Spring is finally here, but that certainly doesn’t mean corporate America will cease to use the cold weather as an excuse for abysmal corporate earnings. Throw a dart at any sector, and you’ll find CEOs blaming the weather in some capacity—well, save for the utilities companies.
One sector that might be able to (on some level) justifiably blame the weather for a weak start to the year is the auto sector. Overall, U.S. auto sales were up eight percent year-over-year, while Canadian auto sales were up four percent. (Source: Isidore, C., “Car sales make a strong comeback in 2013,” CNN Money web site, January 3, 2014.)
In 2013, U.S. auto sales topped 15 million for the first time since 2007. While auto sales of 15.6 million were below the 16.0 million forecast by analysts, it was still an encouraging sign for the auto industry. Ford Motor Company’s U.S. sales were up 11%, while Chrysler Group LLC saw its sales climb by nine percent, and General Motors Company reported a 7.3% increase.
The 2013 auto sales data is encouraging in light of the disappointing December sales numbers; this also happened to coincide with the start of the dastardly winter of 2014. The weak end-of-the-year auto sales sentiment skidded over into 2014. Auto sales missed both their January and February expectations.
So far, 2014 has been good for global auto sales. Global sales hit record territory in February, climbing seven percent year-over-year. Auto sales in China climbed 22%, while car sales in Western Europe climbed year-over-year for the sixth consecutive month. Spain led the way with an 18% jump in auto sales. … Read More
The U.S. economy is weak. Everyone knows it. We just don’t know where to lay the blame. Businesses on the S&P 500 have been using the weather as an economic scapegoat. And not a small number, either.
Between January 1 and March 12, 2014, 195 companies on the S&P 500 used the term “weather” at least once in their conference calls. This represents an 81% increase over the 108 companies that mentioned the weather in their conference calls in the same period last year. (Source: “How many S&P 500 companies have commented on the weather?” FactSet, March 14, 2014.)
And if you want to not-so-subtly warn investors things aren’t looking too good, just blame the weather. The estimated earnings growth rate for the S&P 500 this week is an anemic 0.3%. That’s down slightly from a growth rate for the S&P 500 stocks of 0.4% last week, but it’s like night and day when compared to the December 31, 2013 Q1 earnings growth rate forecast of 4.4%.
Not a big surprise when you consider 84% of all companies on the S&P 500 that have issued earnings-per-share (EPS) guidance have revised it lower. That’s well above the five-year average of 64%. And, for comparison’s sake, during the first quarter of 2013, 78% of companies on the S&P 500 did so.
Weather aside, it’s quite possible S&P 500 companies aren’t doing that well because the U.S. economy just isn’t gaining traction. Unemployment remains high, wages are stagnant, consumer confidence levels are down, personal debt levels are up, and housing and auto sales have been disappointing.
Even though February retail sales were up … Read More
As the investing adage of the day goes, “When the going gets tough, the tough get eating, smoking, and drinking.” And there’s plenty of tough economic data out there to send people into the arms of their favorite vices and sin stocks.
In a nutshell, U.S. unemployment has improved year-over-year to 6.7%, but the improved numbers are the result of an increase in low-wage-paying part-time retail jobs. The underemployment rate remains high near 13%, as does the long-term unemployed at 2.3%. And despite the soaring S&P 500, wages haven’t really budged in years.
In January, new orders for manufactured durable goods fell one percent, or $2.2 billion, to $225 billion—the third decrease in the last four months. Not surprisingly, retail sales, which account for about 30% of consumer spending, rose just 0.2% in February after two straight months of declines.
March consumer sentiment data missed forecasts, falling from 81.6 in February to 79.9—the lowest level in four months and the eighth miss in the last 10 months. This trickled down to February auto sales, which flat-lined year-over-year to 1.19 million and sat on the low end of annualized auto sales estimates of 15.34 million. Even January housing data were weak.
I realize most economists are blaming the weak U.S. economy on the bad winter weather, but I’m not so sure. And I’m certainly not alone. Even Stephen Poloz, the governor of the Bank of Canada, says it’s hard to believe that the recent economic slowdown is all due to the weather. (Source: “Loonie falls on Stephen Poloz’s gloomy forecast for growth,” The Canadian Press, March 18, 2014.)
The tough economic … Read More
According to Wall Street, the cold winter weather is responsible for holding back an economy that’s just itching to take hold. And as we’ve recently learned, when it comes to poor earnings and revenues, nothing makes for a better excuse than the weather. After all, the cold harsh winter that has blanketed much of North America doesn’t care how much money you make.
But while the cold winter weather might not care what area code people live in, the feeling is mutual—people in the wealthy area codes don’t care about the cold weather either, especially when it comes to auto sales.
February auto sales figures came in earlier this week, and it’s as if auto sales have flat-lined. Overall, February auto sales were unchanged year-over-year at 1.19 million for an annualized auto sales rate of 15.34 million—at the low end of the estimated 16 million the industry expects to sell in 2014. (Source: “U.S. Market Light Vehicle Deliveries February 2014,” Motor Intelligence web site, March 2, 2014.)
Leading the February auto sales’ non-event are the “Big 8” (General Motors Company; Ford Motor Company; Toyota Motor Company; Chrysler Group LLC, Honda Motor Co., Ltd.; Hyundai Motor Company/Kia Motors Corp.; Nissan Motor Co., Ltd.; and Volkswagen AG), which accounted for 1.06 million units, or 89% of the month’s sales.
