Friday, November 3, 2017

Bonddad Economic Potpourri

The anecdotal comments from the latest ISM report are strong:

  • "Raw material costs on the rise, but purchasing operation has navigated shortages caused by hurricanes." (Chemical Products)
  • "Incoming orders are strong, mainly due to recovery efforts in the wake of Hurricanes Harvey and Irma. Backlogs are up due to operating inefficiencies." (Machinery)
  • "Hurricanes have caused shortages in the resin market, resulting in price increases, inventory constraints and increased lead times." (Computer & Electronic Products)
  • "Ongoing market growth. Minimal impact expected from hurricanes so far in this season." (Miscellaneous Manufacturing)
  • "Business seems to be a bit depressed due to the storms last month, but is picking back up." (Fabricated Metal Products)
  • "Business continues to be better than expected." (Transportation Equipment)
  • "Business is good. Supplier deliveries have extended. Things are really picking up." (Food, Beverage & Tobacco Products)
  • "Our plants are sold out for 2017 — we can’t take any new orders." (Nonmetallic Mineral Products)
  • "In plastics processing, Hurricane Harvey is the reason for every price increase being announced — and virtually all suppliers are announcing price increases." (Plastics & Rubber Products)
The hurricanes are causing some shortages, lengthening delivery times, raising some prices and increasing demand from Texas and Florida.  But all of these effects are temporary and should dissipate in the coming months.

     The Fed's preferred inflation measure is still weak:

Both measures of PCE inflation are below 2% -- the Fed's target.  

     Auto sales enjoyed a solid month of growth as consumers replaced cars destroyed in recent flooding:

Expect a few more months of this.  But sales should return to their weaker position in by 1Q18.  

     Consumer staples, discretionary and now utilities are under-performing: