note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs, and also left us with less options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....





Sunday, February 10, 2013

CBO’s outlook, December’s trade, factory orders, & consumer credit, & ISM’s January NMI

US Federal Government Budget Surplus Deficit there was quite a bit of buzz this week with the release of the CBO's (Congressional Budget Office) latest annual tome "The Budget and Economic Outlook: Fiscal Years 2013 to 2023" (77pp pdf; html summary here); there's always a notable disconnect in the blogosphere with these releases, as the inaccuracy of previous forecasts is put aside and what's now forecast 10 years out is discussed as if it were gospel...but it's still worth noting some of the main points, as long as we stay aware that it's all likely to change with the next drop of a congressional hat...for starters, CBO assumes that all laws affecting government spending and revenues remain in place, including the $1.2 trillion of sequestered spending cuts over ten years that we looked at 2 weeks ago, and which are now scheduled to kick in on March 1st; so far, that seems likely, as there has been little movement in the House to delay or change them, despite pressure from defense hawks in the Senate to restore at least part of that department's large budget cuts...at any rate, the CBO forecasts which garnered the most attention were the expectation of a decline in the federal budget deficit from 7% of GDP in 2012 to 5.3% this year, and then as a recovery takes hold in fiscal 2014, further declines to 3.7% of GDP, and then to 2.4% of GDP in fiscal 2015, at which time the economy will be growing faster than 4% per annum and revenues will be 25% higher than currently...they then expect deficits as a percentage of GDP to start to creep up over the remaining years, as the economy slows and the health care costs for baby boomers increase, which we can see graphed in blue on the adjacent chart from bill mcbride, which also shows in purple deficits by that same metric back to 1980.....CBO also expects the unemployment rate to stagnate under the weight of budget cuts and tax increases at 8% for the remainder of this year, adding just enough jobs monthly to keep up with population growth, and only gradually improve to average 7 1/2 percent through 2014, making 6 years the longest period of unemployment that high in the past 70 years..

 U.S. Trade Deficit there were also a handful of monthly economic reports that we should take a look at. too...we'll start with the surprisingly lower trade deficit in goods & services for December from the Dept of Commerce, because with the much better than expected results, it seems likely that the 4th quarter GDP reported last week as negative will be revised to show modest growth when the next GDP estimate is released at the end of this month...the goods and services trade deficit for December came in at $38.5 billion, down from $48.6 billion in November, as December's exports of $186.4 billion were $3.9 billion more than November exports of $182.5 billion, while December's imports of $224.9 billion were $6.2 billion less than November's imports of $231.1 billion...exports of goods increased $3.3 billion to $132.6 billion, and imports of goods decreased $6.1 billion to $188.8 billion, resulting in a goods deficit of $56.2 billion, $9.4 billion less than the November goods deficit...the real change in exported goods for the 4th quarter is now an increase of 5.9% at an annual rate, in contrast to the estimated decline of goods exports at 7.9% annualized rate as reported by the BEA last week,. while goods imported fell at a rate of 3.5% rather than the estimated rate of 2.7% from BEA; this unexpected improvement is expected to boost 4th quarter GDP by between 0.3% and 0.6%...
   the largest boost to December exports came from a $3.8 billion month over month increase in sales of industrial supplies and materials, which was partially offset by a decrease of $0.4 billion in exports of capital goods, a $0.3 billion decrease in exports of automotive vehicles, parts, and engines, and a $0.2 billion decrease in exports of consumer goods...the largest monthly decrease in imports was a $4.24 billion decline in the broad industrial supplies and materials category, as crude oil imports alone dropped -$3.3 billion, partially due to a decline in the average price of oil from $97.45 per barrel in November to $95.16 in December, but also due to a decline in the volume of oil imports to 1997 levels; it's clear on bill mcbride's above chart that the smaller oil deficit in black is driving the improvement in the overall trade figures shown in blue ..we also imported $0.9 billion less cars, parts, and engines, $0.3 billion less capital goods, and $0.6 billion less miscellaneous...exports of services increased $0.6 billion from November to December, while imports of services decreased $0.1 billion...as has been the case for quite some time, our largest bilateral trade deficit in December was again with China, at $24.5 billion; other sizable deficits were with the European Union at $8.7 billion; Japan at $5.7 billion; Germany at $5.4 billion; Mexico at $3.9  billion; Canada at $3.6 billion; and OPEC at $3.4 billion; the only countries we ran surpluses greater than a billion were Hong Kong at $4.0 billion, Australia at $1.7 billion, & Singapore at $1.1. billion....these bilateral trade deficits and surpluses are not seasonally adjusted...

