Trade The Journey

Trade The Journey

Insight: May 12

Economy

Inventories: Wholesale

The wholesale inventory report showed that merchant wholesalers’ inventories were unchanged in March. Sales for wholesales were down 2.1%. The inventories-to-sales ratio rose by 0.03 points to 1.40.  Sales for durable goods declined 2.3% and for nondurable goods sales declined 1.9% from the February levels. Inventory levels for durable good wholesalers were unchanged and fell slightly for nondurable goods. The year-over-year change for durable good inventory levels is up by 13, showing that inventory levels for durable goods remains high.

Prices: Consumers, Producers, Import/Export

CPI

The CPI rose 0.4% in April and excluding food and energy, core CPI also rose 0.4%. The year-over-year total change for CPI showed that prices rose 4.9%. The year-over-year total change for core CPI rose 5.5%. The CPI showed its lowest year-over-year increase for the first time in many months. The food index was unchanged, rising 0.4% for food away from home, and falling slightly for food at home. The energy index rose 0.4%, the smallest increase since the December 2022 level.

The energy services index fell 4.5%, falling for both electricity and utility (piped) gas service. Excluding food and energy, commodities rose 0.6%. New vehicles fell 0.2%, while used vehicles rose 4.4%, the largest increase in several months. Shelter, a big component of core CPI, was unchanged from the previous month at 0.4%, which is a good sign. Other indexes mentioned in the report that rose noticeably over the past year were motor vehicle insurance (15.5%), household and furnishings and operations (5.3%), recreation (5%), and new vehicles (5.4%). Most of the indexes have risen sharply over the past year, only showing sharp declines in Energy and health insurance.

The CPI is moving in the right direction but remains at an uncomfortably high level for the Fed.

PPI

After falling last month more than forecasted, the PPI continues to moderate. PPI for final demand rose 0.2% in April. Final demand for services rose 0.3% and final demand for goods rose 0.2%. Final demand excluding foods, energy and trade services rose 0.2%. Prices for final demand goods have fallen sharply from its levels over a year ago. Final demand for services, although far below the 9% level, remains close to 3% level from over a year ago.

For final demand services, a rise in the prices for portfolio management helped lead to the rise in prices for services. For demand goods, of8.4% rise in prices for gasoline helped lead to the rise in the price for goods.

Intermediate demand for processed goods fell 0.4%, while rising for unprocessed goods by 1.7%. Intermediate demand for services rose by 0.7%. Intermediate demand for processed goods declined from the previous month, can be attributed to a 4.1% fall in diesel fuel. The rise in Intermediate demand for unprocessed goods can be attributed to a 14.2% rise in crude petroleum. The rise in intermediate demand for services can be attributed to a 2.4% rise in prices for nonresidential real estate rents. The list of goods or services mentioned in the rise or fall of the various indexes are not all inclusive.

Stage 4 Intermediate demand: Rose 0.9% for services inputs and fell 0.1% for goods inputs

Stage 3 Intermediate demand: Rose 0.7% for services inputs and fell 1% for goods inputs

Stage 2 Intermediate demand: Rose 0.7% for services inputs, and rose 1.8% for goods inputs

Stage 1 Intermediate demand: Rose 0.5% for services inputs and fell 0.5% for goods inputs

Prices for producers continue to decline which bodes well for consumers.

Imports/Export Prices

Prices for imports rose 0.4% and rose 0.2% for exports in April. Imported fuel prices rose 4.5%, with prices for import petroleum rising 5.7%, while natural gas import prices fell 17.4%. Nonfuel import prices were unchanged for April. Foods, Feeds and Beverages import prices rose 0.2%. Nonfuel industrial supplies and material import prices fell 0.2%. Consumer goods import prices rose 0.2%.

Agricultural export prices rose 0.4%. Excluding agricultural, export prices rose 0.2% in April. Nonagricultural industrial supplies and materials export prices rose by 0.2%. Finished goods price exports rose, with consumer good prices rising 0.3%.

Treasury Budget:

The treasury budget showed a surplus of $176.2 billion after declining by $378.1 billion in March. Over the last twelve months the deficit has increased from a deficit of 1.419 trillion to 1.94 trillion in April. Individual and corporate income tax receipts both fell in April, with individual tax income receipts falling sharply.

I’m sure that you’ve probably heard that the debt ceiling needs to be raised or at least suspended in the near-term future for the United States to meet its obligations. Negotiations have begun but nothing has been cemented thus far between the opposing parties. There is growing concern that a default while unlikely is not totally off the table.

NFIB Small Business Optimism Index:

The index fell by 1.1 points, citing labor quality as a top concern followed by inflation. The index is now far below the 49-year average of 98. Owners are still attempting to fill open positions, with 17% planning to create new jobs in the next three months. Labor concerns are elevated in construction, transportation, and manufacturing.

56% of the owners reported capital outlays, led by new equipment, followed by acquired vehicles and new fixtures & furniture. Positive profit trends fell five points in March, with most of the blame centered around weaker sales, rise in the cost of materials, seasonal change, labor cost, lower prices and higher taxes or regulatory costs, in that order.

In regard to credit, 59% reported they were not interested in a loan, 30% reported that credit need was met and 2% indicated that borrowing needs were not satisfied.

University of Michigan, survey of Consumers:

Consumer Sentiment declined nearly 10%, current economic conditions declined 5.4% and the index of consumer expectations declined 11.7%. Consumers remained worried about the possibility of a recession although when it will occur, and the severity is unknown. The year-ahead inflation level declined by 0.1% to 4.5%. While the year-ahead inflation declined, the long-run expectations rose by 0.2% to 3.2%. Although the consumer remains resilient, there are signs that the consumer has begun to pull-back spending on big ticket items.

Initial Claims & Continuing Claims:

Initial Claims increased by 22,000 bringing the total claims for the past week above forecasts to 264,000. Continuing jobless claims increased by 12,000 to 1.813 million. This is a sign that the labor market may finally be loosening which should increase the possibility of rate pause if the trend continues. The four-week moving average is now at 245,000, its highest level in the past several weeks.

MBA applications:

Mortgage applications rose 6.3% from the week prior. The refinance index rose 10% and the purchase index rose 5% from the week prior. The average rate for a thirty-year fixed mortgage for conforming loans fell 0.02% to 6.48%. The average rate for a thirty-year fixed mortgage for jumbo loans fell 0.04% to 6.33%. Mortgage rates declined as treasury yields declined this past week.

Other News:

JP Morgan purchased first republic. Chinas’ recovery isn’t as buoyant as many hoped it would be leading to declining copper prices, crude oil and metals.

This past week’s cash flow in review:

This past week went as expected although my expenses were elevated. This past income cycle proved to be more challenging than anticipated with bills coming due and a renewed sense of urgency to reduce my credit levels. I’m hopeful that I’ll continue to make the necessary improvements to spending plan.

Grade: D+

Reason: Rising Credit balance outstanding

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