Mish's Global Economic Trend Analysis

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• Homebuilding Off to Slow Start in 2015; Starts Miss Expectations; Atlanta Fed GDP Forecast 0.1%
• Philly Fed Positive, but New Orders Stall, Backlog of Orders Contracts, Prices Contract; Why the Optimism?
• Another 5.27 Billion in Capital Flight from Greece in March

Homebuilding Off to Slow Start in 2015; Starts Miss Expectations; Atlanta Fed GDP Forecast 0.1% Posted: 16 Apr 2015 12:11 PM PDT Add home building to the list of disappointing economic reports. The Bloomberg Consensus for seasonally adjusted starts was for 1.04 million. Instead we saw .926 million. Highlights Housing is still sluggish based on the latest starts data which disappointed. Starts in March slightly rebounded a monthly 2.0 percent after plunging a monthly 15.3 percent in February. Expectations were for a 1.040 million pace for February. The 0.926 million unit pace was down 2.5 percent on a year-ago basis. By region, starts gained 114.9 percent in the Northeast-almost certainly a weather related rebound but in a small region. The Midwest also saw a weather related gain of 31.3 percent. However, the large South region declined 3.5 percent and the West fell 19.3 percent. Housing permits were a little stronger but still disappointed, falling 5.7 percent after gaining 4.0 percent in February. The 1.039 million unit pace was up 2.9 percent on a year-ago basis. The median market forecast was for a 1.085 million unit pace. Overall, housing is still soft even with weather improving. The latest data will likely keep the Fed on the loose side in the near term. Recent History Of This Indicator Housing starts unexpectedly fell sharply in February. Starts fell a monthly 17.0 percent, following no change in January. The 0.897 million unit pace was down 3.3 percent on a year-ago basis. This was the lowest starts level since January 2014 with a 0.897 million unit annualized pace. Adverse winter weather likely played a role. Single-family units dipped 14.9 percent in February, following a 3.9 percent decrease the month before. Multifamily units dropped 20.8 percent after rising 7.9 percent in January. Housing permits, however, were more positive, gaining 3.0 percent after no change in January. The 1.092 million unit pace was up 7.7 percent on a year-ago basis. Atlanta Fed GDP Forecast 0.1% The Atlanta Fed's GDPNow Forecast ticked down to 0.1% growth for the quarter, based on yesterday's poor Industrial Production numbers. See String of Good News Snaps at One: Industrial Production Down 0.6 Percent, First Quarterly Decline Since 2009 Today's poor showing in the Philly Fed manufacturing survey (see Philly Fed Positive, but New Orders Stall, Backlog of Orders Contracts, Prices Contract; Why the Optimism?) coupled with weakness in housing, I would expect the GDPNow forecast to decline back to zero, if not negative. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Philly Fed Positive, but New Orders Stall, Backlog of Orders Contracts, Prices Contract; Why the Optimism? Posted: 16 Apr 2015 11:10 AM PDT As typical, there is not much to cheer about in the latest Philadelphia Fed Manufacturing Survey. The index is hovering above zero where it has been for months. That's about as good as it gets. April vs. March New orders are weak while shipments dipped into contraction. Prices paid is negative for the second month and prices received has been in contraction for four months. The number of employees is positive, but that will not last long unless orders pick up. Strength in the US dollar suggests orders, especially export orders, won't pick up. That said, a special survey question this month shows exports only account for 10 percent of revenue. Thus, weakness in orders is also local. Special Question on Exports Approximately what percentage of your total revenues come from exports and what percentage of total nonlabor costs are paid to foreign suppliers? Expectations Six Months From Now Why the Optimism? As is typically the case, firms were optimistic in their forecast six months ahead. The first chart shows expectations are generally overly optimistic and essentially useless. Expectations rise and fall with current report and are typically higher. Optimism in the face of mediocre to downright poor economic reports is quite interesting. Does the Fed have everyone believing the economy will  pick up? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Another 5.27 Billion in Capital Flight from Greece in March Posted: 16 Apr 2015 10:07 AM PDT Data from the Bank of Greece for March shows net Target2 liability for Greece increased by another €5.27 billion in March to €96.427 billion. Target2 represents capital flight from Greece. Data for the chart is from Eurocrisis Monitor, with my update reflecting the latest data from the Bank of Greece. The pace has slowed, but the trend is clear. Capital flight from Greece continues. For a refresher course on Target2, please see Reader From Europe Asks "Can You Please Explain Target2?" Eurozone exposure to Greek liabilities is €96.427 billion of Target2 imbalances plus another €14.028 billion net liabilities related to the allocation of euro banknotes. Thanks to reader Lars who has been following these imbalances. Net liabilities to euro banknotes was about €13 billion last month and €10 billion at the end of 2014. Yesterday at a press conference Lars informs me Draghi mentioned Eurozone exposure to Greek liabilities was €110. One can arrive at that number by adding €96 and €14. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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