The Silver Ink

Monday, January 20, 2020
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US existing home sales hit 18-month high in March

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The sales of existing homes in the United States rose to their highest level in 18 months in the month of March as more and more homes came on the market, signaling a strengthening housing sector ahead of the selling season of spring.

The report of the National Association of Realtors, which was released on Wednesday, showed that the existing home sales rose 6.1 percent to an annual rate of 5.19 million units last month. This was the highest level reported since September 2013. Moreover, the percent surge was the largest since December 2010.

According to the market analysts, the fairly upbeat report provided another indication that the country’s economy was regaining some amount of momentum after striking at a speed bump at the beginning of the new year.

However, data on housing starts, retail sales and manufacturing indicate the rebound in second-quarter growth will likely be inadequate to convince the US Federal Reserve Bank to begin raising rates of interest in June.

Gennadiy Goldberg, an economist at New York-based TD Securities, said, “The stronger rebound in home resales is extremely encouraging as it hints at a nascent rebound in economic activity over the coming weeks.”

Several economists had predicted home resales increasing to only a 5.03 million-unit pace in March.

The US housing index declined in line with the broader stock market. The greenback emerged weaker against a basket of global currencies. The US Treasury debt prices also witnessed a drop.

 

 

US consumer prices surge in March, backs Federal Reserve’s rate hike

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The consumer prices in the United States surged in March for a second consecutive month on increasing costs of housing and gasoline, signaling of an uptick in country’s inflation that should keep the US Federal Reserve Bank on course to begin hiking interest rates this year.

The Labor Department report, released on Friday, showed that the Consumer Price Index (CPI) rose 0.2 percent in March after recording a similar gain in February. The CPI dropped 0.1 percent in the 12 months through March after remaining unchanged in February.

The core CPI, which strips out energy and food costs, rose 0.2 percent last month after a similar increase in February. In the 12 months through March, the core CPI increased 1.8 percent. This was the largest surge reported since October last year.

The broad-based price gains in March bolstered the long-held view of the US central bank that the country’s inflation will gradually move toward its two percent target as the damaging effect of the lower energy prices begins to fade.

RBS chief economist Michelle Girard said, “The data should allay the disinflation concerns that predominated earlier this year and, on the margin, increase the Fed’s confidence that inflation will eventually move toward its target.”

Even though a price measure that is being tracked by the Federal Reserve is running lower than the so-called core CPI, a number of Fed officials seem optimistic about an increase in key rates at the policy-setting meeting in June.

The Federal Reserve has kept its overnight rates of interest near zero since December 2008.

The US dollar increased against a basket of global currencies. The US stocks declined sharply on investors’ woes over a clamp-down on margin trading in China as well as a number of depressing earnings reports from American corporations. The US government debt prices were recorded slightly weaker.

Top Federal Reserve official skeptical about June interest rate hike

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A top Federal Reserve Bank official has said that the recent “murky” US data run has made him take stance against the much-speculated interest rate hike in June.

Atlanta Federal Reserve Bank president Dennis Lockhart on Thursday said that the recent US economic data report has made him leaning against a June rate increase, adding that he is confident the US economy will remain on track.

“I would lean to a little later versus a little earlier. I don’t think it is a stark decision where we are risking a lot by going with one date versus another date. So I don’t take June off the table it is just not my preference,” said Lockhart.

According to him, a disappointing employment report in March and other related economic factors are making the country’s economy tough to read. The Fed official said that he is expecting that the signs of weakness will turn transitory. He, however, needs more evidence to become sure.

The Federal Reserve Bank has announced that it will be considering increase in the key rates on a meeting-by-meeting basis, commencing in June this year. It has not raised key rates since 2006. Moreover, its main lending rate has remained at a near-zero level since late 2008 as part of the effort for repairing the damage from the financial crisis during 2007-2009 period.

 

US retail sales surge in March, signal thaw in economic activity

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The US retail sales increased in March for the first time since November last year as the consumers rose their purchases of automobiles and other items, indicating that a sluggish economic growth in the first quarter was temporary.

The US Commerce Department report, which was released on Tuesday, and other government data showed that the producer inflation slithered last month should continue keeping the Federal Reserve Bank on track to commence hiking the rates of interest later this year.

An unusually harsh winter had undercut the economic activity early this year. The other major reasons that had contributed in hurting the country’s economy include a stronger dollar, a recently settled labor dispute at West Coast ports, lower crude oil price and softer global demand.

Markit chief economist Chris Williamson said, “A rebound in retail sales last month provides evidence that the American economy is pulling out of a soft patch seen at the beginning of the year. The improvement in retail sales … adds to the likelihood of policymakers voting to hike interest rates this year.”

The sale in the retail sector rose 0.9 percent last month, falling in line with the economists’ expectations. This was the largest gain recorded since March 2014 and snapped three consecutive months of drops that had been blamed on harsh winters.

