Category Archives: Uncategorized

June Durable Goods Orders and Pending Home Sales

KEY DATA: Orders: -4%; Excluding Aircraft: +0.3%; Capital Spending: +0.2%/ Pending Home Sales: +0.2%; Year-over-Year: +1%

IN A NUTSHELL: “Big-ticket demand remains soft and that needs to change if the economy is to pick up steam.”

WHAT IT MEANS: The manufacturing sector has been buffeted by a variety of issues, including the strong dollar and the collapse of energy prices which led to energy-sector capital spending dropping precipitously. The energy-sector cut backs may be stabilizing a bit with the move back up in prices. However, there are still reductions occurring that are restraining overall investment demand. Durable goods orders fell sharply in June, but the major reason was a sharp reduction in the very volatile aircraft segment. Excluding both civilian and defense orders, which don’t lead to a short-term change in activity given the long lead times for these products, orders actually rose. While that sounds good, the increases were not that broadly based. Continued solid vehicle sales led to a jump in vehicle orders and there was an increase in electrical equipment and appliances. But there was a reduction in orders for metals, computers and communications equipment. Demand for machinery was essentially flat. As for business capital spending, if you exclude government and aircraft, it was up modestly. Up is nice, but there doesn’t seem to be a major drive on the part of the companies to invest heavily.

On the housing front, the National Association of Realtors reported that pending home sales moved up a touch in June after falling sharply in May. The index surged in April but came down to more a typical level in May and the June index continues what has been a slow, but steady rise over the past few years. That said, there is little reason to expect a major uptick in sales, if only because there is a dearth of inventory.

MARKETS AND FED POLICY IMPLICATIONS: The Fed’s FOMC meeting statement is expected in a few hours, so investors will not likely react a whole lot to these data. Will they have an impact on what the Committee says? Probably not. The housing market is getting better, but sales are not that great an indicator of the state of the sector since there are a limited number of homes for sale. The limited supply is viewed as the major restraint to sales growth and is the reason we are seeing such solid increases in prices.   Until the energy sector stabilizes, there will be limited growth in durable goods orders. Nothing new there. In any event, the Fed members seem to search every meeting for something to worry about. While most of the issues they were so concerned about at the last meeting have faded, that doesn’t mean they will say conditions have firmed enough to start thinking about normalizing rates. So investors will wait and see and react to the statement. 

June NonManufacturing Activity and Online Help Wanted and May Trade Deficit

KEY DATA: ISM (NonManufacturing): +3.6 points; Orders: +5.7 points; Hiring: +3 points/ HWOL: -226,700; Trade Deficit: $3.8 billion wider

IN A NUTSHELL: “With activity rebounding in services and strengthening in manufacturing, it is unclear why firms are not looking for more workers.”

WHAT IT MEANS: Friday’s employment report is a critical one given the uncertainty created by the Brexit vote. If you believe those at the forefront of business activity, the nation’s supply managers, the June job gain should be a pretty good one. Today, the Institute for Supply Management (ISM) report on the non-manufacturing portion of the economy was much better than forecast. That came after last Friday’s report that manufacturing activity and hiring picked up in June. Orders surged, including both imports and exports, activity jumped and hiring rose solidly. In other words, the sector showed clear signs of accelerating from its more moderate growth pace of the past few months. Indeed, the overall index hit its highest level since last November. The only negative aspect of the report was that backlogs eased, which was odd given the robust rise in new demand. Still, when you are talking about most of the economy, it is good to see that conditions are firming.

Despite the indications that hiring was improving across the economy, at least according to the ISM, the Conference Board reported that online want ads dropped precipitously in June. There has been a major decline in advertising for positions this entire year. I had been assuming that it made no sense to advertise for openings that could not be filled because of the lack of workers. Now, though, the length and breadth of the decline makes me wonder if we are indeed in the middle of a major hiring cut back. We should have a better idea on Friday whether the supply managers or the online want ads better represent what is happening in the labor market.

The trade deficit widened more than expected in May. Much of that had to do with the increase in petroleum prices. In addition, there was a jump in non-monetary gold imports, which doesn’t mean much. However, the large rise in consumer goods imports points to an improving household sector, which bodes well for U.S. growth. Exports were off slightly, with declines reported in most categories. The rest of the world is still buying lots of goods from the U.S., but not at a growing pace. Adjusting for price changes, the average for the first two months of this quarter remains below the first quarter’s average, so trade could add to growth.  

