What is Macro Pulse?

Macro Pulse highlights recent activity and events expected to affect the U.S. economy over the next 24 months. While the review is of the entire U.S. economy its particular focus is on developments affecting the Forest Products industry. Everyone with a stake in any level of the sector can benefit from
Macro Pulse's timely yet in-depth coverage.


Thursday, January 30, 2014

4Q2013 Gross Domestic Product: First (Advance) Estimate

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The Bureau of Economic Analysis (BEA) estimated 4Q2013 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of +3.2 percent. That rate was notably slower than the 4.1 percent posted for 3Q, but in line with expectations of 3.3 percent. Three of the four categories -- personal consumption expenditures (PCE), private domestic investment (PDI) and net exports (NetX) contributed to 4Q growth; government consumption expenditures (GCE) subtracted from growth. Comparisons to 3Q showed (from Global Economic Intersection):
·   changes to the trade balance (exports higher and imports lower) – this makes GDP higher as exports contribute to GDP while imports are subtracted from GDP;
·   inventories declined – and lower inventories make lower GDP;
·   government spending overall was almost a 1 percent headwind to GDP;
·   and consumer spending growth accelerated.
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The Consumer Metrics Institute summarized the GDP report as follows: At face value a new headline growth rate above 3 percent (and a prior quarter number north of 4 percent) qualifies as healtheconomic growth, and continues to place the United States among the fastest growing developed countries. And absent the [partial federal government] shutdowwe could have had a second consecutive quarter above 4 percent. The growth rates certainly provide cover for continued tapering [by the Federal Reserve\. And in fact these kinds of growth rates might argue for a return to more historically normal interest rates.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

Tuesday, January 28, 2014

December 2013 U.S. Home Sales, Inventory and Prices

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Sales of new single-family homes fell by 31,000 units (7.0 percent) to 414,000 (SAAR) in December. This was well off (-13.4 percent) October’s peak rate of 463,000 units. Despite the retreat, however, sales were 4.5 percent above year-earlier levels; in fact, 2013 was the best year for sales since 2008. Meanwhile, the median price of new homes sold nudged higher (by $1,700 or 0.6 percent) to $270,200. Although the drop in starts outpaced the drop in sales during December, the three-month average starts-to-sales ratio bumped up to 1.51 (from 1.45). Click here for our post on December housing permits, starts and completions.
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Single-unit completions fell faster (-49,000 units or 8.2 percent) than sales (-31,000 units or 7.0 percent) in December. Consequently, new-home inventory dropped in absolute terms by 5,000 units but rose by 0.3 month in months-of-inventory terms. 
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Existing home sales reversed a three-month slide in December, rising by 50,000 units (1.0 percent) to 4.87 million units (SAAR); as a result, the share of total sales comprised of new homes nudged down to 7.8 percent. The median price of previously owned homes sold in December also advanced (by $2,500 or 1.3 percent), to $198,000.
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Housing affordability improved marginally in November because the median price of existing homes for sale fell for a fifth month in November (by another $1,400) to $198,000; the National Association of Realtors’ prices of existing homes for sale were $18,400 (8.6 percent) off their June 2013 high. Concurrently, Standard & Poor’s reported that both the 10- and 20-City Composites in the S&P/Case-Shiller Home Price indices posted not-seasonally adjusted monthly decreases of less than 0.1 percent in November (13.6 percent relative to a year earlier). While the year-over-year appreciation rate was the fastest since February 2006, the combination of a lower median home price and falling gains in the monthly home price index suggest home prices may be at a crossroad.
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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

Tuesday, January 21, 2014

November 2013 International Trade (Pulp, Paper & Paperboard)

