Friday , August 23 2019

Warren Mosler

Warren Mosler is an American economist and theorist, and one of the leading voices in the field of Modern Monetary Theory (MMT). Presently, Warren resides on St. Croix, in the US Virgin Islands, where he owns and operates Valance Co., Inc.

Articles by Warren Mosler

Employment revision, US pmi, KC Fed, Archetecture index, German PMI, Australia PMI, Trump comments

1 day ago

Employment growth has been revised substantially lower. Note that one of the inputs used for estimating monthly employment is data from the weekly jobless claims report, which I had suggested would be misleading due to claims being made substantially harder to get over the last several years.

Employment: Preliminary annual benchmark revision shows downward adjustment of 501,000 jobs
The BLS released the preliminary annual benchmark revision showing 501,000 fewer payroll jobs as of March 2019. The final revision will be published when the January 2019 employment report is released in February 2020. Usually the preliminary estimate is pretty close to the final benchmark estimate.
Each year, the Current Employment Statistics (CES) survey employment estimates are

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Mtg apps, Existing home sales, Freight, Germany, Greenland

2 days ago

The surge in refinancing is easing as the related index, after spiking 37.0 and 12.0 percent in the two prior weeks, rose only 0.4 percent in the August 16 week. Yet rates did move lower in the week, down another 3 basis points to 3.90 percent for conventional 30-year loans and down nearly 20 basis points over the past month. Mortgage-related gains for the purchase index have been much more subdued with this index up 0.4 percent in the latest week and the year-on-year increase slowing sharply to 5.0 percent. The slowing in the purchase index will not be lifting expectations for home sales which have been struggling to move higher this year.

Maybe try to buy Denmark?

U.S. President Donald Trump said he was postponing a scheduled meeting with Denmark’s

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Japan exports, RV sales, Tariff delays

4 days ago

Japan Exports Fall for 8th Month
Exports from Japan dropped 1.6 percent from a year earlier to JPY 6.64 trillion in July 2019, the eighth straight month of decrease and compared to market expectations of 2.2 percent fall, amid weakening global demand and the US-China trade dispute.

An Economic Warning Sign: RV Sales Are Slipping
Elkhart, Ind., is flashing a warning sign that a recession could be just ahead.
Capital of the country’s recreational-vehicle industry, the northern Indiana city and the surrounding area are watched by economists and investors for early indications of waning consumer demand for luxury items, often the first sign of economic anxiety.
Shipments of recreational vehicles to dealers have fallen about 20% so far this year, after a 4.1% drop last

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Inventory/sales ratio, PMI’s, Housing starts, Consumer Sentiment

6 days ago

Still elevated:
Not looking good:
Starts down and rolling over, permits up for the month but still trending lower, as per the charts:

A slow turn upward is the indication from a mixed but still positive housing starts and permits report for July, headlined by a much lower-than-expected rate for starts and a much higher-than-expected rate for permits.
Starts, at a total 1.191 million annual rate, were dragged lower by a sharp fall for multi-family homes to a 315,000 annual rate and 2.8 percent contraction from July last year. Yet starts for single-family homes, which are key for the residential component of GDP, actually rose to a 876,000 rate for a 1.9 percent year-on-year gain.
The news on permits, at a total 1.336 million rate, is strong throughout including

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Industrial production, Retail sales, Housing index, NY manufacturing, Trump comments

8 days ago

Tariffs doing their thing to the US economy:

A jump in utility output couldn’t save industrial production in July which, pressured by contraction in both manufacturing and also mining, came in near the low end of Econoday’s consensus range with a 0.2 percent decline. Utilities, where production is affected by the weather and where results are often volatile, jumped 3.1 percent in the month following a 3.3 percent June decline. Outside of this component, however, positives in the July report are scarce.
Manufacturing production fell 0.4 percent in the month to miss the low end of the consensus range. Construction supplies fell 1.0 percent in the latest uneven indication for this sector while motor vehicles, where production had been on the rise, edged back 0.2

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Germany, Euro IP, China

9 days ago

German Economy Contracts in Q2 as Exports Fall
Germany’s gross domestic product contracted by a seasonally-adjusted 0.1 percent on quarter in the three months to June 2019, following a 0.4 percent expansion in the previous period and matching market expectations, a preliminary estimate showed. Net external demand contributed negatively to the GDP, mainly due to a slump in exports, while fixed capital formation in construction also declined.