MARKETS AND FED POLICY IMPLICATIONS: The economy is in good shape, despite the sturm and drang in the markets. Brexit’s aftershocks are creating uncertainty in the equity markets and a worldwide rush to the security of U.S. Treasuries. Interest rates are cratering as the 10-year note has set new record lows. That is great for those of us, including myself, who are refinancing. But it also shows the Fed has little control over the yield curve. When uncertainty strikes, the safest port is U.S. assets and that means the Fed can only sit and watch. It also points out that movements in the yield curve may have little meaning for the U.S. economy. Until the implications of Brexit are clearer, volatility in the markets is likely to continue. And since market volatility paralyzes the Fed, don’t expect any rate hikes for a while, even if the economy really is solid and job gains rebound.  

June Supply Managers’ Manufacturing Survey and May Construction Spending.

KEY DATA: ISM (Manufacturing): +1.9 points; Orders: +1.3 points; Hiring: +1.2 points/ Construction: -0.8%; Private: -0.3%

IN A NUTSHELL: “With manufacturing coming back, it looks like the early year economic swoon is over.”

WHAT IT MEANS: Manufacturing has been battered by the collapse of the energy sector and the strength of the dollar, but those factors may be moderating. The Institute for Supply Management reported that manufacturing activity improved solidly in June. New orders and production increased strongly and that led to hiring to finally kick in again. The employment index had been negative for most of the past year, so this may be a sign that firms are seeing strong enough demand to add to their payrolls. Indeed, with new orders running at a very high level, we payroll gains could accelerate, especially since order books are filling again.

Construction spending fell in May, led by a drop in government spending. Distressingly , construction of key infrastructure items such as transportation, highways and streets, waste and sewer, power and water were all down not just in May but also over the year. It is hard to grow the economy strongly if the government doesn’t invest in future-growth generating infrastructure, and that seems to be happening.

MARKETS AND FED POLICY IMPLICATIONS: The Fed was cautious in June, in part because of the softening job gains, led by contracting manufacturing payrolls. But it looks like manufacturing is coming back and that should stabilize if not lead to rising industrial employment. We will get an idea about that next Friday when the June employment report is released and I do expect a solid increase in manufacturing. Regardless, if manufacturing production really is accelerating, that would indicate the U.S. economy is on the rise and the Fed has to keep its eye on the target, which is U.S. economic growth. Of course, if government doesn’t want to spend money on what just about everyone agrees are necessary infrastructure projects, not only will near-term activity be slowed but long-term growth will be limited as well. Investors should be buoyed by the manufacturing improvement and maybe they will recognize that the U.S. economy can withstand the impacts of Brexit.

June Consumer Confidence, Revised First Quarter GDP and April Housing Prices

KEY DATA: Confidence: +5.6 points: GDP: +1.1% (up from 0.8%); National Home Prices: +0.1%; Year-over-Year: +5%

IN A NUTSHELL: “When the dust settles on Brexit, it will be consumer spending that will determine the course of the U.S. economy and we need to wait a while before we know what consumers are thinking.”

WHAT IT MEANS: The news is all about Brexit and while the uncertainty it has created will likely dominate discussions for a while, ultimately, the U.S, economy will rise and fall on its ability to withstand whatever shocks may come. I don’t think the impact on the real economy will be great, even if the financial economy takes some hits. Where there could be some fallout is with consumer confidence if the equity markets don’t bounce back quickly. The Conference Board’s reading of household confidence jumped sharply in June as expectations of the future as well as views of current conditions increased solidly. Respondents’ views on business conditions were positive and they expect the labor market to get better going forward. This report, though, is in contrast with the University of Michigan’s June Consumer Sentiment Index, which fell. It also came before the Brexit impacts on the markets could be determined. So, let’s wait a little while before we say that consumers are feeling good enough to keep spending.

There wasn’t a lot of growth at the end of last year and the first part of this year. Yes, first quarter GDP was revised upward again, to a more palatable but not very strong 1.1% from the previous 0.8% estimate. There were two good bits of news in the report. Business investment in software and research and development rose rather than declined and despite the strong dollar, exports expanded instead of declining.