The sales rebound, which was majorly driven by clothing, furniture, automobiles, restaurants and bars and building materials, was even more encouraging due to the major step back in job growth in March.

The retail sales, excluding gasoline, automobiles, food services and building materials increased 0.3 percent after declining 0.2 percent in February.

The stocks at the Wall Street traded marginally higher, with banking majors Wells Fargo & Co and JPMorgan Chase & Co reporting an unexpected strong earnings but Johnson & Johnson declaring that it was slashing its forecast for full-year earnings because of the impact of the buoyant greenback.

The prices for the government debt increased, while the US dollar emerged weaker against a basket of global currencies.

 

 

U.S. import price fall 0.3% in march

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ImportStronger U.S. dollar and cheaper oil has retained U.S. inflation from moving towards the Federal Reserve target of 2 percent.

Strong dollar is also crashing the brakes on inflation and this is delaying the Federal Reserve decision to increase the interest rate for the first time in nine years.

Since last summer there is 50 percent fall in the price of the petroleum and this has pushed Fed’s PCE inflation index to 0.3 percent increase over the past year.

U.S. inflation is stabilizing with the oil prices slowly stabilizing but the increasing dollar price has become the hurdle for inflation where the foreign goods such as French wine, Asian made high-definition television and German autos are becoming less expensive for Americans to buy.

In March, the prices U.S. paid for imported goods and services fell for the eighth time in the last nine months but the costs of the oil actually rose for the second time.

Import prices last month dropped 0.3 percent or 0.4 percent excluding fuel.

Import prices have fallen by 10.5 percent over the past 12 months. Cheap oil is the main reason even the price of imports excluding fuel have declined by nearly 2 percent in the same period.

Imported goods are available at low cost which is not good as customers pay less for all goods such as cell phones, household-appliances thereby stretching their paychecks further.

The stronger dollar will make Americans goods more expensive for foreigners reducing the demand for American goods. It is affecting the corporate profits and could cost Americans their job and thereby slowing the growth of the nation.

The inflation rate which Fed officials are considering healthy for economy won’t close in on the banks 2 percent target until 2016.

If the dollar remains strong then inflation is unlikely to rise much in near future.

It was reported that if the inflation continues then it will be difficult for Federal Reserve to increase the interest rate.

 

JP Morgan CEO warns of shortage of government-backed Treasury bonds

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JP Morgan Chase chief executive Jamie Dimon has cautioned against the shortage in supply of the government-backed Treasury bonds.

According to Dimon, the problem is set to grow in distinctly worse manner in the next economic crisis.

In a letter to the company’s shareholders this week, Dimon said, “In a crisis, everyone rushes into Treasuries to protect themselves. This will be even more true in the next crisis. But it seems to us that there is a greatly reduced supply of Treasuries to go around.”

The 59-year-old CEO underscored the day of last October when the Treasury bonds, which was normally stable, moved .04 percentage points, 40 basis points, in one fell swoop.

Dimon termed the move “unprecedented”, saying it is promoted by fears that the Federal Reserve Bank would slow its stimulating program for lending by buying large assets of the banks.

The issue which is underlying Dimon’s warning is his ever-ready concerns about the adverse impact of regulation on the banking sector. By underscoring the dramatic move in Treasuries last October, the CEO sought to highlight the impact of tougher capital requirements on demand for safe assets, such as Treasuries, in case of a downturn.

Dimon said, “In effect, there may be a shortage of all forms of good collateral.”

The banks will lead the charge to exhaust the Treasuries and other liquid assets in the condition of another downturn because of the stricter rules that defines about the quantity of liquid assets required by the banks to hold relative to potential outflows of cash.

 

 

US job openings hit 14-yr record high in February; hiring remains steady  

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The job openings in the United States increased to a 14-year high in the month of February, but the pace of hiring remained steady, suggesting that the American employers have been facing trouble in finding suitable workers. The prevailing trend is likely to put upward pressure of growth in wages.

The job openings, which are measure of labor demand in the country, rose 168,000 to a seasonally adjusted 5.1 million. This was the highest level recorded since January 2001.

The figures were released on Tuesday by the US Labor Department as a part of its monthly Job Openings and Labor Turnover Survey.

The hiring of new employees was little changed at 4.9 million in the month of February, leaving the rate of hiring steady at 3.5 percent.

John Ryding, chief economist at New York-based RDQ Economics, said, “We interpret the combination of rising job openings and slower hiring as a potential sign of increased mismatch between the needs of employers and the skills of available workers.”

This clearly implies that the employers will require raising wages that was remained tepid despite a significant pick-up job gains.

The Federal Reserve Bank is closely following the so-called JOLTS report before taking its final call on raising the rates of interest this year. The US central bank has left its benchmark overnight interest rate untouched near zero since December 2008.

Even if the growth in employment braked sharply last month after 12 consecutive months of job gains above 200,000, the report by JOLTS indicated that the country’s labor market remained firm.