China Industrial Output: Growth at Over 17-Year Low
China’s industrial production increased 4.8 percent year-on-year in July 2019, the weakest annual gain since February 2002 and below market consensus of 5.8 percent, on the back of

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China news, CNBC small business survey

11 days ago

China Vehicle Sales Fall for 13th Month
Vehicles sales in China decreased 4.3 percent from a year earlier in July 2019, the 13th consecutive month of decline, as the economy slows further amid the trade spat with the US. Sales of new energy vehicles (NEVs) tumbled 4.7 percent to 80,000 units, the first yearly drop in more two years, following China’s move to cut NEV subsidies last month.

Interesting how the chart shows the belief trade policy would help increased for a bit before going back down:

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Auto sales, Auto cutbacks, Central bank gold buying

13 days ago

Peaked a few years ago and trending lower:

BEA: July Vehicles Sales decreased to 16.8 Million SAAR
The BEA released their estimate of July vehicle sales on Tuesday. The BEA estimated sales of 16.82 million SAAR in July 2019 (Seasonally Adjusted Annual Rate), down 1.8% from the June sales rate, and down slightly from July 2018.
Sales in 2019 are averaging 16.9 million (average of seasonally adjusted rate), down 1.5% compared to the same period in 2018.

Automakers trim production as market weakens – but hope to avoid wholesale cuts of a decade ago
Industry officials, including General Motors CEO Mary Barra, say they learned critical lessons during the last recession and hope to be more proactive this time around, adjusting production early to stay in line with market

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Bankruptcy cuts, Wholesale trade, Turkey

15 days ago

Bankruptcy-related job losses invoke grim reminders of Great Recession
In the first seven months of the year, U.S.-based companies announced 42,937 job cuts due to bankruptcy, up 40% from the same period last year and nearly 20% higher than all bankruptcy-related job losses last year, a report released Tuesday concluded. Despite record-low unemployment, bankruptcy filings have not claimed this many jobs since the Great Recession.“It is the highest seven-month total since 2009 when 50,258 cuts due to bankruptcy were announced,” according to the report by outplacement and business coaching firm Challenger, Gray & Christmas. “In fact, it is higher than the annual totals for bankruptcy cuts every year since 2009.”

Not good, sales in contraction:

Inventories in

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Germany, Argentina, Rate cuts

16 days ago

Deep into global industrial contraction:

Not that rate cuts are expansionary, of course, but that they think they are. As the barber quipped, ‘no matter how much I cut off, it’s still too short’ :

Central Banks Across Asia Cut Interest Rates
The Reserve Bank of India cut its benchmark repo rate for a fourth straight meeting by a deeper-than-expected 35bps to 5.4%; the Reserve Bank of New Zealand slashed its official cash rate/OCR by a larger-than-expected 50bps to a fresh record low of 1%; and the Bank of Thailand unexpectedly lowered its policy rate by 25bps to 1.5%.

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JOLTS, Exports, Lumber prices, Trump comments

17 days ago

Openings have rolled over and hires gone flat. Neither are population adjusted so it’s worse than it looks here:
New export orders now below 2016 collapse:

All these statements are entirely false, of course, but interesting how the ’45 year’ statement repeats- seems somehow he’s ‘connecting’ it to him being the 45th President?
[embedded content]

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ISM, Canada

18 days ago

US service sector continues its rapid deceleration:

Seems about the same everywhere- imports and exports both down:

Canada’s trade surplus decreased to CAD 0.14 billion in June 2019 from a downwardly revised CAD 0.56 billion in the previous month and against market expectations of a CAD 0.3 billion gap. It was the third trade surplus since December 2016, as exports were down 5.1 percent, while imports fell at a softer 4.3 percent, both due in part to significant decreases in crude oil, as well as aircraft and other transportation equipment and parts. Balance of Trade in Canada averaged 1281.20 CAD Million from 1971 until 2019, reaching an all time high of 8524.80 CAD Million in January of 2001 and a record low of -4962 CAD Million in December of 2018.