Home prices continued to rise in April. The S&P/Case-Shiller seasonally adjusted national index edged upward but the increase over the year moderated. Two of the twenty largest metropolitan areas, San Francisco and Seattle, covered reported declines over the month. However, these areas had experiencing surging prices, so a modest drop is not a major surprise.

MARKETS AND FED POLICY IMPLICATIONS: Until we get some “major” data, such as the June employment numbers on July 8th, the markets will probably continue to be obsessed with the Brexit issue. Of course, since no one really has a good handle on what will happen, it is the uncertainty, not the reality, that will drive market reactions. In terms of importance, the United Kingdom is the fifth largest national recipient of our exports, or about 3.7%. Thus, what happens to the British economy matters, but not greatly given that our exports to the UK in 2.015 of $56.4 billion represented only 0.3% of total GDP. The real concern is what this means for the European Union. Exports to the EU were five times greater than to the UK and that is why there is uncertainty. No one knows if this is a one-off issue or if other nations will follow. I can’t see that happening, but I didn’t see Brexit either. For the Fed, the whole Brexit issue reinforces the argument that the FOMC needs some weapons in its arsenal if it is to be in position to deal with the periodic shocks that crop up. Right now, the best the Fed can do is nothing. Doesn’t that say it all?  

June 14,15 2016 FOMC Meeting

In a Nutshell: “Slowing job growth seems to have spooked the Fed and the members are becoming less certain about multiple rate hikes this year.”

Rate Decision: Fed funds rate range maintained at 0.25% and 0.50%

Until the May employment numbers were released, there was a feeling that we could get an increase in interest rates either at the June or July FOMC meeting. My, how one weak number can change just about everything. Now, the Fed members seem to be trending toward just one rate hike and who knows when that will be. Of course, it only took a few months to go from two or three hikes to one, so don’t be surprised if the amorphous blob that seems to be the monetary authorities transforms into a two rate increase group by September.

The statement released after the meeting didn’t really provide a clear indication of the thinking of the participants about the economy. Actually, it was hard to figure out what the Committee thought. Consider what was written: “The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. Although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft.” Some things were better, some were worse and some were, whatever. In other words, obfuscation rather than clarity seemed to be the main purpose of the statement on growth.

Though the statement reflects the yin and the yang of the recent economic data, the economic projections, which are released every other meeting, were decidedly downbeat. Instead of just one member expecting only one rate hike this year, that number has ballooned to six. Estimates of growth for this year and next were downgraded even as 2016 inflation expectations were increased. And maybe most telling, the median funds rate projection was reduced to 1.6% in 2017 from 1.9% and the to 2.4% from 3% for 2018. Those are large changes.

So what has happened since March 16th, the last time the projections were released? The only significant change was a slowing in job gains. Do the Fed members really believe that the initial round of job estimates bear any resemblance to what the ultimate numbers will look like? It is hard for me to believe that is the case. Keep in mind, according to BLS, “the confidence interval for the monthly change in total nonfarm employment from the establishment survey is on the order of plus or minus 115,000”. Really, Fed members are making interest rate projections based on employment numbers that have huge variations around the estimates?

I don’t know what to say. Today, producer prices rose faster than expected as goods costs accelerated and the softening in services disappeared. Yesterday, the inflation story was sharper than expected import price increases. While manufacturing production fell, retail sales were solid in May and that came on top of a robust gain in April, indicating the consumer is spending like crazy. In other words, the economy has hardly fallen on hard times, yet the way the Fed members have reacted, you would think a major slowdown is coming.

So, what will the Fed do this year? I still expect two rate hikes. It is looking more like a September one will be the first, followed by one in December. Even a strong June employment report is not likely to get a rise out of the members, given the pretty dovish projections. They need some time to walk back these numbers and there may not be enough solid data for them to do that before the July 26-27 meeting.

(The next FOMC meeting is July 26-27, 2016.)

April Job Openings, Hires and Quits

KEY DATA: Openings: +118,000; Hires: -198,000; Quits: -36,000

IN A NUTSHELL: “Hiring may be slowing, but it is not because the need for workers is declining.”

