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Tuesday, August 9, 2016
Higher markets with Nasdaq reaching a new record high
Dow went up 43, advancers over decliners almost 3-2 & NAZ added 20. The MLP index lost pennies in the 317s & the REIT index was up a fraction to the 369s. Junk bond funds edged higher & Treasuries rose. Oil slid lower & gold found buyers.
The productivity of American workers unexpectedly declined for a 3rd straight qtr, deepening efficiency woes that have
characterized the economic expansion. The measure of employee
output per hour decreased at a 0.5% annualized rate in Q2 after dropping 0.6% in the prior qtr, according to the Labor Dept. The
forecast called for a 0.4% gain. Expenses
per worker climbed at a 2% pace after being revised to a decline
in the previous period. Productivity compared with a year earlier
fell for the first time since 2013 as lackluster global markets prompted
companies to scale back capital investment plans. In the face of
deteriorating corporate profits & an absence of faster economic
growth, the risk is that businesses may begin to ratchet back the hiring
they’ve relied on to meet demand. Unit
labor costs, which are adjusted for efficiency gains, were forecast to
increase 1.8% in Q2. In the prior qtr, they were revised to a 0.2%
decrease from an initially reported 4.5% advance. Adjusted
for inflation, hourly compensation fell at a 1.1% rate, the most in 2 years, after dropping 0.4% in Q1. Worker efficiency fell 0.4% from the same time in 2015, while labor costs climbed 2.1%.
The Q2 reading on productivity compares with the 2.6% average over 2000-2007. Among manufacturers, productivity declined at a 0.2% rate after a 1.5% gain in Q1. Growth
continued to disappoint in Q1. Amid
fragile global growth prospects & presidential election year
uncertainty, the risk is that business investment continues to languish.
That may bode ill for workers, whose potential for wage increases
could suffer as companies look to get the most out of weak profits.
China’s passenger-vehicle sales accelerated the most in 17 months, as
General Motors (GM) & Guangzhou Automobile boosted
deliveries & dealers offering discounts helped clear inventories in
the world’s biggest auto market. Retail sales of cars, sport
utility & multipurpose vehicles climbed 23% to 1.6M
units in Jul, the biggest monthly percentage gain since Feb 2015,
according to the China Passenger Car Association. Deliveries increased
to 12.4M units in the 7 months thru Jul. Dealers offered discounts on models to help reduce stockpiles. A gauge of inventory levels fell
to an 11-month low & indicated contraction for the first time in that
span, the China Automobile Dealer Association said.
The
gov's purchase-tax cut on vehicles with smaller engines has
helped drive demand for compact & mid-size SUVs. With increasingly
affluent Chinese buyers opting for more spacious vehicles, SUVs sales
grew 45% in Jul, outpacing the 15% expansion for sedan
models. Deliveries for GM increased 18%
to 270K units, while Ford (F) rose 15% to
88K vehicles. Toyota (TM) sales gained 5.7% to 97K
units.
US wholesale inventories unexpectedly rose in Jun on gains in
stocks of farm products & other nondurable goods, suggesting an upward
revision to Q2 economic growth estimate. The Commerce Dept said that wholesale
inventories increased 0.3% after having been initially estimated
as unchanged. Inventories for May were revised up to show a 0.2%
rise instead of the previously reported 0.1% gain. The forecast for wholesale inventories was for unchanged in
Jun in line with the gov estimate last month. That unchanged
reading was incorporated in the advance Q2 GDP estimate. The component of wholesale inventories that goes into the
calculation of GDP, wholesale stocks excluding autos, increased 0.3% in Jun. That would imply a mild upward revision to the
Q2 GDP growth estimate. An outright drop in inventory investment subtracted almost 1.2
percentage points from GDP growth in Q2, restricting the
rise in output to a tepid 1.2% annualized rate.
The sellers are away at the beach, enjoying the warm weather, the buyers are in command of the stock market. News continues to be more of the same & the path of least resistance for stocks is to head north. But the dark clouds of uncertainty have not gone away.
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