Archive for September, 2016

  • Auto Sales & Assemblies

    Auto and light truck sales no longer growing

    - by Tom Sanderson

    Auto and light truck sales no longer growing

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks fell to 16.9 million in August, coming in below the consensus forecast (17.1 million). Sales were 4.6% below prior year sales and were down 5.0% from prior month. Year-over-year sales for our three month moving average was down 1.6%. Imported and domestic light truck sales performed much more strongly than auto sales. Year-to-date sales are up 0.5% over 2015, with light trucks up 8.0% and cars down 8.8%.

    Sales set an all time record in 2015 at 17.39 million, narrowly eclipsing 2000 (17.35 million) and 2001 (17.12 million). The full-year sales total for 2014 was 16.5 million up 6% from 15.6 million in 2013 and right in line with the prerecession 2001-2007 average (16.7 million). The recessionary low point for auto sales occurred during the first six months of 2009, when annualized sales averaged only 9.6 million units. Auto purchases represent a large portion of the typical household budget, and improving auto sales is directly correlated to rising confidence among American consumers. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

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  • ISM Manufacturing Index

    Manufacturing slows down in August

    - by Tom Sanderson

    Manufacturing slows down in August

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index fell to 49.4 in August from 52.6 in July. March broke a streak of 5 consecutive months of contraction in the manufacturing sector of the economy, and and began a streak of 5 consecutive months of expansion. August data shows the manufacturing sector is contracting again.  PMI came in below expectations (52.2). The New Order Index fell 7.8  points to 49.1. The Production Index fell by 5.8 points to 49.6. Of 18 manufacturing industries, only 6 reported monthly growth in August.

    After a slow start in January of 2014, PMI recovered, with a range of 54.3 to 58.1 for the balance of 2014. We did not see a reading above 53.9 in 2015, and that high mark was reached in January. This year we have not seen a number above June’s 53.2. An index over 50 indicates growth while a PMI under 50 represents contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December 2008 but then recovered more quickly than other areas of the economy.

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  • Housing Starts, Sales, and Inventory

    New home inventories fall on strong sales results

    - by Tom Sanderson

    New home inventories fall on strong sales results

    Single-family new home inventories fell to 233k in July (seasonally adjusted). Inventories had been rising since August 2015 but have leveled off over the last 6 months (low of 233k and high of 244k). July’s new home inventories were 18k (8.4%) above the prior-year level of 215k. New home inventories still remain low by historical standards.

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes completed  (+8k) more so than homes under construction (+5K) or homes not yet started (+5k).

    Inventory levels slowly increased throughout 2014, peaking at 212k in December. Inventories rose from 149k at the beginning of 2013 to 187k by December, following a year of remarkable stability in 2012 where the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories fell to 4.3 months of supply in July, from 5.2 months a year ago and 4.9 months in June. This is the lowest level of inventories since June 2013. Sales of single-family houses rose to 654k (seasonally adjusted annual rate), up 12.4% from revised prior month sales and up 31.3% from prior year. Year-to-date absolute sales are up 12.4% at 352k.

    Full year 2015 new home sales were up 14.6% to 501k. For the full year 2014, new home sales only grew by 1.9% to 437k units. The months of supply figure remained below 5 months between February 2012 and June 2013, but was 5.0 or more from that point through the end of 2014 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months. The average months of supply over the last 50 years is 6.1, so current new home inventory are well below “normal” levels. For the 9-year period of 1997 through 2005, the inventory level averaged 4.1 months with relatively little volatility, despite the dot-com boom and subsequent recession, and we are nearly at that level today.  The vertical bars in the graphs represent recessions.

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  • Ocean Freight

    Ocean rates surge on Hanjin receivership filing

    - by Tom Sanderson

    Ocean rates surge on Hanjin receivership filing

    West coast ocean spot market rates increased $593 (51%) to $1,746 on September 2, while east coast rates increased $757 (45%) to $2,441. The dramatic jump in spot market rates was driven by the August 31 receivership filing of Hanjin Shipping, the South Korean ocean carrier accounting for 8% of eastbound Transpacific trade volume and the 7th largest ocean carrier in terms of total capacity. Spot rates also spiked on July 1, with west coast rates up 61% and east coast rates up 19% in anticipation of August general rate increases. Rates had drifted slightly lower since the July 1 increase until the current spike. With two significant spikes, west coast spot rates are $290 (20%) above prior year levels and at their highest point since May 2015. East coast spot rates remain $231 (9%) lower than prior year despite two significant jumps over the summer.

    The spread between east and west-coast ports declined from a peak of $2,937 on 2/27/15 to $682 on 12/25/15, then immediately jumped back up to $1,037, but had since declined to $531 on 8/26 before jumping up to $695 after the Hanjin filing. The premium drops below $1,000 at some times, but typically not for very long. This year has been an exception as the spread has been below $1,000 for most of the year.Carrier’s clearly exercised their market power during the strike as shippers diverted freight to the east coast, but now even after recent increases, spot rates have corrected to levels considerably lower than those preceding the strike.

    The SCFI reflects spot market rates for the Shanghai export container transportation market.

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