Look at the US Economic Reports Going into Earnings Season

Look at the US Economic Reports Going into Earnings Season

Look at the US Economic Reports Going into Earnings Season


Economic Growth and Investment

The latest industrial production report was much better than expected and positive on multiple levels. Overall production was up 1.1% while the manufacturing component was up 1.2%.

Probably more importantly, the improvement in manufacturing was centered on business equipment.

Mining (Crude Oil extraction) was up 4.3% but that was offset by a 4.7% drop in utility output.

So, there is a clear positive for manufacturing and hope for business investment.

These numbers do tend to be volatile though and it should be noted that last month’s numbers were revised downward.

Existing home sales also showed life, up 3% on the month and now a positive 1.1% Y-Y. We are even starting to see total inventory rise some, up 4.6% on the month although on a sales basis supply was unchanged at 3.4 months. Inventory has been a problem for a lot of this cycle but higher prices may finally be pulling in some sellers.

The leading economic indicators reflect this improving data coming in at 0.6% on the although last month was revised lower from 1.0 to 0.8%.

Overall this points to an economy that has improved. These reports are solid and certainly moving in the right direction but nothing here points to a large acceleration in growth.

That is confirmed by the HeffX-LTN market indicators, reviewed below, as follows:


We have seen just 2 reports in this section over the last 2 weeks. The Empire State and Philly Fed reports were both positive with new orders and backlog both up significantly.

Note, both reports showed rising cost pressures.

Remember these are basically sentiment reports and have little forward looking value; they are snapshot of how companies think things are right now.

Consumption and Distribution

It is great to see manufacturing picking up per the industrial production report noted above, but at some point, you have to sell what you manufacture.

Retail sales shows that, at least so far, that is not happening to the degree we would like to see.

Retail sales ex-autos and gasoline were up but less than expected.

Overall, retail sales are still tracking at less than a 4% Y-Y growth rate which sounds OK but compared to history is not.

In past expansions, 4% was the low end of growth while in this expansion it has mostly been the high end. Within the report, department stores and motor vehicles were the losers, both down 0.9%.

The winners were non-store retailers (aka Internet) and building materials.


Reflecting that weak retail sales environment, business inventories rose 0.6% in January with rises at both the wholesale and retail levels. Total sales were down 0.2% and the inventory/sales ratio rose a tick to 1.34, so seeing that turning higher in here.


The industrial rebound seems to be confirmed by the durable goods orders, reported at up 3.1% in February, a major improvement over January.

Ex-Trans orders were also positive, up 1.2%.

Even better were core capital goods orders up 1.8%.

Note: primary metals were a big part of the upside surprise. That may have been companies stocking up before The Trump Administration imposed tariffs on aluminum and steel. If so, this may weaken.


Prices at the consumer and producer levels cooled in February.

While headline CPI is running slightly over 2%, the core rate is still at just 1.8%. Producer prices are running a little hotter at 2.8% and 2.5% year over year for headline and core respectively.

Import and export prices were hotter still at +3.5% and +3.3% respectively.

Those figures are no doubt more heavily influenced by the weaker USD than CPI and PPI.

If you want to see inflation look no further than house prices.

The FHFA house price index accelerated in January, up 0.8% for the month and 7.3% Y-Y. I suppose that makes some sense with existing home sales finally perking up and especially with lean inventories.


Job openings surged in January, up nearly 700,000 over the December level that was revised lower. And that is noteworthy by the way, as these numbers are volatile. If this holds up to revisions it might mean something but right now it just looks like an outlier. Especially when we look at Quits and Hires which were down slightly and up very slightly on the month. The Quits number in particular is interesting as we would expect to see Quits rising with so many alleged job openings. We wait, we see.


The real estate picture is mixed on the new home side.

Housing starts were down sharply for the month and are now down over 4% Y-Y. Single family starts were up 2.9% but that was overwhelmed by a 26.1% drop in multi-family starts. The drop in MF starts is potentially explained by another number in the report; multi-family completions were up 19.4%.

It might make sense to see a lull after so much new supply has come to the market over the last few years. Permits were also down on the month but are still up Y-Y by over 8%. Both SF and MF permits were lower.

New home sales were down at 618-K. That’s up less than 1% Y-Y although you could not tell that by prices which were up 9.7% Y-Y. Builders are optimistic though as the Housing Market Index came in at a slightly less than expected 70. Future sales an traffic were both down a bit.


Consumer and small business sentiment is running high.

The University of Michigan consumer sentiment survey hit a 14 year high at 102 while the NFIB Small Business Optimism index hit 107.6, the highest since Y 1983.


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