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Exports of pulp, paper and paperboard decreased by 24,000 metric tons (1.0 percent) in November. Imports rose, but by a more modest 5,000 tonnes (0.7 percent). Exports were 76,000 tonnes (3.0 percent) below year-earlier levels while imports were 13,000 tonnes (1.5 percent) higher. Net exports slid by 1.8 percent relative to October, and were 3.8 percent below November 2012. Year-to-date (YTD) net exports were running 5.8 percent behind the levels seen during the comparable period in 2012.
The drop in November exports compared to October was led by Taiwan (a 23,000 tonne drop compared to total decline of 24,000 tonnes). November's increase in imports was led by Canada (a 23,000 tonne increase compared to total increase of 5,000 tonnes). Looking at the cumulative net exports over the past six months through November, net exports have fallen by just over 6 percent compared to the same six months one year ago. Despite this, exports, imports, and net exports have all been slightly increasing over the past six months on a trend line basis. 
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Year-to-date pulp exports (24.123 million tonnes through November) are down by 3.7 percent compared to the same period in 2012. China remains the chief destination of U.S. pulp exports representing nearly 58 percent of total U.S. pulp exports YTD. Nevertheless YTD pulp exports to China have declined by 5 percent. Among the top 15 destinations for U.S. pulp exports in 2013, Indonesia, Taiwan, and Belgium have all logged significant percentage increases. In terms of rankings, Taiwan, logging a 14.6 percent increase in year-to-date pulp exports receipts, switched places from 11th to 10th with the Netherlands, which posted a 20.8 percent drop in YTD pulp export receipts. Belgium, with its 166.5 percent increase YTD, has jumped from the 20th ranked destination in 2012 to the 13th ranked in 2013. 
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YTD paper and paper board exports (2.371 million tonnes through November) are up by 7.2 percent compared to the same period in 2012. Mexico and Canada are in essentially a dead heat as destinations for U.S. paper and paperboard exports YTD through November; Mexico holds a slim lead at 22.4 percent of total U.S. exports while Canada checks in at 22.0 percent. The notable change between these two countries between 2012 and 2013 is Canada's receipt of U.S. paperboard exports are up nearly 49 percent while U.S. paperboard exports to Mexico are up a scant 0.6 percent year-to-date. The Canadian increase more than accounts for the entire change seen in exports YTD. The top five ranked countries remain identical between 2012 and 2013 and account for 64 percent of the total exports; the top 20 countries account for nearly 89 percent of the total exports. In terms of ranking among the top 20 in 2013, the largest ranking improvement is Pakistan, ranked 14th in 2013, up from 31st in 2012, with an over 300 percent increase in receipts of U.S. paper and paperboard exports. The biggest decline in ranking is Venezuela, dropping from 9th place in 2012 to 13th in 2013 on a 16.3 percentage drop on receipts of U.S. paper and paperboard exports. 
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YTD pulp imports (5.854 million tonnes through November) are up by 4 percent compared to the same period in 2012. Canada remains the chief source of U.S. pulp imports, representing nearly 65 percent of total YTD. However, while Canada has posted a small decline on a percentage basis on a YTD basis (1.4 percent) the next three countries in terms of rank all show significant increases in pulp imports into the U.S.:
·   Brazil, ranked 2nd in both 2012 and 2013 has increased by 12.6 percent on a YTD basis;
·   Chile, ranked 4th in 2012 and 3rd in 2013, has increased its imports by 148.1 percent;
·   Mexico, despite falling from 3rd-ranked pulp import source in 2012 to 4th place in 2013, increased YTD pulp imports by 35.1 percent.
Sweden and France, ranked 5th and 6th in both 2012 and 2013, respectively, are showing double-digit percentage drops in pulp imports. The top six ranked sources account for over 99 percent of 2013 pulp imports. 
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YTD paper and paperboard imports (2.919 million tonnes through November) are up by 4 percent compared to the same period in 2012. Canada remains the chief source of U.S. paper and paperboard imports, representing over 89 percent of the total YTD. Given the magnitude that Canadian imports represent of the total, no surprise the YTD change for Canada (3.5 percent) is close to the total change (4.0 percent). The top five ranked countries between 2012 and 2013 remain the same; in fact, the only change in ranking among the top 10 countries between both years is a switch between Germany (7th to 6th) and South Korea (6th to 7th). Among the top five ranked countries, which in aggregate represent 96 percent of total imports, Finland posted the largest percentage gain (42.1 percent) and Sweden the largest percentage loss (10.8 percent). On a regional basis, after North America, the region of the world showing the largest increase in paper and paperboard imports into the U.S. is Europe, with a 25 thousand tonne (22 percent) increase.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

