February 2015 International Trade (Softwood Lumber)

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Softwood lumber exports increased by 9 MMBF (7.9%) in February while imports fell by 13 MMBF (1.3%). Exports were 37 MMBF (23.2%) below year-earlier levels; imports were 105 MMBF (12.3%) higher. The net export deficit was 142 MMBF (20.2%) higher. 

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The rest of North America (i.e., Canada and Mexico) was once again the primary destination for U.S. softwood lumber exports in January (44.3%). Asia (especially China and Japan) was a distant second (35.2%). Canada was also the largest single-country destination (24.0%). Year-to-date (YTD) exports to China were down 60.3% relative to the same period in 2014. Meanwhile, Canada was the source of nearly all (97.4%) softwood lumber imports into the United States. Overall, YTD exports were down 24.5% compared to a year earlier, while imports were up 11.3%. 

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Despite the port slowdown, U.S. softwood lumber export activity through West Coast customs districts stayed relative stable in relation to the other districts during February (39.2% of the U.S. total); Seattle retained the title of most-active district, with 26.1% of the February total. At the same time, Great Lakes customs districts handled 69.8% of the softwood lumber imports (especially Duluth, MN with 29.0%) coming into the United States. 

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Southern yellow pine comprised 28.9% of all softwood lumber exports in February, followed by Douglas-fir with 16.6%. Southern pine exports were down 6.9% YTD relative to a year earlier, while Douglas-fir exports were down 37.8%.

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.

February 2015 International Trade (General)

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The goods and services deficit was $35.4 billion in February, down $7.2 billion from $42.7 billion in January. February exports were $186.2 billion, $3.0 billion less than January exports. February imports were $221.7 billion, $10.2 billion less than January imports.

The February decrease in the goods and services deficit reflected a decrease in the goods deficit of $7.4 billion to $55.2 billion and a decrease in the services surplus of $0.1 billion to $19.7 billion.

Exports to Canada and Mexico, the main U.S. trading partners, fell in February. Exports to China tumbled 8.9%, while those to the European Union were unchanged. Imports from China plunged 18.1%, pushing the politically sensitive U.S.-China trade deficit down 21.2% to $22.5 billion.

Year-to-date, the goods and services deficit decreased $2.6 billion (3.2%), from the same period in 2014. Exports decreased $5.3 billion (1.4%). Imports decreased $7.9 billion (1.7%). 

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On a global scale, data compiled by the Netherlands Bureau for Economic Policy Analysis showed that world trade volume decreased by 1.4% in January (but +2.3% year-over-year) while prices fell by 1.8% (-16.1% YoY).

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.

March 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment increased by 126,000 jobs in March -- only about half the expected 247,000. Moreover, combined January and February employment gains were revised downward by 69,000. Meanwhile, the unemployment rate (based upon the BLS’s household survey) remained stable at 5.5% -- more a result of individuals dropping out of the workforce (277,000) than workers finding jobs (34,000). 

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Observations from the employment report include:

* The disparity in jobs gains between the establishment (+126,000) and household (+34,000) surveys was noticeable again in March.

* The downturn in oil-sector (part of the Mining & Logging category) employment continued in this report.

* Roughly 70% (91,000) of private-sector job growth occurred in the three super-sectors typically associated with the lowest-paid jobs: Profession & Business Services; Education & Health Services, and Leisure & Hospitality.

* The ongoing narrowing in the number of Manufacturing versus Food Service & Drinking Places (FS&DP) jobs continued in March. Interestingly, in January 2000, there were 9.168 million more U.S. manufacturing jobs than FS&DP jobs. As of March 2015, the gap has shrunk to 1.302 million. Although the number of manufacturing jobs was 188,000 higher than March 2014, the concurrent growth rate in FS&DP jobs was more than double that (+415,100). 

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* The employment-population ratio was stable at 59.3%, but the number of employment-age persons not in the labor force jumped 277,000 to a new record of 93.2 million. 

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* The labor force participation rate ticked lower by 0.1 percentage point, tying its multi-decade low of 62.7%. Average hourly earnings of all private employees rose up by $0.07, resulting in a 2.1% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose $0.04 (+1.8% YOY). With the CPI running at an official annual rate of 0.0%, wages are technically rising in real (inflation-adjusted) terms. The amount of time people worked each week, meanwhile, slipped 0.1 hours to 34.5 hours after hovering at a post-recession high for months. 

