Federal spending slowing down. Stocks maybe stall out here.

Spending is still up year-over-year by $35 billion, which is good, however, the rate of spending growth is slowing so we could see the stock market stall out here.

I don't think the spending slowdown is fatal by any means, it's just a "downshifting."

Fiscal net withdrawals thru end of November

Running slightly ahead (a few 10s of $B) of the last 2 years thru the first 2 months of this FY.

This month (December) will be revealing I think we will get a good idea where the full FY is headed when the data for December comes in and we have a whole quarter to look at that was mostly NOT under a continuing resolution.

Net Fiscal Withdrawals for FY 2015 End

Month by month representation of the YoY comparison below:

YoY through the end of the FY here:

Up a bit YoY by over $100B.  This flow should at least sustain things here about where they are but there is no sight of any meaningful increase in view currently.

The only potential increase for the new FY may be the Fed moving towards (to them) a tightening stance via increased interest payments; or perhaps a new war in the middle east could get cranked up.

Transfer payments in Medicare and Social Security will be increased also as our population ages and more people sign up for these programs for seniors.

Indeed we'll be running under a flatline CR through pretty much the whole of the 1Q of the new FY  as these morons report here:

Lawmakers passed a continuing resolution funding the government through December 11, 2015 at #FY2015 levels. https://t.co/V4CcOeHZUX

— CRFB.org (@BudgetHawks) October 1, 2015

Plus we can't forget this still has to be resolved:

Treasury Sec. Lew to Congressional leaders: Treasury will exhaust extraordinary measures "on or about Thursday, Nov. 5"

— Phil Mattingly (@Phil_Mattingly) October 1, 2015

With One Month to Go

YoY leading govt spending thru end of August with another month to go in the US FY:

Looks like we will end up (AGAIN) around $4.2T for the FY.

US Treasury Spending thru end of July

Chart below depicting where we are thru end July (and thru 2nd statement day of August).

We are on track to come out at about the usual $4.15T spending level that has been the norm for the last several years. Chart below depicting the longer term trend:

We should come out just above the $4T level with 2 more months left in the FY and Treasury spending running at about $300B per month.

Its good to see Bill using similar analysis of government spending recently wrt to Greece. Below is an image of a chart Bill recently created for a post in an analysis of Treasury spending in Greece. (Just ignore the red "% GDP" line it does not edify.)

In Bill's chart, you can see the post 2009 drop-off in Greece from the 125B level down to a more recent 85B level (2004/2005 levels!) where it seems to have stabilized for now, we'll have to see if it can stabilize there after the next "agreement" with the "institutions" is implemented, I don't think this level can hold if they attempt to meet the agreement.

This is pretty severe compared to what the trend has been here in the US as you can see from the chart immediately above, the US has stabilized at about the 4.1T level which is thankfully in excess of 1.5T ABOVE 2004/2005 levels.

(Could you imagine the chaos here in the US if the deranged shit-for-brains disgraced libertarian sub-human waste of flesh detestable morons got their way and government spending was cut back from the current 4.1T to 2.5T !!!!  This is what Greece is going thru to give you an idea... oh brother....)

I would think that Bill's data does not include xfer payments it may just include the NIA framework's  "G" component of government spending, but you still can get the idea as far as trend and relative values.

The picture Bill paints here wrt Greece (and the further analysis in his post) is probably indicative of what we would go thru fiscally if the detestable libertarians among us ever could pass a "balanced budget amendment" to the US.constitution similar to how the Greek people have been signing on to these "agreements" with the "institutions"...

Scary!

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Stock rally may fizzle out soon. Here's why.

We've had a nice "Greek deal" rebound in the stock market in the past 36 hours, but I think that there may be only a limited amount of upside in this rally. Could end by tomorrow or, Thursday at the latest.

I have been closely following spending data off the Daily Treasury Statement and there has been a very noticeable slowdown in the rate of Federal spending since early May. This has capped the rally in my opinion.

While year-over-year data still looks strong, the rate of flow (think water flowing through a hose into a pool) is slowing. Furthermore, employment tax deposits to the Federal government have been  slowing, too, suggesting some weakness emerging in the job market.

I cannot confirm this with any particular data, but these are observations I have been making from reading and following the DTS.

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US Fiscal Snapshot

Status quo YoY on leading USD spending thru end of 3rd Quarter:

On track for a fourth year in a row of just above a $4.1T spending result, don't expect much/any domestic growth as defined within the NIA framework:

There is still the outstanding "event risk" associated with the required eventual adjudication of the so-called 'debt ceiling' which will at some point have to be raised in order for leading spending and resultant savings to continue at the current (at best) minimally sufficient rate.

Economy may be at "stall speed"

I know the jobs report bounced back and everyone got all excited and clearly, it's a good sign because it would have been a nail in the coffin, I think, for the growth trend for the remainder of the year had that not happened.

However, looking at Federal Government spending trends--and there is the risk that I am getting too "micro" in my analysis, here, but nonetheless--it seems to me that spending data has slowed to a stall, at least the way I see it, and that suggests the economy is also at a stall.

Spending could pick up and, admittedly, it is looking a little bit better now than it looked around the first and second weeks in April and I understand that April, being tax month, is when individual and firms' bank accounts get drained so there is some seasonality at play here.

With respect to that latter comment, being that this is the seasonal, "Sell in May and go away" period and the market is hanging in there pretty well (i.e. undergoing perhaps a "churning" correction), then things may actually not be all that bad.

I will see in the coming days, based off flows from the DTS, what it looks like.

#Itsnotaboutthedeficit

Treasury Withdrawals thru April

A bit ahead of last year still. "Debt Ceiling" still an issue that is unresolved for this FY. Stay tuned.