Monday, January 20, 2014

December 2013 Residential Permits, Starts and Completions

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Total housing starts in December retreated to a seasonally adjusted and annualized rate (SAAR) of 0.999 million units, down by 108,000 units (-9.8 percent) from November’s peak of 1.107 million units -- the biggest fallback since April 2013. The drop was about evenly split between single-family (-50,000 units, or -7.0 percent) and multi-family (-58,000 units, or -14.9 percent) starts.
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The drop in the not-seasonally adjusted data was more noticeable, and represented the largest November-to-December retreat since 2007. Total starts fell by 18,500 units (22.0 percent) relative to November; single-family retreated by 8,800 units (-17.2 percent), while multi-family contributed 9,700 units (-29.4 percent). The year-over-year gain was cut back to just 4.0 percent.
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Completions also “took a hit,” dropping by 90,000 units to 744,000 units (SAAR). Once again the components were roughly comparable, with the single-family segment contributing -49,000 (-8.2 percent) and the multi-family -41,000 (-17.4 percent). Total completions were up 9.3 percent over year-earlier levels.
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Total permits declined modestly in December, posting a 31,000 unit (-3.0 percent) drop to 0.986 million units (SAAR). All of the retreat was contained in the single-family component (-4.8 percent). As a forward-looking indicator, permits appear to be suggesting that the surge in residential construction activity is waning. Year-over-year percentage changes have trended lower throughout 2013 and (although higher than in November) were 11.5 percent above December 2012 levels.
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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

December 2013 Consumer and Producer Price Indices (incl. Forest Products)

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The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in December. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment. Advances in energy and shelter indexes were major factors behind the increase in the seasonally adjusted all items index.
The seasonally adjusted Producer Price Index for finished goods (PPI) advanced 0.4 percent in December. Prices for finished goods declined 0.1 percent in November and 0.2 percent in October. At the earlier stages of processing, prices received by producers of intermediate goods rose 0.6 percent in December, and the crude goods index climbed 2.4 percent. On an unadjusted basis, prices for finished goods increased 1.2 percent in 2013 compared with a 1.4 percent advance in 2012.
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Most of the price indices we track were unchanged in December; only one (Softwood Lumber) declined relative to the previous month. All indices were either unchanged or higher than a year earlier. The indices of Wood Fiber and Pulp, Paper & Allied Products once again achieved new all-time highs.
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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

December 2013 Industrial Production, Capacity Utilization and Capacity

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Industrial production rose 0.3 percent in December, its fifth consecutive monthly increase. For 4Q2013 as a whole, industrial production advanced at an annual rate of 6.8 percent, the largest quarterly increase since 2Q2010; gains were widespread across industries. Following increases of 0.6 percent in each of the previous two months, factory output rose 0.4 percent in December and was 2.6 percent above its year-earlier level. The output of utilities fell 1.4 percent after three consecutive monthly gains. 
At 101.8 percent of its 2007 average, total industrial production in December was 3.7 percent above its year-earlier level and 0.9 percent above its pre-recession peak in December 2007. Wood Products output dropped by 2.2 percent while Paper rose by 0.5 percent.
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Capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent, a rate 1.0 percentage point below its long-run (1972--2012) average. Wood Products capacity utilization fell back by 2.3 percent while Paper increased by 0.5 percent.
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Capacity at the all-industries and manufacturing levels moved, respectively, 0.2 and 0.1 percent higher in December. By contrast, Wood Products remained unchanged while Paper contracted by 0.1 percent.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

Saturday, January 11, 2014

January 2014 Macro Pulse -- New Year: Steady Progress, Continuing Challenges, Persistent Risks

With 2013 behind us and 2014 showing on the calendar, now is as good a time as any to assess where the U.S. macro-economy stands. We look at some positive and negative risks in the January 2014 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.