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* Finally, full-time jobs increased (+190,000) while part-time jobs fell (-170,000). Full-time jobs have been trending higher since December 2009, but are still 851,000 short of the pre-recession high. Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million.

New York Post columnist John Crudele is the latest to expose the methodological problems that underlie the employment reports. Those issues include “rogue” seasonal adjustments that make the numbers look stronger, to outright lying and data fabrication. Crudele’s advice: Take the employment report with a “giant grain of salt” because it is “unreliable to the point of being nearly useless at best and fraudulent at worst.” Unfortunately, it is the best information available.

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.

February 2015 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 $3.6 billion or 0.7% to $481.3 billion in February. Shipments of durable goods decreased $0.5 billion or 0.2% to $244.0 billion, led by primary metals. Meanwhile, nondurable goods shipments increased $4.1 billion or 1.8% to $237.4 billion, led by petroleum and coal products. Wood shipments rose by 0.8% while Paper fell 0.6%. 

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Inventories increased $0.9 billion or 0.1% to $651.0 billion. The inventories-to-shipments ratio was 1.35, down from 1.36 in January.

Inventories of durable goods increased $1.2 billion or 0.3% to $413.0 billion (the highest level since the series was first published on a NAICS basis in 1992), led by transportation equipment. Nondurable goods inventories decreased $0.3 billion or 0.1% to $238.0 billion, led by chemical products. Inventories of Wood expanded by 0.8% while Paper contracted 0.2%. 

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New orders increased $0.8 billion or 0.2% to $468.3 billion (0.0% expected). Excluding transportation, new orders increased 0.8%. Durable goods orders decreased $3.3 billion or 1.4% to $230.9 billion, led by transportation equipment. New orders for nondurable goods increased $4.1 billion or 1.8% to $237.4 billion.

Prior to July 2014, as can be seen in the graph above, real (inflation-adjusted) new orders had been essentially flat since early 2012, recouping roughly 75% of the losses incurred since the beginning of the Great Recession. With July’s transportation-led spike now in the rearview mirror, new orders have fallen back to around 57% of their December 2007 high. 

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Unfilled durable-goods orders decreased $5.9 billion or 0.5% to $1,156.3 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.71, unchanged from January. Real unfilled orders, which had been a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders in June 2014 were back to just 79% of their December 2008 peak. Real unfilled orders jumped to 102% of the prior peak in July, thanks to the largest-ever batch of aircraft orders, hence, this metric is likely to remain elevated for several years.

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.

March 2015 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil hovered near its lowest price in six years, edging down $2.75 to $47.83 per barrel in March. The price drop coincided with a strengthening U.S. dollar, the lagged impacts of a 268,000 barrel-per-day (BPD) decrease in the amount of oil supplied/demanded in January (to 19.2 million BPD), and a seemingly unstoppable accumulation of crude oil stocks (to the highest levels in about 80 years). The monthly average price spread between Brent crude (the predominant grade used in Europe) and WTI widened by $0.64 in March, to $8.16 per barrel. 

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With futures prices in “contango” (i.e., near-term contracts are priced lower than later-term contracts), we do not expect significant additional fallout in spot oil prices. 

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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.

March 2015 Currency Exchange Rates

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In March the monthly average value of the U.S. dollar appreciated against all three major currencies we track: 0.9% against Canada’s loonie, 4.9% relative to the euro, and 1.4% against the yen. On a trade-weighted index basis, the dollar strengthened by 1.8% against a basket of 26 currencies. 

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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.

February 2015 Construction Spending

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Overall construction spending in the United States nudged lower (-0.1%) during February (+0.2% expected), to a seasonally adjusted and annualized rate (SAAR) of $967.2 billion. Private construction spending rose 0.2%. Outlays on residential projects shrank by 0.2% while non-residential expanded by 0.5%. Spending on public construction projects decreased 0.8%. 

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Click here for a discussion of February’s new residential permits, starts and completions. Click here for a discussion of new and existing home sales, inventories and prices.

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.