Thursday, May 15, 2014

US Data for May 15 , 2014 ( CPI rises 2.0 percent ( year over year ) , but check rising food and in particular meat prices ....Initial Claims for to lowest since May 2007 - but then Empire Manufacturing Data reveals spending / job outlook tumbling ........ Apart from Germany Q1 GDP is very bad .......Walmart claims everything but coronal canyons caused earning disappointment !

CPI Rises 2.0% From Year Earlier, Most Since June: Meat Prices Soar Most In Over A Decade

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The CPI headline print of 0.3% for April came just as expected, rising from 0.2% in March and the highest sequential increase since June of 2013. It was also in line with expectations. The CPI ex-food and energy rose 0.2% and up 1.8% from a year ago, both just modestly higher than expected.
The breakdown shows why April inflation wasn't even higher: energy service prices tumbled by -1.9% driven by a 2.6% drop in the price of electricity. On the other hand food prices refused to decline in line with what the PPI disclosed yesterday.
However, when drilling down into the food prices we find the following revelation:
The food index rose 0.4 percent in April. The index for food at home, which rose 0.5 percent in both February and March, increased 0.4 percent in April. The index for meats, poultry, fish, and eggs rose 1.5 percent in April and has increased 3.9 percent over the last three months. The index for meats rose 2.9 percent, its largest increase since November 2003. The index for fruits and vegetables also continued to rise, increasing 0.7 percent. The dairy index also rose in April; its 0.5 percent advance was its sixth increase in a row. In contrast to these increases, the index for other food at home declined 0.2 percent, and the nonalcoholic beverages index declined for the fourth month in a row, falling 0.1 percent. The index for cereals and bakery products was unchanged in April. The food at home index has risen 1.7 percent over the past 12 months, with the index for meats, poultry, fish, and eggs up 6.4 percent over the span, the largest increase among the major grocery store food groups. The index for food away from home rose 0.3 percent in April, the third straight such increase, and has increased 2.2 percent over the last 12 months.
How about other hedonically-adjusted prices?
The index for all items less food and energy increased 0.2 percent in April, the same increase as in March. The shelter index, which rose 0.3 percent in March, increased 0.2 percent in April. The rent index increased 0.3 percent, the index for owners’ equivalent rent advanced 0.2 percent, and the index for lodging away from home rose 0.4 percent. The medical care index rose 0.3 percent in April, with the indexes for medical care services and medical care commodities both increasing 0.3 percent. The index for airline fares rose sharply in April, increasing 2.6 percent, its largest increase since November 2009. The new vehicles index increased 0.3 percent in April, and the index for used cars and trucks rose 0.5 percent. The recreation index, which declined in March, rose 0.2 percent in April. The tobacco index rose 0.1 percent, the same increase as in March. The indexes for apparel, for household furnishings and operations, and for personal care were all unchanged in April. The index for all items less food and energy has risen 1.8 percent over the last 12 months. This figure has remained in the range of 1.6 percent to 1.8 percent for 13 months in a row. The shelter index has increased 2.8 percent over the last 12 months; this figure has been trending upward. The medical care index has risen 2.4 percent over the span.The new vehicles index has risen 0.4 percent, while the index for used cars and trucks has advanced 0.2 percent.
And since US consumer disposable income is lower than most of these annual increases, it is increasingly becoming clear that aside from meat, airline travel, shelter and medical care, which are getting ever more unaffordable, US households have never been able to buy as many LCD TVs as they can now.

Initial Claims Plunge To Lowest Since May 2007

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"Mission Accomplished"... At 297k this is the lowest initial claims print since May 2007 (beating expectations of 318k by the most in 8 months). This rebound jump lower in claims reflects on many of the most recent indicators bouncing back from weather-effects but the question is its sustainability - and extrapolatibility (which we are sure is a word being used by the sell-side strategists expecting 4% GDP growth in Q2). Total benefits dropped 9k to 2.67 million - the lowest since Dec 2007. All things considered - America is fixed... so why are bond yields collapsing and GDP so piss-poor? Just like Japanese GDP however, good news appears to be bad news as the US equity market did not flinch on this record-setting jobs print.

Empire Manufacturing Rebounds To Best In 4 Years But Spending/Jobs Outlook Tumbles

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After the biggest miss in over a year, Empire manufacturing rebounded phoenix-like to its biggest beat in 5 years and highest level in 4 years (at 19.0). The massive surge in the headline was matched by a huge jump in the number of employees - great news, except that the average work week was stable and proces received tumbled. What is more worrisome - and suggests this spike is entirely unsustainable is the outlook for capex and tech spending dropped, average workweek expectations shrank, and the number of employees is expected to fall.

And here is the outlook section of the report...

Europe's "Very Disappointing" Q1 GDP In Charts

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Thank god for Germany, whose Q1 GDP printed at 0.8%, above the expected 0.7%, and higher than Q4's 0.4%, or else the Eurozone's very disappointing Q1 GDP, which printed at 0.2% or half the expected 0.4%, could have been flat or negative.
Here is what happened from the WSJ:
The euro zone's economy expanded at a weak pace last quarter despite a strong recovery in Germany, putting added pressure on the European Central Bank to enact fresh easing measures to prevent the region from sliding into a lengthy period of low inflation and economic stagnation.