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Employment, Factory orders, Trade, Construction

21 days ago

Deceleration continues- see chart:

How far along the rate-cut path will the Fed go? Maybe a bit further given a middling employment report where an important detail is pointing to big trouble for the next industrial production report. First the headlines as nonfarm payroll rose 164,000 which is actually 13,000 above Econoday’s consensus for 151,000. But much of the strength came for a second month from government payrolls which, reflecting the heavy government spending that’s underway, rose 16,000 to top June’s 14,000 rise. Private payrolls, which exclude government payrolls, rose 148,000 which, in contrast to the nonfarm headline, is 12,000 under Econoday’s consensus.
But a key detail is a decline in manufacturing hours, at 40.4 hours in the weeks and down

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ADP, Chicago PMI, Buy backs, Domestic product sales

23 days ago

Rolling over:

ADP estimates that private payroll growth in Friday’s employment report for July will rise 156,000. Econoday’s consensus for this estimate was 155,000 and forecasters see actual private payrolls coming in at 160,000 in Friday’s report vs 191,000 in June.

In the lowest reading in 4-1/2 years, the Chicago PMI fell 5.3 points in July to 44.4. New orders sank deeper into contraction with employment falling into contraction for the first time in nearly two years and to its deepest level of contraction in nearly 10 years. Production is also at a 10-year low and given the indications on new orders, may weaken further in the reports to come. This sample was flying high as recently as February this year, holding for a year-and-a-half in the

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Personal income and consumption, Home prices, Pending home sales, Oil capex, Euro area

24 days ago

Income and consumption is growing at lower but moderate pace, but has been decelerating since the tariffs started to bite and global trade began its collapse:

The month-to-month breakdown of consumer spending shows slowing in what will offer support for those on the FOMC who want to cut interest rates this week. Despite the strength of June retail sales, total consumer spending in the month rose only 0.3 percent following gains of 0.5 percent in May and 0.6 percent in April. Spending on both goods and also services shows this similar pattern.
Monthly data on income and also core inflation are steady in the monthly sequences, at 0.4 percent for April through June on income and at 0.2 percent each month for core PCE inflation (ex-food ex-energy). The year-on-year

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GDI, Productivity, China pmi, Dallas Fed

25 days ago

Gross domestic income was just revised higher. The blue bars are the previously reported levels and the red bars are the revised levels. This further meant that the savings rate unspent income) was higher as previously discussed. And an increasing savings rate generally reflects a deceleration in borrowing:

Lack of aggregate demand- desires to not spend income not being sufficiently ‘offset’ by’ private or public sector net (deficit) spending:
I see deceleration in both, just less so in services:

Texas manufacturing activity bounced back but not as much expected in July, with the general business activity index rebounding by 5.8 points from June’s three-year low though remaining in contraction at minus 6.3. The production index also improved slightly, rising

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Durable goods, KC Fed, Mtg purchase apps, New home sales, US and euro area PMI’s, Trump quote

28 days ago

Year over year in contraction. And the chart is not adjusted for inflation:

Lower rates don’t seem to be helping:

The purchase index continues to pull back in what is an unfavorable indication for underlying home sales. After falling 4.0 percent in the prior week, the index fell 2.0 percent in the July 19 week to pull down year-on-year growth to 6.0 percent. Refinancing activity has also been coming down, 2.0 percent lower in the week. Rates fell back in the week, down 4 basis points to 4.08 percent for conventional 30-year loans.

Still rolling over from what are already historically depressed levels, with tariffs now widely mentioned:

The housing trend is visibly fading at the half-way point, opening the year on a solid rise before

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Mtg purchase apps, New home sales, US and euro area PMI’s, Trump quote

29 days ago

Lower rates don’t seem to be helping:

The purchase index continues to pull back in what is an unfavorable indication for underlying home sales. After falling 4.0 percent in the prior week, the index fell 2.0 percent in the July 19 week to pull down year-on-year growth to 6.0 percent. Refinancing activity has also been coming down, 2.0 percent lower in the week. Rates fell back in the week, down 4 basis points to 4.08 percent for conventional 30-year loans.

