Top reads from across the past week…
Macro
Retail sales (February 2017)
by US Government Census
Another great report that not only crushed expectations, but did it again despite massive upward revisions to prior month data; yoy growth accelerated further above trend GDP; we’re still in the midst of easy yoy comps due to energy’s low base, which is offsetting the weakness in brick & mortar retailers…
– Core (ex-autos): +0.4pp @ +5.7% yoy, +0.2% mom (meet +0.2e); prior month revised higher
– Headline: +0.1pp @ +5.7% yoy, +0.1% mom (miss +0.2e); prior month revised significantly higher
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: Consumer confidence remains extremely bullish signal & Income & consumption remain bullish signals]
#Bullish! $XLY $XRT #tailwind
Housing permits, starts & completions (February 2017)
by US Government Census
A good end to the year, beating expectations thanks to a big recovery by multifamily (after last month’s collapse); this continues a choppy trend, as multifamily volatility suggests its boom has ended (as expected)…
– Monthly housing starts: +4.8pp @ +10.5% yoy, -2.6% mom @ 1.246M saar (_ 1.266e); prior months revised significantly higher
– Growth rate: n/a ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17 & Homebuilder confidence spikes to 11-year high]
#Bullish $XHB $ITB
Inflation: Consumer Price Index (February 2017)
by Bureau of Labor Statistics (BLS)
Prices accelerate in-line with expectations; energy’s still lapping its low base for yoy comps, so expect headline inflation to run hot for the remainder of 2017h1; even though inflation is above the Fed’s 2% target, Yellen has said she’d tolerate higher run-rates, so don’t expect too hawkish of a tightening cycle from the Fed…
– Core CPI (ex food & energy): -0.1pp @ +2.2% ttm, +0.2% mom (meet +0.2e)
– Headline CPI: +0.2pp @ +2.7% ttm, +0.1% mom (meet +0.1e); high run-rate since 2/2012
Energy: +4.4pp @ +15.2% ttm, -1.0% mom
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral #Dovish $TIP
Credit
Loans & leases in bank credit, all commercial banks (2017.03.01)
by St. Louis Federal Reserve (FRED)
Lending growth continued to decelerate post-Election, now at multiyear lows, although econometrics suggest that this is a lagged effect of last year’s industrial production slowdown…
– Weekly loan growth: -40bps wow @ +4.6% yoy (below 7.3% historical average); lowest level since 5/2014
This is a key indicator; although the Fed’s rising rates & Trump’s deregulation increase NIMs, I’d expect continued credit expansion due to household & corporate balance sheets being more deleveraged than at any point since the 1970s.
[Previously: Consumer indebtedness remains a bullish signal, Banks’ future credit supply & demand fundamentals expected to remain neutral & Households remain extremely deleveraged]
#Neutral #Releveraging? #Credit cycle $XLF $KBE $KRE
–Romeo
