Thursday, July 4, 2013

US Auto Sales Probably Jumped In May Following Short-Lived Dip

ford explorer made of LEGOREUTERS/Frank Polich

DETROIT (AP) — U.S. auto sales rebounded in May, with Memorial Day sales and Nissan price cuts drawing buyers back into dealerships after a slower than expected April.

Analysts forecast sales will rise 7 percent from May 2012 to 1.4 million vehicles, putting the industry back on pace for full-year sales of more than 15 million. In April, the annualized rate dropped below 15 million for the first time in six months, causing some concern that the industry's gradual recovery could be slowing.

"May sales quickly chased away any of last month's concerns that the auto recovery is stalling," said Jessica Caldwell, a senior analyst at car-shopping site Edmunds.com. "This quick rebound is just another example of how the auto industry is currently one of the most resilient areas of the overall economy."

Auto companies are scheduled to report May sales on Monday.

Nissan's sales likely surged thanks to competitive pricing. Car buying site TrueCar.com estimated that Nissan's sales jumped 25 percent in May, the biggest increase of any major automaker.

Nissan announced in early May that it was lowering the price of seven models, including the recently redesigned Altima sedan. But even before that, the company was giving dealers aggressive credits so they could discount vehicles that were shipped to their lots before the price reduction. Cars and trucks with the higher sticker prices are now being discounted, and that's what drove Nissan's May sales increase, said Larry Dominique, a former Nissan product chief who is now executive vice president of TrueCar. Nissan is advertising no down payment and $1,000 cash on the Rogue crossover, for example.

"That certainly is stimulating a lot of sales and interest," Dominique said.

Nissan's goal was to hold average sales prices steady by cutting sticker prices while trimming discounts such as rebates by a like amount, Dominique said. TrueCar estimates that Nissan cut its incentive spending by 34 percent in May, to an average of $1,821 per vehicle. That's $660 lower than the industry average.

Whether the strategy works won't be known until the summer months, after dealers use up all the credits they got to sell existing inventory, Dominique said. Once the credits go away, Nissan's pricing strategy will be fully in operation, he said.

Full-size pickup trucks are also selling well as home construction continues to see double-digit growth. That benefits the Detroit automakers, who sell the vast majority of pickups in the U.S. Kelley Blue Book expects General Motors Corp., Ford Motor Co. and Chrysler Group all to see sales gains in the 6 percent to 8 percent range thanks to a 20 percent rise in pickup sales.

Memorial Day offers — such as Chevrolet's $500 cash rebate on top of other discounts — also juiced sales, Kelley Blue Book analyst Alec Gutierrez said.

Toyota Motor Co., whose Camry and Corolla sedans have been struggling in the face of newer rivals like the Honda Accord and Ford Fusion, is expected to report sales fell slightly from last May.


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Construction Spending Misses Expectations, Barely Grows

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Enter your email address and zip code to set up customized email alerts.You have successfully emailed the post. Sam Ro | Jun. 3, 2013, 10:00 AM | 194 | The April construction spending report is out and it's a miss.

Spending climbed by just 0.4% month-over-month in April.  Economists were looking for a 0.9% gain.

The March number, however, was revised up to -0.8% from -1.7%.

From the Census Bureau:

PRIVATE CONSTRUCTION
Spending on private construction was at a seasonally adjusted annual rate of $602.0 billion, 1.0 percent (±1.2%)* above the revised March estimate of $595.9 billion. Residential construction was at a seasonally adjusted annual rate of $301.9 billion in April, 0.1 percent (±1.3%)* below the revised March estimate of $302.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $300.1 billion in April, 2.2 percent (±1.2%) above the revised March estimate of $293.7 billion.

PUBLIC CONSTRUCTION
In April, the estimated seasonally adjusted annual rate of public construction spending was $258.8 billion, 1.2 percent (±2.8%)* below the revised March estimate of $261.8 billion. Educational construction was at a seasonally adjusted annual rate of $58.7 billion, 4.4 percent (±4.4%)* below the revised March estimate of $61.4 billion. Highway construction was at a seasonally adjusted annual rate of $76.7 billion, 0.5 percent (±9.9%)* above the revised March estimate of $76.2 billion.

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MORE GREEN SHOOTS: Italian PMI Hits 4-Month High

Another solid number.

For May, Italian PMI rose to 47.3, from 45.8.

Like the Spain number from earlier, this is still a level of contraction, but a beat in estimates, and green shoots.

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Read the full report at Markit -->


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One Of The Tightest Correlations To Gold Continues To Hold Strong

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Ed Yardeni is the President and Chief Investment Strategist of Yardeni Research

The core CPI and personal consumption expenditures deflator (PCED) rose only 1.7% and 1.1% y/y during April. The latter is the lowest reading for the core PCED on record and well below the expected inflation rate in the 10-year TIPS, which is also falling.

The demand for inflation-protected bonds tends to rise (fall) when inflationary expectations are rising (falling). In the current environment, inflationary expectations are falling, and so is the demand for inflation-protected bonds, which is why the TIPS yield is rising.

The narrative gets more interesting still when we see that the inverse of the TIPS yield remains highly correlated with the price of gold. What’s that all about? Obviously, rising gold prices must reflect some concerns about rising inflation, which would increase the demand for TIPS. This year’s break in the gold price suggests that inflationary expectations are coming down, and so is the demand for TIPS. By the way, the price of gold tends to be a useful indicator of the underlying trend in industrial commodity prices.

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Today's Morning Briefing: Clash of the Titans. (1) Despite all the clashes, stocks at record highs. (2) The clash that could crash stocks. (3) Central bankers are central planners. (4) Bond Vigilantes are rising from the dead. (5) Mythology and the bond market. (6) Yields rising despite record low inflation reading. (7) Bad breaks for gold and TIPS. (8) Back to old normal in bond yields? (9) The Fed is getting cornered. (10) Don’t bet against the richest men in the world. (11) The Hindenburg Omen. (More for subscribers.)

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The Saudis Do NOT Want To Talk About America's Shale Revolution

Rob Wile | Jun. 3, 2013, 9:40 AM | 1,219 | saudi arabian ministers REUTERS/Stephanie Mcgehee

American oil inventories are at all-time highs thanks to shale production.

And the Saudis do not want to talk about it.

At OPEC's biannual meeting Friday, the Wall Street Journal's Summer Said and James Herron asked Saudi oil minister Ali Al Naimi what he thought of all the new crude being pumped in the U.S.

Naimi's answer was basically: Talk to the hand.

From WSJ:

Why are you all excited all of a sudden on shale? You know why, because you like to chit chat…you are an agent of disturbance,” he said, pointing a finger at his questioner. “Leave us alone and leave all these issues. We had enough of shale oil and talks of shale. Please talk about anything else,” he said, switching from English to Arabic.

OPEC left production rates unchanged.

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The Entire Debate About What The Fed Is Going To Do In One Huge Slide

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Deutsche Bank's Torsten Slok has the entire debate about the Federal Reserve, and whether it will soon start "tapering" the amount of bonds it buys each month via Quantitative Easing.

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