Earlier: Philly Fed Manufacturing Survey showed "Continued Growth" in October

Earlier: Philly Fed Manufacturing Survey showed "Continued Growth" in October

by Bill McBride on 10/19/2017 12:30:00 PM

Earlier from the Philly Fed: October 2017 Manufacturing Business Outlook Survey

Manufacturing firms reported continued growth in regional manufacturing in October. The survey’s current indicators for general activity, new orders, shipments, and employment all remained positive this month. Both of the survey’s current labor market indicators showed notable improvement. The indexes assessing the six-month outlook suggest that firms remained optimistic about future growth.

The index for current manufacturing activity in the region increased 4 points to a reading of 27.9 and is now at its highest reading since May … Firms reported, on balance, an increase in manufacturing employment and longer workweeks this month.
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through October), and five Fed surveys are averaged (blue, through September) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).

This suggests the ISM manufacturing index will show solid expansion in October.

The Weak Dollar Is Pushing Up Import Prices

The Weak Dollar Is Pushing Up Import Prices

Here’s a rare bit of positive news for investors worried about tepid U.S. inflation: The weakness of the U.S. dollar is bolstering prices for foreign goods. U.S. import prices rose 2.7% in September from the prior year, accelerating from 2.1% growth in August, according to data from the Labor Department.  On a month-over-month basis, September’s increase was the largest since […]

Can Ireland Withstand Hurricane Ophelia?

Can Ireland Withstand Hurricane Ophelia?

2017 has been the strongest hurricane season since at least 2005, and many observers would say that it is a year when the hurricanes and tropical storms just did not quite behave normally. The United States and Caribbean have endured hurricanes Harvey, Irma and Maria. Now there is Hurricane Ophelia, but what makes it unusual is where the current storm path is headed — Ireland.

It is quite normal for Ireland to experience unusual weather. After all, if you have been there you might get the joke that you can experience all four seasons in a single day. According to most reports, this is set to be the strongest storm to hit Ireland since Hurricane Debbie back in September of 1961.

Ireland has undergone much expansion in the past 20 years, and the island nation was among the European nations hit the hardest during the financial crisis. Ireland was even a member of the PIIGS — Portugal, Italy, Ireland, Greece and Spain — the nations that continued to suffer after the crisis. Ireland took its lumps and did what it had to do to recover from the financial crisis the best of all the PIIGS.

The question that needs to be asked is just how ready Ireland is for a hurricane, and what sort of hurricane strength is likely to occur.

The National Hurricane Center (NHC) has a current projection that Hurricane Ophelia is likely to hit Ireland on Monday, and for the storm to pass over it in a north-northeast path and then to hit the northwestern coast of Scotland in the early hours of Tuesday as a tropical storm.

The NHC advisory on Saturday morning said:

Given that Ophelia is forecast to become extratropical, the wind field should expand, resulting in impacts over portions of the British Isles regardless of its exact location or strength. By 96 hours, Ophelia should have weakened due to the interaction with land, causing the surface circulation to become ill-defined, and dissipation is expected shortly thereafter.

Although the center of Ophelia is not forecast to reach Ireland or the UK for another 48-60 hours, wind and rain effects will arrive well in advance of the cyclone center. Individuals in those locations should consult products from their local meteorological service for more information on local impacts.

Tropical-storm-force winds are possible throughout the Azores beginning tonight, primarily due to an approaching cold front. However, any track deviation to the west could bring stronger winds associated with Ophelia’s circulation to those islands.

According to the CIA World Factbook, the population of Ireland is projected to be 5.01 million people as of 2017. Only about 23.5% of the population is aged 55 and older. Hurricane Ophelia may spare much of Ireland’s population as its primary path is north or west in Ireland. The CIA World Factbook says:

Population distribution is weighted to the eastern side of the island, with the largest concentration being in and around Dublin; populations in the west are small due to mountainous land, poorer soil, lack of good transport routes, and fewer job opportunities.

Ireland’s gross domestic product (GDP) was estimated at $324.9 billion on a purchasing power parity basis in 2016. That GDP figure was reported as $293.6 billion at the official exchange rate. To show what a snapback economy looks after a major recession, Ireland’s 5.2% GDP growth in 2016 was preceded by 26.3% growth in 2015 and 8.4% growth in 2014.

Ireland’s GDP per capita is quite high. In 2016 that was $69,200, up from $66,300 in 2015 and $52,900 in 2014.

