Positives
1)Initial jobless claims fell back below 200k at 184k and there is no seasonal adjustments around a holiday to blame. That is down from 227k last week. The 4 week average fell to 219k from 240k and that compares with 210k at the end of January 2020. Delayed by a week, continuing claims rose by 38k after 3 weeks of declines in November which totaled 255k. At 1.99mm, it compares with 1.7mm in January 2020.
2)The December UoM consumer confidence index rose 3 pts m/o/m off a 10 yr low to 70.4 and that was just above the estimate of 68. Most of the gain was driven by the Expectations component which rose 4.3 pts m/o/m. Current conditions rose 1 pt. One year inflation expectations held at 4.9% which is the highest since July 2008 but expectations for a lower gasoline price kept a lid on any gains. The 5-10 yr guess was unchanged at 3% but matches a 10 yr high. Employment expectations rose 2 pts but income fell 1 pt off the highest since March 2020. Off depressed levels we did get a lift in spending intentions. The UoM said “When directly asked whether inflation or unemployment was the more serious problem facing the nation, 76% selected inflation while just 21% selected unemployment.”
3)The MBA said refi’s rebounded 9% w/o/w after falling by 15% last week. They remain down 37% y/o/y on tough comps.
4)China saw aggregate credit financing total 2.61T yuan in November, just under the estimate of 2.7T and up from 1.59T in October. Of this total about half were bank loans.
5)PPI in China rose 12.9% y/o/y in November, above the estimate of up 12.1% but a modest slowdown from the 26 yr high 13.5% rate of change seen in October. CPI rose by 2.3% y/o/y, up from 1.5% in October but 2 tenths less than expected. It was led by higher vegetable prices. CPI was up just 1.2% y/o/y when taking out food and energy.
6)China’s November trade data saw a 22% y/o/y increase in exports, just above the estimate of up 20.3%. Imports were higher by almost 32% y/o/y vs the forecast of up 21.5% as commodity imports were strong, particularly for coal.
7)Taiwan said its exports in November jumped by 30.6%, well more than the consensus of 22.8% and driven by semi’s. Imports were up by 34% vs the estimate of 24.5%.
8)While very much supply constrained, German exports and imports in October both exceeded expectations but much of this was due to higher inflation. The German Chamber of Industry and Commerce said “Much of the increase is down to price rises in important semi-finished goods and raw materials that our exporters then pass on to foreign customers.”
9)The November ZEW investor expectations index in the Germany economy fell to 29.9 from 31.7 but that was better than the feared fall to 25.4. Current conditions though, because of the covid spike and supply challenges, fell to -7.4 from 12.5 and vs the estimate of +5.7. The ZEW president said “The German economy is suffering noticeably from the latest developments in the Covid pandemic. Persisting supply bottlenecks are weighing on production and retail trade. The decline in economic expectations shows that hopes for much stronger growth in the next 6 months are fading. Especially the earnings expectations of export oriented and consumer related industries are assessed more negatively.”
10)Notwithstanding the supply issues, Germany did report an upside surprise to their industrial production figure with a 2.8% m/o/m gain vs the estimate of up 1%. Manufacturing production in particular got a boost from a lift in auto and truck output.
11)With inflation in November up 10.7% y/o/y, the Brazilian central bank raised its Selic rate to 9.25%, up 150 bps and promised another 150 bps hike in February. They said, “Given the increase in inflation projections and the risk of a de-anchoring of long term expectations, it is appropriate to advance the process of monetary tightening significantly into the restrictive territory. The Committee will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate.”
Negatives
1)The CPI in November rose by .8% headline and .5% core m/o/m. The core rate was as expected while the headline increase was one tenth more. Versus last year prices are up 6.8% headline and 4.9% core. It was 1982 the last time we saw a headline print like that. The core rate is running at a 30 yr high. Energy prices grew by 3.5% m/o/m and 33% y/o/y while food prices were up by .7% m/o/m and 6.1% y/o/y. Services prices ex energy rose .4% m/o/m and 3.4% y/o/y, still dramatically undercounting rent. On the goods side, core goods prices jumped another .9% m/o/m and are up 9.4% y/o/y, a 40 yr high.
2)The Atlanta Fed’s Sticky CPI rose 3.4% in November, the quickest since 2002.
3)The Cleveland Fed’s 16% trimmed CPI was up 4.6% y/o/y, a 30 yr high.
4)The Atlanta Fed Wage Growth Tracker saw a 4.3% increase in the November, the highest since September 2007 but obviously still negative on an inflation adjusted basis. For job switchers, the growth rate was 5.2% which is the 2nd highest print dating back to 2002. For 16-24 yr old’s, wage growth was up 10.1% y/o/y as lower skilled workers are seeing the quickest raises. That’s the fastest increase since 1998. For higher skilled workers, the growth in wages of 3.6% is pretty much in the middle of the 5 yr average.
5)I’m late in mentioning the Apartment List National Report for December which came out last week. The rent increase was just .1% m/o/m in November which is the slowest rate of change m/o/m this year. However, the year to date gain is now 17.8%.
6)The Logistics Managers’ Index for November had “the highest Aggregate Logistics Price level in the history of the index.” These costs include inventory costs, warehousing prices and transportation prices.
7)In October there were 11mm job openings, up from 10.6mm in September and above the estimate of just under 10.5mm. The October count is slightly below the record high of almost 11.1mm seen in July. The number of quitters remained above 4mm but at 4.16mm, off the September level of 4.36mm. The quits rate thus fell to 2.8% from the record high of 3%. The difference between hiring’s and separations saw a net gain of 572k in job gains and the hiring rate was 4.4% for the 3rd month.
8)With mortgage rates little changed w/o/w, the MBA said purchases fell 5% after rising by a like amount last week. Versus last year they are down 8.1%.
9)Japanese PPI in November rose .6% m/o/m, 2 tenths more than expected and October was revised up by 2 tenths to a gain of 1.4%. Versus last year, prices jumped 9% y/o/y. It was 1980 the last time Japan saw a quicker rate.
10)The UK economy in October grew by just .1% m/o/m and that was less than the expected increase of .4%. Industrial production was light there too in addition to in its construction sector.
11)German factory orders in October tanked by 6.9% m/o/m, well worse than the estimate of down just .3%. An 18.1% drop in non eurozone orders was the main reason.
12)Spain and Italy both reported October industrial production figures that were light relative to expectations with supply bottlenecks the main reason.
13)The Bank of Canada kept rates unchanged at .25% as expected and they are also no longer saying inflation is temporary. While QE is over, they are still reinvesting proceeds from the maturity of holdings.
14)The RBA remained dovish too, believing that a benchmark rate of .10% is still appropriate even as headline inflation is above 3%.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.