Still rolling over from what are already historically depressed levels, with tariffs now widely mentioned:

The housing trend is visibly fading at the half-way point, opening the year on a solid rise before flattening out and slowing in May and June. This is true of existing home sales which were

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Existing home sales, Richmond Fed, UK factory orders, Chemical Activity Barometer

July 23, 2019

Worse than expected and in contraction year over year:

The housing market firmed in the early Spring but has since flattened out. Existing home sales came in softer-than-expected at a 5.270 million annual rate in June which, however, is right in line with the 3-month average of 5.280 million. This average started the year at roughly 5.1 million.
Single-family resales fell 1.5 percent in the month to a 4.690 million pace while condo sales, the second and much smaller component in the report, fell 3.3 percent to 580,000. By region, the Northeast and Midwest posted mid-single digit monthly gains with the South and West posting mid-single digit declines.
For home sellers, the good news is centered in prices which rose a sharp 2.7 percent to a median $285,700. For

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Housing starts, Architecture index, Foreign home buyers

July 18, 2019

Rolled over and on the decline and from highs that were at historically depressed levels:
Now in contraction:

From the AIA: Design services demand stalled in June, Project inquiry gains hit a 10-year low
Demand for design services at architecture firms decreased in June in comparison to the previous month, according to a new report today from The American Institute of Architects (AIA).
AIA’s Architecture Billings Index (ABI) score for June was 49.1, which is down from 50.2 in May. Any score below 50 indicates a decrease in billings. Both the project inquiries index and the design contracts index continued to soften in June but remained positive.

Foreign purchases of American homes plunge 36% as

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Trucking index, Tariffs, Singapore exports, Turkey retail sales

July 17, 2019

FTR Trucking Conditions Index weakens in May

The President is in no hurry because he narrowly views the some $5 billion/mo in tariff revenues as a profit for the US at China’s expense, totally insensitive to the global economic downturn this ‘tax hike’ has created:

Trade war to drag on as Trump says long way to go and China strikes hard-line tone

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Retail sales, Industrial production, Housing index, Business inventories

July 16, 2019

Better than expected:

HighlightsTaking out a policy-insurance rate cut when the main driver of the economy is booming sounds a little counter-intuitive, in retail sales results that came in much stronger than expected in June. Total sales rose 0.4 percent in the month with ex-auto sales also up 0.4 percent — both of these hit the top end of Econoday’s consensus range. Easily surpassing the top end of the consensus range are two of the report’s key core readings with less auto & less gas and also the control group up very sharply at 0.7 percent gains on the month.
Strength abounds in this report with the isolated weak points led by gasoline stations, where price effects tied to lower oil prices pulled down sales by 2.8 percent, and also department stores, an ailing segment

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Manhattan home prices, Capital goods imports, Rails, Euro area industrial production, China imports

July 13, 2019

Still in contraction:

China Imports Tumble in June
Imports to China plunged 7.3 percent from a year earlier to USD 161.86 billion in June 2019, much worse than forecasts of a 4.5 percent drop, a further sign of weak domestic demand that could lead Beijing to add more stimulus. Purchases fell for: unwrought copper (-27.2 percent); iron ore (-9.7 percent); and soybeans (-25.1 percent) amid higher tariff on US cargoes and following outbreaks of African swine fever. By contrast, increases were seen in imports of crude oil (15.2 percent) and coal (6.4 percent). Among China’s largest trade partners, imports fell from the US (-31.4 percent), South Korea (-21.9 percent), Taiwan (-7.4 percent) and Japan (-5 percent), but grew from the EU (8.6 percent), Australia (8.8 percent)

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Employment, China, Trump speech

July 5, 2019

The annual rate of change continues to take a dive:

There’s still time to cancel your rate-cut party. Nonfarm payrolls shot 224,000 higher in June and well beyond Econoday’s consensus range where the high forecast was 205,000. There are no flukes in this report underscored by a 17,000 jump for what has been an uneven manufacturing sector that Federal Reserve policy makers are watching with concern. Payrolls at professional & business services jumped 51,000 as employers scramble to meet demand with contractors. Government payrolls, up 33,000, were also a large contributor to June’s growth.

China says there will be no trade deal unless existing tariffs are stripped

Continuing evidence that dementia is setting in:

“In June of 1775, the Continental Congress

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Small business indicators, China business survey, Car sales, FDI, Euro retail sales

July 4, 2019

Light vehicle sales peaked a while back:
Been helping to support the $US:

Eurozone Retail Sales Fall Unexpectedly
Retail trade in the Euro Area fell 0.3% in May, following a 0.1% drop in April and missing expectations of a 0.3% growth, as sales declined for all main categories. Among the bloc’s largest economies, Germany’s retail trade decreased for the second month, while gains were recorded in France and Spain. Year-on-year, retail sales rose 1.3%, also missing forecasts of 1.6%.

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