1. U.S. Budget Deficit Shrinks to Eight-Year Low As Revenues Strengthen
The U.S. Treasury Department reported a $438.9 billion budget deficit during FY2015, narrower than the $483.4 billion deficit in FY2014. It was the smallest deficit since FY2007. As a percent of GDP, the roughly 2.5% was the least since 1.3%, also in 2007. The latest projection from the Congressional Budget Office calls for a deficit of $414 billion next year then $416 billion in 2017. → it's near sustainable point...
| US Government Finance | FY'15 | FY'14 | FY'13 | FY'12 | |
|---|---|---|---|---|---|
| Budget Balance | -- | $438.9 bil. | $483.4 bil. | $-680.2 bil. | $-1,089.2 bil. |
| As a percent of GDP | -- | 2.5 | 2.8 | 4.1 | 6.8 |
| % of Total | |||||
| Net Revenues (Y/Y % Change) | 100 | 7.6% | 8.9% | 13.3% | 6.4% |
| Individual Income Taxes | 47 | 10.5 | 5.9 | 16.3 | 3.7 |
| Corporate Income Taxes | 11 | 7.2 | 17.3 | 12.9 | 33.8 |
| Social Insurance Taxes | 33 | 4.1 | 8.0 | 12.1 | 3.2 |
| Excise Taxes | 3 | 5.3 | 11.1 | 6.3 | 9.2 |
| Net Outlays (Y/Y % Change) | 100 | 5.2 | 1.4 | -2.4 | -1.7 |
| National Defense | 16 | -2.3 | -4.7 | -6.3 | -3.9 |
| Health | 13 | 17.8 | 14.3 | 3.3 | -7.0 |
| Medicare | 15 | 6.7 | 2.8 | 5.5 | -2.8 |
| Income Security | 14 | -0.9 | -4.3 | -1.1 | -9.1 |
| Social Security | 24 | 4.4 | 4.5 | 5.2 | 5.8 |
| Veterans Benefits & Services | 4 | 6.8 | 7.7 | 11.5 | -2.0 |
| Education, Training, Employment & Social Services | 3 | 34.7 | 25.9 | -21.9 | -10.3 |
| Interest | 6 | -1.8 | 2.8 | 0.4 | -3.0 |
But, manufacturers seem cautious...
2. U.S. Industrial Production Continues to Soften
Overall industrial output eased 0.2% during September (+0.4% y/y) following a 0.1% dip in August, last month reported as -0.4%. The latest decline matched expectations in the Action Economics Forecast Survey. Manufacturing sector production dipped 0.1 % (+1.3% y/y) following a 0.4% fall. Mining output was off 2.0% (-5.7 % y/y), the most since May. Utility output gained 1.3% (1.0% y/y) for a second straight month.
| Industrial Production (SA, % Change) | Sep | Aug | Jul | Sep Y/Y | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|
| Total Output | -0.2 | -0.1 | 0.8 | 0.4 | 3.7 | 1.9 | 2.8 |
| Manufacturing | -0.1 | -0.4 | 1.0 | 1.3 | 2.5 | 0.9 | 2.7 |
| Consumer Goods | 0.2 | -0.4 | 1.6 | 2.7 | 2.2 | 1.5 | -1.3 |
| Business Equipment | -0.1 | 0.6 | 0.1 | 1.8 | 4.8 | -0.4 | 9.9 |
| Construction Supplies | -1.3 | 0.3 | 0.4 | 0.1 | 3.9 | 2.8 | 4.3 |
| Materials | -0.3 | -0.5 | 0.6 | -0.3 | 5.1 | 3.1 | 4.1 |
| Utilities | 1.3 | 1.3 | -1.4 | 1.0 | 1.0 | 2.5 | -2.1 |
| Capacity Utilization (%) | 77.5 | 77.8 | 78.0 | 78.2 | 78.1 | 76.7 | 76.7 |
| Manufacturing | 75.9 | 78.1 | 76.4 | 75.7 | 75.3 | 74.0 | 74.5 |
3. Philadelphia Fed Business Conditions Remains Below Break-Even
4. Empire State Factory Sector Activity Continues Lower
5. U.S. Business Inventories Remain Unchanged
...while labor market continues to improve...