WHAT IT MEANS: We have had two consecutive disappointing payroll numbers and it is unclear if that is due to a lack of demand or a lack of supply. The April Job Openings, Layoffs and Terminations (JOLTS) report provides some insight into the situation. Firms are simply not bringing on workers nearly as rapidly as their need for new employees is growing. Job openings expanded solidly in April and are now back at their record highs, even as hiring slowed. Trade, transportation and utility companies had large increases in unfilled positions. Manufacturing firms hired more but still couldn’t meet their growing needs. There were a variety of other sectors, including finance, information, health care and education that couldn’t meet the growing demand for workers, but hiring in most of those areas fell. That suggests firms couldn’t find the workers they wanted. In contrast, openings in professional and business services fell sharply, as did hiring. This sector may be softening.

One of the key measures in this report is the quits rate. It indicates the willingness of workers to leave their jobs. The number and rate of quitting eased in April. While the rate is nearing historic highs, it still has a little way to go and the ups and downs in this number points to continued uncertainty on the part of workers as to the strength of the labor market.

 MARKETS AND FED POLICY IMPLICATIONS: The hand wringing over the May jobs report maybe misplaced. Yes, payroll increases are slowing, but it doesn’t look as if it is because the demand for new hires is dropping. Indeed, it looks like the need for workers is rising but for whatever reasons, firms are just not hiring. It may be because prospective employees don’t have the skills, or it could be because firms are unwilling to pay the price to attract the needed people. Most likely it is a combination of the two and that is important in understanding the dynamics of the market and the meaning of the jobs numbers. The slower rate of job creation may not be due to a slowing economy given the rise in job openings. Firms will either have to start paying more or figure out a way to raise productivity. For the past few years, firms have not done a good job of increasing worker efficiency, so it might be time for CEOs to start rethinking their strategies. Piling on more responsibilities and cutting back or limiting compensation gains doesn’t seem to be cutting it. Will they learn that lesson? Got me. As for the Fed, and especially Chair Yellen, this report reinforces her belief that the labor market is “close to eliminating the slack that has weighed on the labor market since the recession”. It’s hard to argue that there is slack in the market when we are at record highs for job openings.

May Private Sector Payroll Gains, Layoffs and Weekly Jobless Claims

KEY DATA: ADP: +173,000; Layoffs: 30,157; Claims: 10,000

IN A NUTSHELL: “The labor market is in decent shape as firms are holding on to their workers as tightly as they can.”

WHAT IT MEANS: While tomorrow’s employment report will be looked at as the be-all, end-all of labor market data, there are other elements of the market that Fed members watch. Fed Chair Yellen is focusing on labor market tightness, not just job gains or the unemployment rate itself. Thus, we need to look at some of the other numbers that provide the texture of the labor market. Layoffs are one of them. Challenger, Gray and Christmas reported that in May, layoff announcements fell to their lowest level in five months. The energy sector continued to lead the way, though the rate of job cuts is slowing sharply. Rising energy prices is apparently helping, though there aren’t a lot of workers left to cut in this sector (just a joke). The summer education cuts were also announced, but that is normal. Manufacturing was also a major player, confirming that this sector is still wobbling along.

The sharp decline in jobless claims adds to the belief that firms just don’t want to let go of their employees. We are nearing record low territory again as the early spring rise has been unwound.

As for tomorrow’s jobs numbers, ADP estimated that payrolls rose more in May than they did in April. As we saw with the layoff announcements, manufacturing continues to cut back. Large companies hired more people, but it would be nice if they actually did it with some gusto.

 MARKETS AND FED POLICY IMPLICATIONS: The labor market is in good shape, but how good we will not know until tomorrow. Even then, the data may be a confusing until we can exclude the Verizon strikers and temporary fill-ins from the numbers. But I expect the additions to payrolls to be near 200,000, adjusting for the Verizon issues and the unemployment rate to decline to 4.9%. Maybe more importantly, the hourly wage number should be solid. If it rises by 0.3%, the wage acceleration that we have been seeing lately could be viewed as becoming systemic, something that the Fed Chair needs to see before she backs sustained rate hikes. By sustained, I am talking about every other meeting for maybe a year. Then sustained would become every meeting. With the employment report less than a day away, it only makes sense that investors act cautiously. as this report has the potential to surprise in either direction.