FRED Graphthe next release we'll look at also involves a revision, albeit minor, of a report we looked at last week; the "Full Report on Manufacturers' Shipments, Inventories, and Orders" for December from the Dept of Commerce, most often referred to as "factory orders" includes and updates last week's report on durable goods, and like the report on durable goods, is mostly watched for the forward looking new factory orders, which were up 1.8% from November to $484.76 billion (see FRED graph)...although that was less than expected, it still beat the decline of 0.3% in November and the modest 0.8% gain in October...new orders for durable goods, reported to have gained 4.6% last week, were modestly pared back to a $9.4 billion, 4.3% gain to $230.0 billion, while new orders for manufactured non-durable goods slipped $0.8 billion to $254.8 billion, a decline of 0.3%...again, the month over month gain was driven mostly by the subset durable goods categories of transportation equipment and defense capital goods; orders for transportation equipment were up by 9.7 billion to $75.6 billion, a gain of 11.7%, while orders for defense capital goods showed a 110.3% increase, from a depressed $7.8 billion in November to $16.4 billion in December...without transport orders, factories orders were up only 0.2%, ex defense, the monthly increase would have been but 0.3%...other December data from this report include the value of manufactured goods shipped, which increased $1.8 billion or 0.4% to $484.9 billion, the 5th increase in the last 6 months, the value of unfilled orders outstanding, which increased $7.9 billion or 0.8% to $991.7 billion, and inventories, which increased $0.5 billion or 0.1% to $615.5 billion following a November decrease of the same magnitude... the inventories-to-shipments ratio was 1.27, unchanged from November, and the unfilled orders-to-shipments ratio was 6.12, down from 6.13 in November..

another report that we've been tracking is the G19 on Consumer Credit for December from the Fed; this covers borrowing by credit card (revolving credit), and longer term "non-revolving" credit, such as car and student loans, but not mortgage or home equity loans...in December, total borrowing increased by a seasonally adjusted $14.59 billion, or at a 6.3% annual rate over November's adjusted borrowing...however, revolving credit declined by $3.63 billion, a 5.1% decrease, meaning non-revolving credit rose by $18.22 billion, which was 11.4% above November's adjusted annual rate and the largest jump since November 2001; however, unlike some other months we've checked this, it wasnt all just student borrowing form the Federal government; borrowing from depository institutions (aka banks) was up $3.2 billion, while credit outstanding at credit unions rose $2.3 billion and finance companies also saw credit increase by a bit, which you can see on the second table under "Major types of credit, by holder" in the G19...for the quarter ending December, consumer credit increased at a seasonally adjusted annual rate of 6.5%; non-revolving credit increased at an annual rate of 9.4% while revolving credit only saw outstanding credit balances increase by 0.1%...for the entire year, total credit outstanding was up 5.8%, revolving credit was up 0.3%, from $847.3 billion to $849.8 billion, while non revolving credit rose from $1,780.1 billion to $1.928.4 billion, or 8.4%; of that, student loans held by the federal government rose from $417.4 billion at year end 2011 to $526.8 billion at the end of 2012; a 26.2% increase for 2012; this was not the largest annual student loan increase in either absolute or percentage terms; over 2010, federally funded student loans rose $130.2 billion, from $178.6 billion to $308.8 billion, which was a 72.9% increase for that year...the bar graph from zero hedge we have included here goes back to the latest major revision and shows the monthly change in revolving credit in blue, the monthly change in non-revolving credit in red, and tracks the monthly change in total credit outstanding with a black line; increases are above the middle line, decreases are below it, and the correct scale is on the left..

FRED Graph

the last release we'll make note of was that of the January Non-Manufacturing Report On Business from the Institute for Supply Management; which we usually cover in conjunction with their manufacturing report, which was released on Friday last week...the overall January non-manufacturing index (NMI) was at 55.2%, down from 55.7% in December, where being above 50 still indicates expansion, albeit at a slightly slower pace; the non-manufacturing business activity index slipped 4.4%, from 60.8% in December to 56.4% in January, but still showing growth for the 42nd consecutive month, while the new orders index decreased by 3.9 percentage points to 54.4%...the employment index increased in January to 57.5%, up from 55.3% in December, and the highest reading since February 2006, which is important since services provide the lion's share of US jobs...inventories showed contraction, slipping from 50.0 to 47.0, as did the order backlog, falling from 49.5 to 49.0, but suppliers deliveries gained 4 points to turn expansionary at 52.5...of the 18 service industries covered by ISM, 8 showed expansion in January: agriculture and related; company management and support; construction; public administration; finance and insurance, technical and professional support, real estate and mining...our FRED chart included here shows the NMI Composite Index since it's inception in January of 2000, and the ISM PMI composite for manufacturing going back 10 years…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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