Gross domestic product grew 0.2% in the euro zone during the first quarter compared with the final three months of 2013, the European Union's statistics agency Eurostat said Thursday, well short of the 0.4% quarterly gain expected by economists.

Last quarter's rise translates into growth of 0.8% in annualized terms, little changed from the fourth quarter. That masked a deepening divergence among the 18-member euro zone. Of the 13 euro members reporting GDP Thursday, only six expanded and some of those were small economies such as Latvia, Slovakia and Belgium.

The report "is a major disappointment, as it suggests that the euro zone is still far away from reaching the escape velocity required for a sustainable recovery," said ING economist Peter Vanden Houte, in a research note.
Naturally, the EUR got promptly hit after algos realized the EURUSD can't trade at 1.40 and have Europe grow at anything beyond stall speed.
Ironically, the strong GDP from Germany was explained by - what else - the weather. From Goldman:
Favourable weather at the beginning of the year is partly responsible for the strong first quarter reading.But even when taking this into account there can be little doubt that the underlying moment of the German economy is strong.  GDP was up 0.8%qoq (real, calendar adjusted) after +0.4%qoq in Q4 last year, a bit higher than consensus expectations of +0.7%qoq. The statistical office will release details only later this month but said in its press release that growth was driven "exclusively" by domestic demand. Private and government consumption increased, but the main driver seemed to have been investment spending (construction as well as equipment), which increased "meaningfully". Inventories also provided a positive growth contribution, while net trade was negative.
Well this is what happens when it is now ok for economists everywhere to be nothing more than constantly wrong weathermen.
Oddly enough favorable weather did not help France or Italy, the first of which came in at 0.0% below the 0.1% expected, and down from 0.2%, while Italy after briefly coming out of recession in Q4 with a positive print after constant negative GDP numbers, appears to be reentering recession after Q1 GDP came at -0.1%, below the 0.2% expected, and down from 0.1%.
Goldman was not happy:
Today's data are at odds with improving business sentiment. Business sentiment has generally improved in Q1, with the composite PMI gaining almost 2pt on the quarter (51.9 in Q1 after 50 in Q4). Similarly, the Istat survey rose by 1pt in Q1. Both surveys are now around/or above their respective long-term averages and thus indicate positive growth
Perhaps maybe someone was lying?
Anyway, here is the full breakdown in table format...

Walmart Misses Across The Board, Guides Lower: Blames It On Weather, Obamacare And Taxes

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In yet another quarter confirming that Walmart is merely a company that can beat analyst expectations when it cashes Uncle Sam's welfare checks and foodstamps, when the impact of Obamacare is ignored, and when the second it snows all bets are off, WalMart reported Q1 EPS of $1.10, below the $1.15 expected, even if the company was able to explicitly quantify what the impact of snow in the winter was: "Severe weather in the U.S. businesses negatively impacted EPS by approximately $0.03." Apparently the weather's impact on the top line was over $1 billion because revenues came in at $114.96 billion, below the $116.3 billion expected.
In fact the weather in the quarter ended April 30 (when as far as we can recall there was only snow in February because retail sales in March soared on the snow thawing) was so bad, the company dedicated an entire section to it:
"Walmart's first quarter net sales increased 0.8 percent over last year. Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected," said Doug McMillon, Wal-Mart Stores, Inc. president and chief executive officer.
Comp stores of -0.2% missing expectations of 0.0% were also due to, you guessed it, ther weather:
"Our comp of negative 8 basis points for the period was in line with our relatively flat guidance," said Bill Simon, Walmart U.S. president and CEO. "A number of severe winter storms negatively impacted us during the quarter. A solid start to spring and a strong Easter drove positive comps in the back half of the quarter.
And then there were taxes:
Additionally, the company's effective tax rate for the quarter was higher than anticipated. The company still expects the full-year tax rate to range between 32 and 34 percent.
How long until WMT buys a Dutch company and reincorporates there to save on taxes?
Ok fine, weather (and taxes) were to blame for everything in the past. So what about the future? Well, WMT forecast a Q2 EPS range of $1.15-$1.25, below the $1.29 consensus, for the following reasons:
"We expect second quarter fiscal year 2015 diluted earnings per share from continuing operations to be between $1.15 and $1.25. This compares to $1.24 last year," said Charles Holley, executive vice president and chief financial officer. "Our guidance assumes incremental investments in e-commerce, headwinds from higher health care costs in the U.S. and increased investments in Sam's Club membership programs. We continue to expect our full-year effective tax rate to range between 32 and 34 percent. We expect our effective tax rate to be at the high end of this guidance for the second quarter."
So to summarize: weather, Obamacare and taxes. And of course, we expect that the lack of foodstamps will also be discussed on the earnings call.
Of course, the only reason why the company's EPS disappointed is that while WMT CapEx tumbled from $3.0 billion a year ago to just $2.2 billion this quarter, so did buybacks, as the company repurchased a measly $626 million of stock down from $2.2 billion a year ago. Judging by the stock reaction in the premarket, shareholders are anything but happy with this outcome.