From The Daily Capitalist
On Friday the employment report will come out and I'll discuss that situation then.
The news today has been the ISM non-manufacturing index for May (I discussed the ISM manufacturing index yesterday) which has not altered my views that the economy seems to be flattening out. The Index remained the same as for the last three months (55.4) which is just "OK." The item of most significance was:
[N]ew orders fell 4.1 points 58.2-still above breakeven. But we may get some moderation in the overall index for May as in addition to the slowing in new orders growth, a more recent reading for the Chicago PMI moderated to 59.7 from 63.8 in April.
The less strong productivity number for the latest period was due to a downward revision in output growth from 4.4 percent annualized to 4.0 percent and due to hours worked nudged up to 1.1 percent from 0.8 percent. Year-on-year, productivity advanced 6.1 percent in the first quarter-up from 5.6 percent in the prior quarter.
Growth in unit labor costs was -1.3%, slightly better than the initial estimate of -1.6%. Year-ago unit labor costs came in at minus 4.2 percent, compared to minus 5.1 percent the previous quarter.
Then picking up on yesterday's report of manufacturing, factory orders reported today:
Overall factory orders in April posted a 1.2 percent increase, following an upwardly revised 1.7 percent gain. However, the April increase came in below analysts' forecast of 1.8 percent. The latest number included a slight downward revision to the advance durables orders figure to a 2.8 percent jump from the initial estimate of 2.9 percent. But March was revised up marginally to a 0.1 percent rise from no change. Nondurables orders for April edged down 0.1 percent after spiking 3.0 percent the month before.
Disappointing is the word.
Store sales reports are a mixed bag, but overall, same store sales have flattened for the past several months. Redbook reported a five month +2.5% YoY gain in sales, but virtually no change on a MoM basis. ICSC-Goldman's weekly same-store sales index which rose 0.6% WoW for a year-on-year rate of plus 2.5%. They have downgraded their estimate for May. Bloomberg reported weak sales at teen retailers, and good sales for discounters like Costco.
One of the big stories has been April auto sales which ran at an 11.6 million unit annual rate versus 11.2. Also, auto makers reported stronger profits. According to David Rosenberg, government fleet sales from GM accounted for 38% of their sales, without which sales would have been at 11 million units. GM, who's your Daddy? Since the government takes your money to buy its cars, these sales have no real economic significance. It's just part of the GM bailout. (What would you have spent your money on?)
Stay tuned for Friday.
Disclosure: No positions