Positives
- The UoM consumer confidence index rose to 98 from 93.8 in November. The estimate was 94.5 and this is the best level since January 2015 which is just .1 pts from the highest since 2004. The UoM said “the surge was largely due to consumers’ initial reactions to Trump’s surprise victory.” Both current conditions and expectations were higher and 1 yr inflation expectations ticked down by one tenth to 2.3%. That is the lowest since 2010 while the bond market thinks otherwise. A key component of the improvement in confidence was the 3 pt rise in Net Income which is at a 6 month high. The employment component rose to the best since April 2015. Both of these led to a rise in ‘household finances.’ One of the questions is “Country will have continuous good times over the next 12 months” and that rose to the best since June 2015. For all the optimism, spending decisions were mixed. Those saying it’s a good time to buy a vehicle and a house both fell 1 pt m/o/m but those expecting to buy a ‘major household item’ rose 6 pts, the highest since 2006.
- Initial jobless claims fell 10k w/o/w to 258k which brings the 4 week average to 253k from 252k last week as a 254k print drops out of average. Continuing claims fell by 79k to just off the lowest since 2000.
- While somewhat dated both in terms of timing and being pre election, the number of job openings in October totaled 5.53mm, about in line with the estimate of 5.5mm and vs 5.63mm in September (revised from 5.49mm). While the jobs hiring rate remained unchanged at 3.5%, the absolute number of hiring’s fell to the lowest pace since May. Reflecting the very low level of jobless claims, Separations also dropped to the lowest since October 2015. The number of those quitting fell to a 3 month low but the quit rate remained at 2.1%.
- The ISM services index for November rose 2.4 pts to 57.2 and that was above the estimate of 55.5. The post election enthusiasm has this index at the best level since October 2015 (the peak in 2015 was 59.6 back in July of that year). Notwithstanding the headline improvement, the internals were more mixed. Of the 18 industries surveyed, 14 saw growth vs 13 in October. The ISM summed up the report by saying “the majority of respondents’ comments are positive about business conditions and the direction of the overall economy.”
- The ECB tapers!? I call it a taper as the flow of monthly QE falls by 25% and it’s all about the flow.
- German factories were hummin’ in October as orders jumped 4.9% m/o/m, well more than the estimate of up .6% and the y/o/y gain of 6.3% was the most since June 2015. Product wise it was driven by motor vehicles/parts.
- The European services PMI for November was revised to 53.8 from the 1st print of 54.1 but it’s up 1 pt m/o/m to the best level since December 2015.
- The UK services index rose .7 pts to 55.2, the best since January. Price pressures though also grew to the most in 5 ½ years.
- Eurozone retail sales grew by 1.1% m/o/m, slightly above the estimate of up .8% but September was revised down by two tenths.
- The November Chinese trade data was better than expected. Exports in dollar terms rose .1% y/o/y which was well above the forecast of a 5% drop. Exports rose 6.9% to the US and 5.1% to the EU but were mixed in Asia. Imports grew by 6.7% y/o/y instead of falling by 1.9% as estimated. On a commodity volume basis, imports rose for coal, crude oil, refined products, iron ore, steel, soybeans and copper.
- China’s private sector weighted services PMI rose .7 pts to 53.1 (again, what’s real and what’s stimulus driven?).
- The Singapore PMI rebounded by 2.3 pts to 52.8, Hong Kong’s was up 1.3 pts but is still below 50 at 49.5. Japan’s services PMI rose 1.3 pts to 51.8.
Negatives
- Mario Draghi continues to get himself deeper and deeper into a policy where there is no chance he’ll be able to exit smoothly considering how low European bond yields are. A French 10 yr yield at .81%, German bund at .37%, an Italian one at 2.04% and a Spanish yield at 1.51% (to name a few and I didn’t even mention all the corporate European debt) are all just accidents waiting to happen when Mario is done.
- Chinese FX reserves in November shrunk again to $3.052T, down about $70b m/o/m and that was $10b less than expected. It’s also the lowest level since March 2011 but part of this was certainly the drop in the value of its non dollar reserves as the dollar rallied post election. This also of course coincides with the weakest yuan vs the US dollar in 8 years.
- The era of China exporting deflation, otherwise known as a lower cost of goods, is over for now. PPI jumped 3.3% y/o/y, a full 100 bps above the forecast and it’s the quickest pace of gain since October 2011.
- Chinese CPI rose by 2.3% in November y/o/y, one tenth more than expected, up from 2.1% in October and matches the fastest increase since May 2014.
- Base earnings in October in Japan grew by just .3% y/o/y vs .2% in September and .3% in August. This was almost all offset by a 1.4% drop in overtime and .5% decline in bonus’.
- Japanese November consumer confidence index fell to 40.9 from 42.3 last month and is basically at the same level as it was in late 2012 when Abe took office. The important Income Growth component fell .6 pts to match the lowest since February.
- In a country that hasn’t seen a recession in 25 years, the Australia economy shrunk by .5% q/o/q in Q3, worse than the estimate of down .1%. The y/o/y gain was still 1.8%. A drop in construction and business investment led to the decline.
- German IP rose by .3% m/o/m in October but that was 5 tenths less than expected. Construction drove the rise while manufacturing was up just .1%. The German economic ministry expects a “moderate recovery” in the months to come.
- German exports in October rose by .5%, 4 tenths below the forecast and September was revised down by 3 tenths.
- UK IP in October as it fell by 1.3% m/o/m instead of rising by .2% as expected. The manufacturing component was lower by .9% vs the forecast of a .2% rise. There was also sharp declines in oil/gas (one of their big fields was shut down) and mining production.
- French IP fell by .2% m/o/m and 1.8% y/o/y, well worse than the estimate of up .6% and down .6% respectively.
- I believe the Italians missed a real opportunity for legitimate reform. Hopefully though this triggers an urgency for other legitimate reform and the 5 Star Movement doesn’t come to power.
- India’s economy is in a temporary mess due to the forced cash exchange and its services PMI plunged to 46.7 in November from 54.5.