Tuesday, January 7, 2014

November 2013 International Trade (Softwood Lumber)

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Softwood lumber exports dropped by 23 MMBF (12.9 percent) in November while imports increased by 45 MMBF (4.7 percent). Exports were 22 MMBF (15.9 percent) above year-earlier levels; imports were 176 MMBF (21.4 percent) higher. 
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Asia (especially China and Japan) retained the “top spot” for U.S. softwood lumber exports in November. China was also the largest single-country destination by a wide margin; year to date (YTD), exports to China were up nearly 69 percent relative to the same period in 2012. Meanwhile, Canada was the overwhelming source of softwood lumber imports into the United States. Imports from Romania, Austria, Estonia, Sweden, Malaysia and Honduras have increased markedly on a YTD-over-YTD change basis. 
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Just over half of U.S. softwood lumber exports left the country through West Coast (primarily Seattle, WA) customs districts in November. At the same time, Great Lakes customs districts (especially Duluth, MN) handled over two-thirds of the softwood lumber imports coming into the United States.
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Douglas-fir made up one-quarter of all softwood lumber exports in November, followed by southern yellow pine.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

November 2013 International Trade (General)

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Total November exports of $194.9 billion and imports of $229.1 billion resulted in a goods and services deficit of $34.3 billion (the lowest deficit since October 2009), down from $39.3 billion in October. November exports were $1.7 billion more than October exports of $193.1 billion. November imports were $3.4 billion less than October imports of $232.5 billion.
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On a global scale, data compiled by the Netherlands Bureau for Economic Policy Analysis showed that world trade volume increased by 1.4 percent in October while prices rose by 0.5 percent.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

Monday, January 6, 2014

November 2013 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments increased $4.9 billion or 1.0 percent to $494.6 billion in November. Shipments of durable goods increased $4.1 billion or 1.8 percent to $238.3 billion (the highest level since the series was first published on a NAICS basis), led by machinery. Meanwhile, nondurable goods shipments increased $0.8 billion or 0.3 percent to $256.3 billion, led by petroleum and coal products.
Wood shipments jumped by 1.2 percent while Paper shipments declined by 0.9 percent.
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Data from the Association of American Railroads (AAR) and the American Trucking Associations’ (ATA) advance seasonally adjusted For-Hire Truck Tonnage Index help round out the picture on goods shipments. AAR reported a 20.7 percent decrease in not-seasonally adjusted rail shipments in November (relative to October), but a 1.3 percent rise from a year earlier; on a trend-line basis, total shipments were up 2.1 percent from a year earlier. Excluding coal carloads, year-over-year shipments were up 5.3 percent. Seasonal adjustments reversed the 20.7 percent October-to-November decrease to a 2.1 percent rise. Rail shipments of forest-related products were higher in November than a year earlier, thanks largely to a 8.0 percent rise in the Lumber & Wood Products category. The ATA’s advance index showed a seasonally adjusted 2.7 percent increase in November.
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Inventories increased $0.2 billion to $633.4 billion (also the highest level since the series was first published on a NAICS basis). The inventories-to-shipments ratio was 1.28, down from 1.29 in October.
Inventories of durable goods increased $0.8 billion or 0.2 percent to $384.3 billion, led by transportation equipment. Nondurable goods inventories decreased $0.6 billion or 0.2 percent to $249.1 billion, led by petroleum and coal products. Wood inventories rose by 0.9 percent, and Paper inventories ticked up by 0.1 percent.
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New orders increased $8.8 billion or 1.8 percent to $497.9 billion; excluding transportation, new orders increased 0.6 percent. Durable goods orders increased $8.1 billion or 3.4 percent to $241.6 billion, led by transportation equipment. New orders for nondurable goods increased $0.8 billion or 0.3 percent to $256.3 billion.
As can be seen in the graph above, real (inflation-adjusted) new orders have been essentially flat since early 2011, and have recouped a little more than two-thirds the losses incurred since the beginning of the Great Recession. The trend since early 2013 seems to be on a rising trajectory.
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Unfilled durable-goods orders increased $10.4 billion or 1.0 percent to a new nominal high of $1,058.5 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.42, up from 6.39 in October. Real unfilled orders, a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders have regained just 60 percent of the ground given up since the Great Recession began.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.