The number of unemployed people looking for job per open job dropped to 1.70 in February, which is the smallest since November 2007. The ratio was recorded at 1.81 in January.

According to the JOLTS report, there was a slower pace of layoffs in the month of February. The layoffs and discharges rate dipped to 1.1 percent from 1.2 percent in January.

 

 

US Dollar tumbles linked to disappointing jobs data

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The US dollar dropped further on Monday as it continues to face the carry-over effects of a depressing jobs report from Friday, questioning the timing for the potential interest rate hike.

The rising expectations over the interest rate increase by the US Federal Reserve sometime later this year have fueled the greenback’s rally since middle of 2014. Higher rate of interest will keep dollar-denominated assets at a yield advantage against the basket of currencies, including yen and euro, where rate of interest are being kept low.

The markets in Europe remained closed on Monday on the occasion of Easter, limiting trading volumes as well as leading to the narrow ranges.

The euro held above the USD 1.10 mark. One foreign exchange strategist has expressed hope in the strong returning of the greenback.

Greg Anderson, foreign exchange strategy’s global head at New York-based BMO Capital Markets, said, “Chalk up the euro’s strength to low volumes. It has had stiff resistance at the USD 1.1050 level, which goes back to the beginning of March. You might have a few people positioning for that move higher in euro but nobody is pounding the table on that and I think it is a sell above USD 1.10.”

The US dollar traded in a modest fashion higher against the yen at 119.08 yen, an increase of 0.11 percent.

The jobs data, released on Friday by the labor department, showed US non-farm payrolls increased by 126,000 in March, which is the smallest gain since December 2013.

The US dollar dropped 0.20 percent against the Canadian counterpart at C$1.2456, CAD=, near the bottom of its C$1.24 to C$1.28 range that has remained in place since the January-end. The halt in the buying of the greenback against the Canadian currency has provided a good opportunity, said BMO’s Anderson to pick up the US dollar once again.

 

US job growth declines sharply; 126,000 workers added in March

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US job growth declined dramatically during March as the country’s economy added only 126,000 new employments as compared to 264,000 done in the month of February.

The Labor Department report showed that this was the smallest gain since December last year.

According to the experts, the report of just 126,000 new jobs is expected to further delay the potential increase in the interest rates by the US Federal Reserve Bank.

A slowdown in the manufacturing sector impacted by the lower crude oil prices, strong US dollar, and harsh winter weather conditions has likely dragged on businesses when it came to recruiting as leisure and hospitality sectors recorded a steep slowdown in jobs growth.

The rate of unemployment held steady at 5.5 percent, a low of more than six years. The overall size of the workforce contracted. The rate of participation of the labor force came back to a low of 36-year reached late last year.

The greenback has surged in value close to 13 percent against a basket of currencies since mid June of last year. Several economists said the impact was equivalent to an interest rate hike of one-half point.

The sharp decline in crude oil prices has also restricted the drilling activity in the US. The employment in construction sector has been limited as payrolls in mining dropped by more than 11,000, which signaled an ongoing gas and oil extraction slowdown. The energy producers have shuttered several oilrigs since the beginning of October of 2014.

The unfavorable weather conditions during late winter of 2014 as well as the recently settled West Coast port dispute weighed heavily on economic activity along with a weaker demand in the global market. It was estimated that harsh weather cut off up to seven-tenths of one percent from economic growth in the first quarter.

On the positive front, the average earnings per hour rose by 0.35.

Low job growth in March adds to the slowing US economy

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economyUS economy has seen its lowest job growth since December 2013. In the march the economy created 126,000 jobs in March which is half of the number in February’s hiring number 264,000 and this will delay the interest rate hike which was later in the year.

Slowdown in manufacturing impacted by the strong dollar, fewer houses being built and cheaper gas and harsh weather may be some of the reason behind the slower growth in hiring but the unemployment rate remained the same at 5.5 percent.

On Friday the Labour Department has reported the slowdown in hiring.

Millan Mulraine, deputy chief economist at TD Securities in New York said, “The report confirms the emerging narrative of slowing growth momentum seen in the other economic indicators. It will weaken the argument for a mid-year (rate) hike.”

Since last June dollar has gained 13 percent against the currencies of the main US trading partners.

The drop in the oil prices has curtailed the U.S. drilling activity. The mining sector payrolls declined 11,000 as there is no activity in oil and gas extraction and construction employment fell by 1,000 in the last month.

Since October energy producers have shutdown most of its rigs.

The unsettled labor dispute at the West Coast ports, harsh winter and global demand falling down has also put its effect on the hiring.

Average hourly earnings increase by 0.3 percent some good news.

The announcements of pay hikes by companies like Wal-Mart and McDonalds could gain traction in the coming months.

TJX Cos Inc and health insurer Aenta are other companies which also announce pay hikes.

Working age employed Americans or looking for job or labor force participation rate has slipped to 62.7 percent by one-tenth of a percent.

There are other measures in the report which improved.

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