Govt spending FYoY thru 2Q

Chart below depicting FYoY thru end March.  Not too shabby.

YoY DTS Top level Comparison thru 19 March...

YoY top-level comparison chart below... ahead of last March by about $21B at this point.

Very supportive on a YoY month basis.  Not quite as bullish a picture on a full YoY basis.

Flows remain robust this month even though  we are operating at the "debt ceiling" and our morons are using their "extraordinary measures" of "borrowing" from the Federal Employees Retirement System (to the satisfaction of their own deranged minds) in order to maintain spending flows.

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February ends with a massive, $460 Federal spending spree

No wonder why the stock market is flying. The data is in and February ended with a humongous, $460 billion spending spree by the Federal gov't. This surpasses last February's $459 billion injection. This may be the biggest February ever. It's certainly the biggest since I have been keeping records.

Last Friday ended with a burst of almost $56 billion in a single day. Total tax refunds for the month (individual and business) came in at $137 billion! That crushes last Feb's refunds of $133 billion. And we can expect another $60 billion in March and $50 billion in April. What a stimulus.

If the idiots in Congress don't f**k it up with the debt ceiling and budget the economy and stocks will be off to the races. Dow 20,000 like butter.

Sadly, though, the Fed will  raise rates. That's my forecast.

You  can't sell into this (stocks). Let's keep our eyes open for Congressional screw-ups mid-month, but for now this is blistering.

Dollar strong now, as it will follow bullish U.S. economic sentiment, but it adds to dollar top probabilities at some point. Bonds will be under pressure from fears of a Fed rate hike due to strong U.S. economy.

Oh yeah, one more thing...

Total employment taxes collected by the Federal gov't in Feb was $186.8b. That is down slightly from the $189.5b collected in January, however, February was a shorter month with less work days so I am hesitant to call any "weaker than expected" result for Friday's jobs number.

Consider this: Last Feb the total employment tax collection  was $177.1b and in Jan of last year it was $185b. That was an $8b differential between Feb and Jan. This year that difference was less than $3 billion, so I am calling Friday's number to be in line with expectations or stronger.

P.S. I teach all of this forecasting off the Treasury Statement  in my course. Watch out for the next one.

YoY Federal Fiscal Withdrawals into Non-govt thru End February

Graphical depiction of what Mike is talking about in his post on this topic above; showing 3 year trend.

Quick Domestic Fiscal Snapshot...

Quick view of the current U.S. domestic fiscal backdrop besides all the attention cast this week on the European chaos wrt Greece's fiscal issues.

Data provided thru the 6th statement-day of February.  Nothing spectacular but generally supportive with a slight upward bias YoY.

This month of February has become a very strong month in this data series due to tax refund withdrawals and EITC withdrawals; so expect a strong February.

Clock still ticking the countdown to the expiry of the "debt ceiling" suspension in mid-March which should produce another moron-fest fiscal soap opera a few weeks from now.

Federal Outlays vs. Net Federal Withdrawals at $700B Divergence for FY 2014

Here is a snip from the latest Monthly Treasury Statement which includes the total Outlays for the previous FY:

So we can see here that Treasury has last FY's total "Outlays"at $3.5T.

While if we look at the Daily Treasury Statement for last FY and examine net Withdrawals from the Treasury account at the Fed here:









































If we subtract the total amount of these withdrawals due to UST redemptions of $6.885T from the total withdrawal figure for the FY of $11.071T we are left with about $4.2T of net withdrawals from the US Treasury account.

So the difference between this cash basis amount of 'withdrawals' from the US Treasury account and the accrual basis amount of "outlays" is running at about $700B annual rate, or about 20% of accrual basis "outlays".

So this divergence between the cash basis number in the DTS vs the accrual basis number of the MTS, each of which is supposed to be representative of what the federal government is "spending", is pretty substantial here for last FY at 20%.

YoY Federal Spending thru 1 December

Chart below depicting YoY federal spending thru 1 December.  We are up YoY by about $32B but that is an easy YoY comp as last year we had the effects of the "shutdown" so-called in October and November FY 2014.

Second chart below depicts the 3 year trend the comparison with is not as impressive.

We shouldn't expect this approximate $16B per month YoY improvement to continue as the comps will get more difficult going forward for the rest of months of the FY.

I assume we will resume towards a slightly positive YoY trend for the next few months; a fiscal policy associated with more 'muddle through' as Warren terms it.

We should get more meaningful economic support from the recent fall in prices in the petroleum complex which at a $30 per bbl price reduction, could result in up to a $30 x 18M bbl per day or $16B per month swing from savings to new consumption, to the extent that the previously paid additional $30 per bbl was saved by the oil sellers.

3 Year Trend in US Treasury Spending thru 4 November Statement Day

Scan below comparing the last three years trend in the individual line items of US government spending into the  non-government sector.

Let's see...

Commodity supports:  DOWN
Energy:  DOWN
Education:  DOWN
Federal Salaries:  DOWN
Defense:  DOWN
Highways:  DOWN
Food & Nutrition:  DOWN
UST Interest:  DOWN (and what's left being paid to the Fed and foreigners...)
Unemployment Comp:  DOWN
NASA: DOWN
Needy Families:  DOWN
Obama's Golf Handicap:  DOWN
Democrat election results:  DOWN
S&P 500 EPS:  UP

Overall though, we are slightly UP mostly due to spending on what can perhaps be termed "retirement" spending line items such as Social Security, Medicare/Medicaid, and Veteran's Benefits.

S&P firms are seemingly still killing it in the work of provisioning this "retirement priority" economy being foisted upon us.