Nissan and Chrysler were the only two Big 8 automakers to report year-over-year growth. Nissan reported year-over-year auto sales growth of 15.8%—ahead of analysts’ predictions of 12%. And Chrysler reported another solid month with auto sales up 11%—analyst forecasts were expecting an 8.8% increase. Chrysler surprised to the upside in January with an … Read More
Income inequality plays an important role in whether or not an economy experiences economic growth. If a small number of people earn the majority of the wages in a country, that sets the country up for a disastrous situation. What this essentially does is create a significant disparity. You can expect to see certain businesses do really well while others struggle severely, which is the result of those who are earning fewer wages spending less and those who are earning a significant portion spending more.
Sadly, this is what we see in the U.S. economy. Income inequality is increasing. It suggests economic growth is a farfetched idea.
According to a study by the Paris School of Economics, in the U.S. economy, the richest 0.1% earns nine percent of the national income. The bottom 90% of Americans—the majority of the population—only earn 50% of the national income. (Source: Arends, B., “Inequality worse now than on ‘Downton Abbey,’” MarketWatch, February 27, 2014.)
Former Federal Reserve chairman Allan Greenspan said, “I consider income inequality the most dangerous part of what’s going on in the United States.” (Source: Well, D., “Greenspan: Income Inequality ‘Most Dangerous’ Trend in US,” Moneynews, February 25, 2014.)
Income inequality in the U.S. economy is very evident, no matter where you look.
As I mentioned earlier, when there is income inequality in a country, you can expect certain businesses to do poorly. For example, consider Wal-Mart Stores, Inc. (NYSE/WMT)—one of the biggest retailers in the U.S. economy known for its low prices. Due to the U.S. government pulling back on its food stamp programs, the company is worried. The executive … Read More
Despite assurances from analysts, economists, and central bankers, the U.S. economy isn’t faring so well—and the markets are finally beginning to see what we’ve been warning about in these pages all last year.
For sustainable growth, the U.S. economy needs to be reporting consistently strong fiscals. But it isn’t. For starters, the key stock indices, a reflection of the U.S. economy, have extended their sharp January losses. The S&P 500 is down 5.6% year-to-date, the Dow Jones Industrial Average has lost more than seven percent of its value so far this year, the NYSE is down roughly six percent, and the NASDAQ is in the red by four percent.
Every quarter since the beginning of 2013, an increasingly larger number of S&P 500-listed companies have revised their quarterly earnings lower. During the first quarter of 2013, the number stood at 78%. This time around, 81% of S&P 500 companies have revised their first-quarter earnings lower.
Why the big losses? That depends on whom you talk to. The Bank of America, without even a hint of a smirk, blames the much colder-than-expected weather for the weak U.S. economy, meaning the U.S. economy and global markets are performing poorly because of a snow storm…
I suggest the U.S. economy is doing poorly and the U.S. markets are tanking for entirely different reasons. For starters, the U.S. economy needs steady jobs and earnings growth. Instead, the U.S. economy is facing high unemployment and stagnant wages. For the week ended January 25, jobless claims jumped more than forecast to a seasonally adjusted 348,000.
And a record number of Americans rely on food stamps. Interestingly, … Read More
We expect American consumers to do a lot in this country; not least of which is to be the nation’s economic engine, after all, 70% of our gross domestic product (GDP) comes from consumer spending.
After years of strong stock market gains, America is still being bogged down with stagnant wages, high unemployment, and near-record-high food stamp usage—not the best formula for a nation that relies on consumers to spend, spend, spend. However, it is also contingent upon us being able to continually pay our bills. It’s the ebb and flow of consumerism.
But that flow is becoming more and more constricted. While banks are more than willing to increase high-interest credit card and loan limits to maxed-out consumers, they’re beginning to fear that this money might never be paid back.
According to the latest quarterly survey, American and Canadian bank managers’ expectations for delinquencies on auto sales loans have hit their highest level since the end of 2012; expectations for delinquencies on credit cards reached a two-year high; and 34% of respondents expect auto sales loan delinquencies to climb in the next six months, while 28% expect delinquencies on credit cards to rise.
Despite these findings, the report also found that consumer borrowing (and spending) shows no signs of slowing down! In fact, 58% of bankers said they expect the average credit card balance to increase over the next six months—only six percent expect balances to go down. On top of that, 44% of polled bankers say they expect the amount of credit extended to consumers to increase—only 14% think it will decrease.
These findings run in step with … Read More
Depending on who you ask, sales in the retail sector may be either brisk or failing to gain traction. Like most things in the stock market, when it comes to the retail sector, it’s all about perspective.
According to the U.S. Department of Commerce, December retail sector sales advanced 0.2% month-over-month, beating analyst forecasts that expected a one-percent increase. Auto sales fell 1.8%, pulling total retail sales numbers down. Not surprisingly, the weak December auto sales numbers are considered more of a reflection of the bad weather than a weak economy. (Source: “U.S. Census Bureau News: Advanced Monthly Sales for Retail and Food Services December 2013,” United States Census Bureau web site, January 14, 2014.) Excluding auto sales, December retail sector sales climbed 0.7% after a 0.2% increase in November.
Are these retail sector sales numbers the latest indication that the economy is getting stronger as we begin 2014?
Well, that depends on how you look at it. Month-over-month, the retail sector sales data looks encouraging. But if you step back a bit and look at the last few months—or even year-over-year numbers—the retail sector and, by extension, the U.S. economy don’t look so bright.
Overall sales of furniture, sporting goods, building materials, garden equipment, electronics, and appliances fell month-over-month. Electronics and appliance stores, two key gift-buying outlets during the holiday season, tripped in November and December. Year-over-year, electronics sales were up a paltry 0.7%.
Department store revenues were essentially flat in November compared to October and were down slightly in December. Overall 2013 department store sales were down 4.7% from 2012.
So now I ask you, will the good … Read More