Earnings are being reported this week.
Johnson & Johnson
This week’s economic news reflects the summer doldrums. Growth, by just about every measure, has slowed in recent weeks.
The ICSC-Goldman Sachs chain-store sales index again rose by 0.4 percent from the prior week for the period ending July 16, 2011 for a year-over-year rate of 4.5 percent. Sales of summer items produced some growth for the second week. This should continue as states promote back-to-school sales with tax breaks in early August.
Building permits in June rose 2.5 percent above the revised May rate of 609,000 and is 6.7 percent above the June 2010 estimate of 585,000. Housing starts in June were at a seasonally adjusted annual rate of 629,000 which is 14.6 percent above May’s number and is 16.7 percent above the June 2010 rate of 539,000.
Existing-home sales declined 0.8 percent from 4.81 million in May, and remain 8.8 percent below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit. However, the national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. Lawrence Yun, NAR chief economist, cited, among other things, economic uncertainty and the federal budget debate that may be holding down sales. The According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51 percent in June, down from 4.64 percent in May; the rate was 4.74 percent in June 2010.
In the week ending July 16, initial unemployment claims rose by 10,000 from the previous week’s revised figure of 408,000. The 4-week moving average was 421,250, a decrease of 2,750 from the previous week’s revised average of 424,000. The 4-week moving average for continuing claims was 3,720,500, a decrease of 4,000 from the preceding week’s revised average of 3,724,500.
The Philadelphia Fed report mimicked last week’s Empire State report, showing regional manufacturing activity remained weak in July. The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased to 3.2 from -7.7. The demand for manufactured goods, as measured by the current new orders index, rose 8 points to a reading of zero, and the percentage of firms reporting increases was equally matched by the percentage reporting decreases (28 percent). The current shipments index remained slightly positive but virtually unchanged from June.
Sources: Phili Fed, DOL, NAR, Census, ICSC websites
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in June on a seasonally adjusted basis, according to the U.S. Bureau of Labor Statistics. Most of the decline came from a 4.4 percent decrease in energy costs that more than compensated for small increases in the price of apparel and used cars and trucks. But one month’s decline, while heading in the right direction, should not obscure the fact that on a year-over-year basis, energy prices are up 20.1 percent with fuel oil leading the pack, up 37.3 percent. The food index for June increased 0.2 percent, which was the smallest increase of the year. The 12 month change in the all items index remained at 3.6 percent.
The core rate edged up to 1.6 percent, its highest level since January 2010.
The Empire State report was released by the New York Fed this morning. It was less than stellar, but one must remember that, while it is the first economic indicator of its kind for the month, it represents a small sampling (175) of respondents. The July Survey indicates that conditions for New York manufacturers declined for a second consecutive month but that the contraction slowed. The general business conditions index remained below zero, at -3.8. While the new orders index remained negative, the shipments index increased to 2.22 vs June’s minus 8.02. Employment expanded slightly to 1.11, which was well below June’s 10.20 expansion.
Industrial production in June rose slightly, by 0.2 percent, after declining in April and May. Gains in Mining and Utilities offset declines in business equipment and final products. The manufacturing component was held down by auto production which fell 2.0 percent in June. On a year-over-year basis, production grew by 3.4 percent.
The University of Michigan’s survey of 500 households, the Consumer Sentiment survey, was released today. The survey showed a drop in the perceived economic outlook for the second time since April. Falling gas prices helped curb negative expectations, which posted a monthly decline of 6.8 percent to 64.8. This reading is about the same as June 2010 and June 2009, signaling, basically, a status quo in the perceived outlook.
Sources: Thomson Reuters, Federal reserve, New York Fed, and BLS websites
Employment reports will be closely watched after last week’s lackluster June jobs report. This week’s employment reading is skewed by 11,500 recently laid-off government workers in Minnesota, the shortened work week following the fourth of July, and seasonal adjustments that may or may not be accurate. In the week ending July 9, the seasonally adjusted initial claims was 405,000, a decrease of 22,000 from the previous week’s revised figure of 427,000. Perhaps a truer picture is found in the 4-week moving average, which was 423,250, a decrease of 3,750 from the previous week’s revised average of 427,000.
Consumers are shopping despite rising fuel prices. According to ICSC-Goldman, the year-on-year rate of same-store sales growth rose by 5.5 percent in the July 9 period from a trend that rarely exceeded 3.0 percent. The week-on-week chain-store sales index rose by 0.4 percent due to increased demand for seasonal goods tied to hot weather, and summer clearance sales.
June’s lower gas prices were apparent in the Producer Price Index released today. Prices for finished goods dropped 0.4 percent in June, following a small increase of 0.2 percent in May and not-so-small increase of 0.8 percent in April. Energy goods decreased 2.8 percent. Prices for finished goods less foods and energy (core PPI) rose 0.3 percent mostly attributable to a rise in the price for light trucks (up 1.6 percent) which was caused by a shortage of components made in Japan.
ConocoPhillips announced it will pursue the separation of the company’s Refining & Marketing and Exploration & Production businesses into two stand-alone, publicly traded corporations via a tax-free spin of the refining and marketing business to ConocoPhillips shareholders.
Sources:Conoco, BLS, ICSC, and DOL websites
The ISM report on Manufacturing in June surprised many analysts with its strength. The main contributor seems to be a rise in inventories which jumped 5.4 percent.
BHP Billiton announced that its $10 billion capital management program announced on 16 February 2011 was completed on 29 June 2011. The number of shares bought under the program 146.9 million shares in BHP Billiton Limited and 94.9 million shares in BHP Billiton Plc.
Boeing commemorated the opening of a new 787 vertical fin assembly line at its production facility in Salt Lake City, Utah. The plant will build the vertical fin assemblies for 787 Dreamliners built at Boeing South Carolina beginning in July.
IBM Research announced a significant advancement in its memory chips with phase-change memory (PCM), which can store multiple data bits over extended periods of time. “This significant improvement advances the development of low-cost, faster and more durable memory applications for consumer devices, including mobile phones and cloud storage, as well as high-performance applications, such as enterprise data storage.”
Tibotec Pharmaceuticals announced that it has entered into a license agreement with Gilead Sciences for the development and commercialization of a tablet fixed-dose antiretroviral combination product containing Tibotec’s protease inhibitor Prezista (darunavir) and Gilead’s cobicistat, an investigational pharmacoenhancing or “boosting” agent.
Sources: Gilead, IBM, BHP, Boeing, ISM websites