U.S. Vehicle Sales Recovered at Yearend, Along With Gas Price

The Autodata Corporation reported that December US sales of light vehicles rose 9.1% to 17.17M units. The gain added to a 6.7% m/m rise in November but the increases were from an October level that was the most depressed since 1998. In addition, the increase left sales below December 2004 and the 2005 average of sales rose just 0.3% y/y and the annual level was down 2.8% from the record set in 2000. Consensus expectations had been for December sales of 16.8M.

Gasoline also moved higher at yearend with the average retail price at $2.24 per gallon (25.9% y/y), up four cents from the prior week and up a dime from the early December low. This week in spot market trading, gasoline is up another fourteen cents from the last week in December. The latest figures on the demand for gasoline indicate full recovery from declines during the Fall.

Gauging the Size of Today's Price Shocks from the Federal Reserve Bank of St. Louis is available here.

Sales of US made cars & trucks rose 9.3% m/m in December (-5.3% y/y) while the 2005 sales average declined 0.2% from 2004 and fell 7.5% from the 2000 peak. Domestic truck sales rose 17.2% (-3.1% y/y) in December and the 2005 average fell 0.9%. Car sales slid 1.1% (-8.6% y/y) though the annual sales average increased 0.9%.

Sales of imported cars & trucks increased 8.3% m/m (-0.3% y/y) in December and for the year rose 2.1%. Sales of imported trucks rose a sharp 12.5% (-4.7% y/y) and sales of imported autos rose 6.2% (2.3% y/y).

Import's share of the US light vehicle market slipped m/m in December to 21.0% and for the year increased to a record 20.4% versus 12.9% ten years ago.

Initial claims for unemployment insurance fell a sharp 35,000 to 291,000 in the last week of 2005 following an upwardly revised 7,000 increase the prior period. The latest level was the lowest since September 2000. Consensus expectations had been for 320,000 claims.

During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.

The four-week moving average of initial claims fell sharply to 316,750 (-4.0% y/y), the lowest level since August.

Continuing unemployment insurance claims increased 13,000 following the downwardly revised 75,000 spike during the prior week.

The insured rate of unemployment remained at 2.1% for the third week.

The Redbook Research survey of chain store sales painted a weaker picture of yearend selling. In fact, weakness throughout the month left the December average of general merchandise sales 0.2% below November.

Today, January 5, a wide variety of data was reported by national statistical agencies and private sources all over the world. Some of these reports glean considerable press coverage, particularly if the results are a surprise, such as with German manufacturing orders: these orders grew again in November, when market forecasters had expected them to decline.

But Haver's databases, of course, carry far more background material on the economies of myriad countries. For instance, yesterday in this space, we highlighted the CPI of Thailand, a major release in a small country. Today we take the opposite approach, describing a secondary release in a major country, to wit, corporate profitability in the UK. The ONS publishes quarterly rates of return for total private non-financial corporations and some subsets of companies. Most prominently, oil companies are highlighted, referred to as "UK continental shelf companies". Separately, manufacturing and service sector groups are shown. A few other miscellaneous sectors, such as construction, are not shown individually.

In Q3 2005, all private nonfinancial companies earned a 13.4% net return on their capital. This is down from 13.8% in Q2, but that was a 6-1/2 year high. The average for the last five years is 12.9%. Manufacturing companies earned just 6.2% on assets in Q3, following a somewhat higher 7.9% in Q2. This group has experienced basically flat returns in recent years, averaging about 7% since 2002. Services industries have higher rates of return, averaging 16.3% over the last four years, but these too are trendless, moving back and forth in a saw-tooth pattern.

The breakout of the petroleum industry is informative. It shows that back in the early 1990s this sector had about the same magnitude return as the rest of UK industry. However, this relationship has changed markedly, with the "Continental Shelf companies" seeing far higher returns now, 36.3% in Q3. Annual data from ONS give some detail on the operating surpluses and capital that generate the return ratio. They indicate that the recent high rates of return are not, as one might think, due totally to higher oil prices. Specifically, since 2000, the UK oil industry has stopped expanding, as capital employed, shown in the third graph, has flattened. At the same time, sharply higher oil prices are surely responsible for 2005's further escalation of returns into the mid-30% range.

Normally, higher returns might be expected to prompt the renewed expansion of an industry. There are mixed signals about these prospects. Haver's OGJ database and OGJANN from the "Oil and Gas Journal" contain other broad data on the UK petroleum industry. Petroleum reserves in the UK are decreasing, and daily production of crude oil has fallen even into Q3. However, the so-called "rig count" of operating oil rigs shows a sustained upturn over the last six months. With this mixed picture about specific UK potential, perhaps what the high returns mean is more general, and perhaps they will be used for new kinds of energy development, not just the expansion of local output.