May Supply Managers’ Manufacturing Survey, Help Wanted OnLine and April Construction

KEY DATA: ISM (Manufacturing): +0.5 point; Orders: -0.1 point; Employment: 0/ HWOL: -285,800/ Construction: -1.8%

IN A NUTSHELL: “If some members of the Fed were looking for weakness to hang their no-rate hike hats on, today’s numbers should suffice.”

WHAT IT MEANS: Things were looking up for the economy, at least when the April data were coming out. But May is a new month and maybe not a great one. The Institute for Supply Management’s Index of Manufacturing rose nicely over the month, but this was one of those look at the details not the headline number. Yes, the sector picked up some steam in May, but it is not clear if that is sustainable. New orders grew decently, but not quite as rapidly as in April, while production slowed appreciably. As a result, hiring was flat and thinning order books don’t argue for stronger output going forward. In other words, let’s wait and see where this sector is going.

On the labor market front, conditions may be softening. The Conference Board’s Help Wanted OnLine measure tanked in May after having been largely flat in March and April. You have to go back to January 2014 to find a level of want ads this low. The fall off in demand for workers was spread across the country as every region reported a decline. Only 1 (Seattle-Tacoma) of the 52 largest metro areas saw labor demand increase. With ads dropping, the gap between demand and supply, as measured by the number of unemployed, narrowed.

Construction activity nosedived in April. There were declines in residential and nonresidential activity as well as public and private construction. There were few categories that were up, making this a pretty ugly report.

MARKETS AND FED POLICY IMPLICATIONS: Today’s numbers don’t provide the foundation for the Fed to raise rate in two weeks. But today’s numbers will be overshadowed by Friday’s employment report. After the more modest April gain, the consensus has moved down to the 150,000 to 175,000 range, especially given the potential of job losses due to the Verizon strike. That will be factored into any detailed discussion. The help wanted numbers seem to support a number in that range and possibly toward the lower end of it. The unemployment rate is expected to decline and if that happens, the focus will shift to the hourly wage number. The year-over-year increase has been accelerating and if that continues, it would be a warning that even more modest job gains are enough to put pressure on the labor markets. The economy is not booming; that is obvious. However, consumers seem to be spending but businesses are once again moving to the sidelines. Maybe it’s the uncertainty about the Fed or the presidential election, but if CEOs don’t want to hire or invest strongly, it is going to be hard to get the economy to accelerate. The Fed needs to get its communications straightened out because it is creating more bad than good and it will be interesting to see what Fed Chair Yellen has to say on at her press conference on June 15th.

April Consumer Spending and Income, May Consumer Confidence and March Housing Prices

KEY DATA: Spending: +1%; Disposable Income: +0.5%; Prices: +0.3%; Excluding Food and Energy: +0.2%/ Confidence: -2.1 points/ Home Prices: +0.1%; Year-over-Year: +5.2%

IN A NUTSHELL: “Consumers have the income to spend and they are doing just that, but they still don’t seem happy about things.”

WHAT IT MEANS: Watch what they do, not what they say is a good phrase to live by when it comes to consumer spending. Household financial conditions are improving as personal income rose solidly in April. Wage and salary increases were robust for the third time in four months. It finally looks like the tight labor market may be forcing businesses to pay up for workers. With the money to spend, households are out there hitting the malls, the dealerships and the dry cleaners – demand for durables, nondurable and services were all up sharply. Spending exceeded income, so the savings rate slipped. It is still reasonably high, though, indicating the households are not getting too carried away. As for prices, they rose solidly, largely on the back of strong energy price increases. However, even excluding food and energy, they were up solidly. Both the overall measure and the core index increases over-the-year will hit the Fed’s target of 2% by the fall, if they continue to rise at the same pace as they did in April.

You wouldn’t know that household financial conditions are getting better by talking to people. The Conference Board reported that consumer confidence fell in May, a surprise given the sharp rise in the University of Michigan’s Consumer Sentiment Index. The labor market is solid, wages are rising and job openings are near record highs, so people should be upbeat. Maybe it’s the thought of the next election that is getting them down, who knows? But they are not a bunch of happy campers. Views on both current and future conditions worsened and respondents worried that jobs would become more difficult to get both now and going forward.

On the housing market front, the S&P/Case-Shiller seasonally adjusted National Home Price Index rose modestly in March. Interestingly, the index of twenty large metro areas showed a much larger gain. I guess the rest of the country is not following those areas. Still, every one of those metropolitan areas, except Cleveland, posted an increase.

