1Q16 GDP Forecast Sinks To 0.6% -- In Light Of Today's Consumer Spending Report -- March 29, 2016

Economy. The Wall Street Journal is reporting:

Consumer Spending Inches Up 0.1%; Inflation Below Fed Target for 46th Month A modest increase in Americans’ outlays points to an uninspired start for the new year’s economy.

The U.S. economy is looking soft as the first quarter draws to a close.

Consumer outlays rose modestly in February, ticking up by a seasonally adjusted 0.1% for the third consecutive month. Incomes have been rising faster, but Americans seem to be saving rather than spending. The personal-saving rate hit 5.4% last month, matching its highest level since the end of 2012.

Early-year fluctuations in financial markets may have contributed to consumers’ caution.

The weakness in consumer spending damped hopes for a pickup from the fourth quarter’s 1.4% growth rate for gross domestic product, the broadest measure of goods and services produced across the economy.

Forecasting firm Macroeconomic Advisers on Monday estimated GDP growth at a 1% pace in the first three months of 2016, down from an earlier prediction of 1.5%. The Federal Reserve Bank of Atlanta’s GDPNow model predicted growth at a 0.6% pace in the first quarter, marked down from an earlier estimate of 1.4% growth.

GDPNow:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6 percent on March 28, down from 1.4 percent on March 24.

After this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis, the forecast for first-quarter real consumer spending growth fell from 2.5 percent to 1.8 percent. The forecast for the contribution of net exports to first-quarter real GDP growth declined from –0.26 percentage points to –0.52 percentage points following this morning's advance report on international trade in goods from the U.S. Census Bureau.

My hunch is everyone is contributing to their IRA before the April 18th deadline. Or paying their ObamaCare premiums. 

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Back to the Bakken

Active rigs:

	3/29/2016	03/29/2015	03/29/2014	03/29/2013	03/29/2012
Active Rigs	31	97	194	188	206

RBN Energy: The Good, the Bad and the Ugly: U.S. Crude Oil Production Declines and Eventual Rebound.

U.S. crude oil production is finally falling in response to the collapse in oil prices that started in mid-2014. Output is now poised to drop below 9 MMb/d--700 Mb/d off its April 2015 peak—and the rate of decline is accelerating. That raises all-important questions of how low will production go, which shale basins will be hit the hardest, and the most important question of all - how much will oil prices need to rise to reverse those declines?  Understanding the factors necessary to answer these questions is the focus of RBN’s latest Drill Down report that we highlight in today’s blog. The bottom line?  All production economics is local.

In June 2014, just as oil prices were about to fall off a cliff, the U.S. was producing 8.7 MMb/d of oil and the Cushing, OK spot price for West Texas Intermediate (WTI) was $106/Bbl. Do the math; about $900 million/day of oil was being produced every 24 hours. Even as oil prices plummeted over the next few months (to less than $50/Bbl by January 2015), production kept rising, propelled in large part by the momentum of ever-growing drilling and completion that marked the previous few years. In fact, U.S. production didn’t peak until April 2015, at 9.7 MMb/d. Fast forward almost another year to now. As we said, production is down to about 9.0 MMb/d (but still 300 Mb/d higher than when prices started free-falling), and oil prices, while up from their recent lows in the mid-$20s, are hovering around $40/Bbl--$60-plus dollars lower than they were 21 months ago. The daily value of production is well under $400 million, and most industry participants are hurting, some of them badly.

Being reported everywhere: house prices in January, 2016, rose faster than wages. The details are even worse than the headline:

U.S. home prices climbed at more than double the rate of incomes in January, a trend that could ultimately create affordability challenges for buyers. The Standard & Poor's/Case-Shiller 20-city home price index rose 5.7 percent from a year earlier, a slight increase from the 5.6 percent annual increase in December.

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FBI: Out Of Its League

Hackers shut down the largest healthcare provider in the Washington, DC, area. The FBI says it is aware of the situation and is investigating. This is a huge story; helps put the Apple-FBI stand-off in perspective. The interesting thing is that this story is not being widely reported. Fox News is reporting:

MedStar Health has reportedly been hit with a virus that has forced it to shut down significant parts of its IT operation.

“Early this morning, MedStar Health's IT system was affected by a virus that prevents certain users from logging-in to our system,” explained the company, in a post on its Facebook page. “MedStar acted quickly with a decision to take down all system interfaces to prevent the virus from spreading throughout the organization. We are working with our IT and Cyber-security partners to fully assess and address the situation.”

“Currently, all of our clinical facilities remain open and functioning. We have no evidence that information has been compromised,” it added. “The organization has moved to back-up systems paper transactions where necessary."

The health group, which runs 10 hospitals, the MedStar Health Research Institute and the MedStar Medical Group, describes itself as the largest healthcare provider in the Maryland and Washington, D.C. region.

The FBI told FoxNews.com that it is aware of the incident. The Bureau is "looking into the nature and scope of the matter," it explained, in an emailed statement.

 One wonders whom the FBI will call this time to help them with this one?

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Just Saying

Speaking of the Apple-FBI spat, does anyone find it interesting that the "problem was solved" exactly one day before the issue was to be taken to court. After all these weeks trying to unlock that iPhone, the FBI says "they got the information they needed" just hours before they were to be in court facing the judge.

I always find it amazing how these things work out.

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Say What?

The Weekly Standard is reporting:

Three years ago, on the eve of Obamacare’s implementation, the Congressional Budget Office projected that President Obama's centerpiece legislation would result in an average of 201 million people having private health insurance in any given month of 2016. Now that 2016 is here, the CBO says that just 177 million people, on average, will have private health insurance in any given month of this year—a shortfall of 24 million people.

Indeed, based on the CBO's own numbers, it seems possible that Obamacare has actually reduced the number of people with private health insurance. In 2013, the CBO projected that, without Obamacare, 186 million people would be covered by private health insurance in 2016—160 million on employer-based plans, 26 million on individually purchased plans.

The CBO now says that, with Obamacare, 177 million people will be covered by private health insurance in 2016—155 million on employer-based plans, 12 million on plans bought through Obamacare's government-run exchanges, and 9 million on other individually purchased plans (plus a rounding error of 1 million).

In other words, it would appear that a net 9 million people have lost their private health plans, thanks to Obamacare—with a net 5 million people having lost employer-based plans and a net 4 million people having lost individually purchased plans.