The CIA World Factbook further says of Ireland:

In late 2013, Ireland formally exited its EU-IMF bailout program, benefiting from its strict adherence to deficit-reduction targets and success in refinancing a large amount of banking-related debt. In 2014, the economy rapidly picked up and GDP grew by 5.2%. The recovering economy assisted lowering the deficit to 2.5% of GDP. In late 2014, the government introduced a fiscally neutral budget, marking the end of the austerity program. Continued growth of tax receipts has allowed the government to lower some taxes and increase public spending while keeping to its deficit-reduction targets. In 2015, GDP growth exceeded 26%, the highest growth in the EU for two consecutive years. This dramatic increase reflected one-off statistical revisions, multinational corporate restructurings, and the aircraft leasing sector, rather than gains in the on the ground economy. Growth moderated to around 4.2% in 2016.

Weekly Initial Unemployment Claims decrease to 243,000

Weekly Initial Unemployment Claims decrease to 243,000

by Bill McBride on 10/12/2017 08:34:00 AM

The DOL reported:

In the week ending October 7, the advance figure for seasonally adjusted initial claims was 243,000, a decrease of 15,000 from the previous week’s revised level. The previous week’s level was revised down by 2,000 from 260,000 to 258,000. The 4-week moving average was 257,500, a decrease of 9,500 from the previous week’s revised average. The previous week’s average was revised down by 1,250 from 268,250 to 267,000.

Hurricanes Harvey, Irma, and Maria impacted this week’s claims.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 257,500.

This was below the consensus forecast.  The recent increase in claims is due to the hurricanes.

Hurricane Damage May Hit 76,000 Homes

Hurricane Damage May Hit 76,000 Homes

As Tropical Storm Nate moves ashore on the Gulf Coast, possibly as a hurricane, tens of thousands of homes are at risk for severe damage. The total amount of the damage could rise as high $16 billion in reconstruction costs for as many as 76,000 homes. This will raise the huge count from hurricanes Harvey and Irma, which have already caused tens upon tens of billions in damages.

According to real estate research firm CoreLogic:

The 2017 hurricane season continues to remain in full swing, and Tropical Storm Nate is the latest storm that the country is monitoring, as it is projected to reach hurricane strength over the weekend. The current hurricane warning for Nate extends from New Orleans to Lake Pontchartrain and Grand Island, Louisiana. The storm is expected to make landfall close to midnight on Saturday, east of New Orleans, which was devastated 12 years ago by Hurricane Katrina.

CoreLogic analysis shows that more than 76K U.S. homes are at risk of storm surge damage in Louisiana, Mississippi, Alabama and Florida, with an estimated $16B in total reconstruction cost value.

A quarter of this damage would most likely be in the Houma-Thibodaux, Louisiana, metro area, and with a total as high as $5.9 billion and 30,000 homes. The next highest total is likely to be in the New Orleans-Metairie, Louisiana, with $4.6 billion in damage to as many as 20,000 homes. The figures are based on a strike by a Category 1 hurricane.

Source: Corelogic

Hurricane season is not over. Climate experts put the season’s end as November 30, which means another seven weeks.

The new CoreLogic damage estimate may not be the last one it issues this year.

ISM Non-Manufacturing Index increased to 59.8% in September

ISM Non-Manufacturing Index increased to 59.8% in September

by Bill McBride on 10/04/2017 10:05:00 AM

The September ISM Non-manufacturing index was at 59.8%, up from 55.3% in August. The employment index increased in September to 56.8%, from 56.2%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: September 2017 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in September for the 93rd consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 59.8 percent, which is 4.5 percentage points higher than the August reading of 55.3 percent. This represents continued growth in the non-manufacturing sector at a faster rate. This is the highest reading since August 2005 when the index registered 61.3 percent. The Non-Manufacturing Business Activity Index increased to 61.3 percent, 3.8 percentage points higher than the August reading of 57.5 percent, reflecting growth for the 98th consecutive month, at a faster rate in September. The New Orders Index registered 63 percent, 5.9 percentage points higher than the reading of 57.1 percent in August. The Employment Index increased 0.6 percentage point in September to 56.8 percent from the August reading of 56.2 percent. The Prices Index increased substantially by 8.4 percentage points from the August reading of 57.9 percent to 66.3 percent, indicating prices increased in September for the fourth consecutive month. This is the highest reading since February 2012 when the index registered 67.6 percent. According to the NMI®, 15 non-manufacturing industries reported growth. The non-manufacturing sector has reflected strong growth in the month of September despite the impact on the supply chain from the recent hurricanes. Respondents’ comments indicate a good outlook for business conditions.”
emphasis added

ISM Non-Manufacturing Index Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests faster expansion in September than in August.