 MARKETS AND FED POLICY IMPLICATIONS: The consumer could push GDP growth above 3% this quarter. Consumption is already growing at a 3% rate and is likely to be higher.   Also, housing has started rebounding from its March low. A few more long security lines at strategic airports (those are ones where powerful members of Congress fly out of) and government spending just might be up sharply as well. Yet despite their actions, households are still cautious. It is hard to explain the decline in confidence that the Conference Board reported. The University of Michigan’s Sentiment Index increase better matches the changes occurring in family finances, but the divergence of the two measures makes you wonder.   But what the Fed needs to start seriously thinking about is their inflation measure. Prices are rising faster and it isn’t just gasoline. The Fed’s dual targets of full employment and trend (2%) inflation are within reach. The Fed is not likely going to wait until both measures hit or exceed their targets, which should happen in the fall. The real question is: Do they raise rates in June or July? A stronger than expected May jobs and wages report on Friday, could push them to act in June. The Verizon strike may have temporarily stunted the jobs number, so study the details even more closely than usual. Given all the uncertainty, it makes sense for investors to temporize this week.

April New Home Sales and May Philadelphia Fed Non-Manufacturing Survey

KEY DATA: Home Sales: +16.6%; Prices: +9.7%/ Phila. Fed: -8.9 points; Orders: +9.2 points

IN A NUTSHELL: “Households went out an bought lots of homes and vehicles in April and if that isn’t a clear sign of confidence, I don’t know what is. ”

WHAT IT MEANS: Just when you thought it was safe to say that the Fed would not raise rates again for a while, along comes the economy, which is showing clear sings that it is bouncing back sharply from the winter malaise. New home sales soared in April to their highest level in over eight years. The gains were in three of the four regions, with only the Midwest posting a decline. The Northeast, where sales had fallen so low that rather than reporting the number of homes sold they had started simply listing the names of people who bought houses (just joking), saw demand up by over 50%. Both the South and West increased by over 15%, so their gains were not too shabby either. But the real eye-opener was the median price number: It spiked and hit the highest level on record, as households started buying more expensive homes again. In April, 56% of the houses purchased cost over $300,000. In 2015, only about 49% of the houses cost that much. That is good news for builders, who just may start putting more shovels in the ground.

The Philadelphia Federal Reserve Bank’s May survey of non-manufacturing firms showed some very odd results. While respondents said the region’s economy slowed, their own activity picked up, led by a surge in new orders and sales. Huh? Conditions are worsening even as demand is rising and hiring is accelerating? And, optimism about both the local economy and their own businesses faded. A special question was asked concerning wage costs and price inflation. Respondents expect wages to rise by about 2.5% over the next year, which is below the 3% that manufacturers forecasted, but still solid. On the inflation front, both service and manufacturing employers expect consumer prices to rise by about 2.5%, which is above the Fed’s target. In other words, most businesspeople in the MidAtlantic region expect inflation to pick up over the next year to levels that would lead to more Fed rate hikes.

 MARKETS AND FED POLICY IMPLICATIONS: The FOMC April minutes said that a rate hike in June was a possibility if the economy continued to show signs of rebounding. Well, housing is one sector that still has lots of room to run and I am no Exaggerator when I say that it can win. (Sorry about that.) A strong housing market, where starts and sales are rising solidly, significantly affects other parts of the economy. Existing home sales rose, though modestly in April, while new home demand jumped. While the May numbers will likely be softer, there is a clear upward trend in sales and prices that should trigger a new round of construction. We started the second quarter with some really good numbers for housing, vehicle sales and retail sales, pointing to renewed strength in the consumer sector. But those increases have to be sustained. Before the June14-15 FOMC, we get the May jobs numbers, vehicle sales and retail sales, so the Committee should have enough information to make a decent guess at second quarter GDP. I have growth above 3% and the numbers are coming in strong enough that most forecasters will likely be revising upward their expectations. A number at or above 3%, with wages rising even modestly in May after the surge in April, should be enough to get he Fed to raise rates either in June or July. As for investors, if they keep in mind that slow growth means weak earnings – and earnings have been soft – then they should be happy with stronger growth and higher rates. But we shall see.