The nominal deficit in commodities shrank more than expected in October, an early indication that trade may weigh on GDP growth in the fourth quarter. The commodity deficit shrank from $ 97 billion in September to $ 82.9 billion in October. Double-digit exports of food, food / beverages, industrial supplies and vehicles. Nominal imports of goods rose by only 0.5%. US 3onomy expanded at a healthy pace and its incentive efforts favored the local economy over the slower global pace. These forces preferred imports. However, as the global economy accelerates, export growth will accelerate. The volume of world trade increased sharply during the post-epidemic period. There are still supply chain issues and higher costs associated with recovery. The corona virus still affects many major manufacturing and transportation hubs in the supply chain around the world. Supply chain problems are expected to ease in 2022, but the recovery rate is still a big question.

Sales of previously owned homes have risen for the second month in a row, as the prospects for a rise in interest rates on the horizon have helped fuel demand. Existing home sales rose 0.8 percent in October, in the face of declining expectations. Sales reached a seasonally adjusted annual rate of 6.34 million. In other housing news, sales of new homes climbed 0.4% to a seasonally adjusted rate of 745,000. The market was limited by limited supply. There are now 6.3 months available at the current sales rate, compared to 6.1 in September. The average house price in October soared to a record $ 477,800, up 21% from a year earlier. Demand is expected to rise slightly in the fourth quarter, but high prices are pushing many buyers out of the market. The increase in inventory should cool the pricing. Consumers are seeing higher mortgage rates in the future and will accelerate purchases towards the same event.

Personal income rose 0.5% higher than expected in October. Income from salary and salary recorded a strong increase of 0.8%, which is the bulk of the increase in October. Interest income and dividends played a supporting role. Government transfers turned out to be a significant counterweight to income growth, as unemployment insurance payments fell more than 50% from September to October. Real personal spending rose 0.7% in October, after rising 0.3% in September. Expenditure on services increased by 0.5%. Commodity spending rose 1%, with car spending contributing for the first time since April. Price increases remained high, as the PCE depletor rose 0.6% in October. Excluding food and energy, the PCE Depleter was up 0.4% and up 4.1% from a year earlier. Most of the rise in prices is still considered transient and should calm down next year.

Important data released this week

The November ISM Production Index will be released on Wednesday, December 1 at 10:00 AM. The manufacturing index fell to 60.8 in November from 61.1 in September, still at a dizzying pace of production. The components of the index reveal how supply chain problems affect production. Unsurprisingly, the biggest advances in the sib index were the prices paid and the shipments of suppliers. There are few signs of improvement in the near term. The number of ships waiting to be loaded on the West Coast is still high and shipping costs from Asia to the West Coast are still six times higher than plague levels. Demand remains strong and we see the index recover to 61.2 December.

The October construction expense report will be released on Wednesday, December at 10:00 a.m. Construction spending fell 0.5 percent in September, with building materials availability and labor market shortages continuing to plague the industry. Residential construction has slowed recently but still increased by 19% year-on-year. Non-residential construction looks towards improvement. Dodge Data and Analytics reported a 29% jump in non-residential permits in October. We expect construction spending to soar 0.6% in October.

The November wage report will be released on Friday, December 3 at 8:30 p.m. Total wages outside the economy increased by 532K in October, a rise well above expectations. The net corrections of the previous two months were also positive. Stronger employment growth is expected in the card when COVID cases recede in November. It is possible that higher wages also attract people, although the employment rate remains unchanged. We expect wage numbers to increase by 600K by November.

The ISM Services Report for November will be released on Friday, December 3 at 10:00 AM. The ISM Services Report reached 66.7. The services economy is back and has some of the same supply chain problems as in the manufacturing sector. Part of the upward movement of the index is caused by the lengthening supply supply index. We expect the index to remain high, at 66, but this is a small setback.

The October Factory Orders Report will be released on Friday, December 3 at 8:30 p.m. Released durable goods orders have already dropped by 0.5% in October, a drop in drugs due to aviation weakness. Other parts of production are doing well, including an increase in the automotive sector. We expect a 0.2% increase for October.

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