6. U.S. Initial Claims For Unemployment Insurance Touch 1973 Low
The job market continues to strengthen. Initial claims for unemployment insurance declined to 255,000 (-6.8% y/y) during the week ended October 10 from a little-revised 262,000 during the prior week. The figure matched the lowest point since November 1973. The four week moving average of claims eased to 265,000.
7. U.S. JOLTS: Job Openings Rate Declines; Hiring Rate Remains Stable
The job openings rate declined to 3.6% during August from July's cycle-high of 3.8%. It nevertheless remained up versus 3.4% one year earlier. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
8. U.S. CPI Dips; Core Prices Strengthen
9. U.S. Retail Sales Are Little Changed Again...
| Retail Spending (%) | Sep | Aug | Jul | Sep Y/Y | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|
| Total Retail Sales & Food Services | 0.1 | 0.0 | 0.8 | -5.6 | 3.9 | 3.7 | 5.0 |
| Excluding Autos | -0.3 | -0.1 | 0.6 | 5.2 | 3.1 | 2.7 | 4.1 |
| Non-Auto Less Gasoline, Building Supplies & Food Services | -0.1 | 0.2 | 0.5 | 3.4 | 3.3 | 2.7 | 3.6 |
| Retail Sales | 0.0 | -0.1 | 0.8 | 1.7 | 3.7 | 3.8 | 4.9 |
| Motor Vehicle & Parts | 1.7 | 0.4 | 1.5 | 8.7 | 7.5 | 8.3 | 9.0 |
| Retail Less Autos | -0.5 | -0.2 | 0.6 | -0.3 | 2.6 | 2.6 | 3.9 |
| Gasoline Stations | -3.2 | -2.0 | -1.0 | -20.0 | -2.7 | -0.7 | 4.3 |
| Food Service & Drinking Places Sales | 0.7 | 0.7 | 0.4 | 8.4 | 6.2 | 3.4 | 5.9 |
10. NABE Lowers Real Growth and Inflation Forecasts
The National Association for Business Economics forecast of 2.7% growth in U.S. real economic activity in 2016 was revised from 2.9% posted in June. Expected growth of 2.5% this year, however, was little-changed.
| National Association For Business Economics | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|
| Real GDP (% Chg. SAAR) | 2.7 | 2.5 | 2.4 | 1.5 |
| Personal Consumption Expenditures | 2.9 | 3.0 | 2.7 | 1.7 |
| Nonresidential Structures | 4.3 | -0.1 | 8.1 | 1.6 |
| Nonresidential Equipment | 5.0 | 3.0 | 5.8 | 3.2 |
| Residential Investment | 8.1 | 8.5 | 1.8 | 9.5 |
| Change in Real Business Inventories (Bil. $) | 60.4 | 94.7 | 68.0 | 61.4 |
| Real Net Exports (Bil. $) | -560.0 | -536.5 | -442.5 | -417.5 |
| Housing Starts (Mil. Units) | 1.28 | 1.12 | 1.00 | 0.92 |
| Light Vehicle Sales (Mil. Units) | 17.1 | 17.1 | 16.4 | 15.5 |
| Payroll Employment Average Monthly Change (000s) | 211 | 212 | 260 | 199 |
| Unemployment Rate (%) | 4.9 | 5.3 | 6.2 | 7.4 |
| Consumer Price Index (Y/Y %) | 2.0 | 0.3 | 1.6 | 1.5 |
| Fed Funds Rate (%, Year-End) | 1.38 | 0.35 | 0.13 | 0.13 |
| 10-Year Treasury Note (%, Year-End) | 3.00 | 2.40 | 2.17 | 3.04 |
... seems too optimistic amid high residential growth and car sales...
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