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November 2013

Experts Expect US Vehicle Sales to Rise Significantly in November

Automakers will release November vehicle sales next Tuesday (December 3rd) and currently, analysts expect sales (Seasonally Adjusted at Annualized Rate) to rebound sharply from October.


Here are some forecasts from several specialists:


1/ Edmunds: November Auto Sales Set the Tone for Final Stretch of 2013, Forecasts, the premier resource for car shopping and automotive information, forecasts that 1,196,663 new cars and trucks will be sold in the U.S. in November for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.7 million. The projected sales will be a 0.7 percent decrease from October 2013, but a 4.7 percent increase from November 2012.
“Any economic uncertainty that car shoppers might have felt in October seems to be a distant memory by now,” says Senior Analyst Jessica Caldwell. “Car buyers are already taking advantage of advertised holiday deals, and as we plow deeper into the holiday season, the table is set for 2013 to finish on a very strong note.”


2/ JD Power-LMC Automotive: Consumer Demand for New Vehicles Picks Up in November

In November, U.S. new-vehicle sales are likely to reach 1.2 million units–up 3% from November 2012–after adjustment for one more selling day this year vs. the same month a year ago,* based on an auto sales forecast update from J.D. Power and strategic partner LMC Automotive.
The average sales pace in November is expected to translate to a 16.1 million-unit seasonally adjusted annual rate, or SAAR, which would be nearly 700,000 units stronger than the 15.4 million-unit SAAR in November 2012. It would also outpace the 15.2 million-unit SAAR in October, 2013.


3/ Wards: Forecast Calls for Post-Shutdown Bounce

U.S. automakers should sell 1.21 million light vehicles in November, according to a new WardsAuto forecast. The forecast looks for strong retail sales in the beginning of the month, accelerating in the final weeks of November, more than offsetting a downturn in fleet deliveries. The forecast sales volume (over 26 days) would represent a 2% rise in daily sales over same-month year-ago (25 days) and equate to a 15.9 million-unit SAAR.


4/ Kelley Blue Book: US: Kelly Blue Book sees Black Friday boosting November sales up 3.6%

New vehicle sales in the United States are expected to rise 3.6% year on year in November to nearly 1.19m units, according to Kelley Blue Book (KBB).
The car data provider said: “Fears of a vehicle sale hangover following the government shutdown in October turned out to be largely overblown as consumers showed no hesitation heading out to the dealership in November.”
KBB has pegged November 2013 SAAR at 15.6m, up from 15.3m in November 2012 and up from 15.2m in October 2013.


Moreover, according to my friend, Christophe Barraud, Chief Economist & Strategist at Market Securities and also the best forecaster of US statistics, total vehicle sales should rise 5% to 15.90M (SAAR).

CBO: Debt Ceiling May Be Delayed Until June 2014

Congress voted last month to end the government shutdown and to extend the debt limit through Feb. 7, 2014. Then, on February 8, the U.S. Treasury Department could use “extraordinary measures”, the special accounting maneuvers that let it keep paying the country’s bills without going over the debt limit, to avoid a default.


By CBO’s estimate, the Treasury might be unable to fully pay its obligations starting in March, but depending on the timing and magnitude of tax refunds and receipts in February, March, and April, the Treasury might be able to continue borrowing into May or early June.

FOMC Minutes Confirm That “Tapering” Is Closer Than Expected

- Christophe Barraud


Last night, the FOMC published Minutes from October meeting. Even they did not provide specific insight into the timing of an initial tapering move, they suggested that (1) “tapering” will start in coming months even before an unambiguous further improvement in the outlook was apparent”, (2) Fed members considers equal cuts to MBS and Treasury Purchases, (3) Fed has yet to determine the best way to help further distinguish between tapering and tightening.


We could isolate some excerpts from the FOMC Minutes:


Participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months. However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent. A couple of participants thought it premature to focus on this latter eventuality, observing that the purchase program had been effective and that more time was needed to assess the outlook for the labor market and inflation; moreover, international comparisons suggested that the Federal Reserve’s balance sheet retained ample capacity relative to the scale of the U.S. economy.

A number of participants believed that making roughly equal adjustments to purchases of Treasury securities and MBS would be appropriate and relatively straightforward to communicate to the public. However, some others indicated that they could back trimming the pace of Treasury purchases more rapidly than those of MBS, perhaps to signal an intention to support mortgage markets, and one participant thought that trimming MBS first would reduce the potential for distortions in credit allocation.


Participants discussed the financial market response to the Committee’s decisions at its June and September meetings and, more generally, the complexities associated with communications about the Committee’s current policy tools. A number of participants noted that recent movements in interest rates and other indicators suggested that financial markets viewed the Committee’s tools–asset purchases and forward guidance regarding the federal funds rate–as closely linked. One possible explanation for this view was an inference on the part of investors that a change in asset purchases reflected a change in the Committee’s outlook for the economy, which would be associated with adjustments in both the purchase program and the expected path of policy rates; another was a perspective that a change in asset purchases would be read as providing information about the willingness of the Committee to pursue its economic objectives with both tools.


Since the last FOMC meeting, several figures have showed that growth will be stronger than expected in H2 2013. Moreover, PCE inflation rebounded in Q3 and the October employment report was very strong. As a consequence, if the incoming data confirm the recent improvement and the Congressional budget committee finds a comprise concerning fiscal issues by Dec. 13, the Fed could decide to taper before the end of the year which is sooner than expected (March 2013).


Regarding the constitution of asset purchases, I think that people were surprised to read that the Fed could reduce both its Treasuries and MBS’ purchases in the same time. The fact is that MBS market is less liquid and impacts directly mortgage rates.

US Q3 and Q4 GDP Will Be Above Expectations

Data published yesterday suggest that Q3 GDP will be revised upward on December 5th. It is very likely that the figure will be above 3% (QoQ Annualized) following the upward revision of total business inventories in August and a stronger than expected rise in September. Moreover, in the same time, the revision of September retail sales was also positive.


According to Census, total business inventories rose 0.6% MoM in September (against 0.3%e MoM) while August data were revised from +0.3% MoM to 0.4% MoM. On the other hand, retail sales were revised in September from +0.3% MoM to 0.4% MoM.


In the meantime, retail sales were largely above expectations in October at +0.4% MoM (against +0.1%e MoM) which confirms that the impact of government shutdown was limited. As a consequence, the consensus should rise its expectations of a 2% (QoQ Annualized) growth in Q4.


These figures show that economic situation has improved since the last FOMC meeting so that 2013 forecasts set in September should be met.