Positives
1)A US/China Phase One deal is officially signed.
2)Housing starts in December totaled 1.608mm, well better than the estimate of 1.38mm, up from 1.375mm in November and it’s the best since December 2006. Both single family and multi family saw good gains. Part of the jump in starts was favorable weather but also due to lower mortgage rates and more supply of lower prices homes where most of the demand is coming from.
3)The NAHB home builder sentiment index for January fell 1 pt m/o/m to 75 but that was 1 pt better than expected and off the best level since 1999. Present conditions fell 3 pts m/o/m while the outlook was unchanged. Prospective buyers traffic rose 1 pt to match the highest since 1998.
4)The Philly manufacturing index surprised to the upside with a print of 17 vs the estimate of 3.8 and up from 2.4 in December. The internals though were mixed. The 6 month business activity outlook rose to 38.4 from 34.8 and that’s the best since May 2018 likely helped by this new trade deal. Capital spending plans also improved to 32.9 from 26. It peaked last year at 36.8 back in July.
5)The January NY manufacturing index was little changed at 4.8 from a revised 3.3 in December (from 3.5) but that is a touch better than the estimate of 3.6. It averaged 19.8 in 2018. The internals were also mixed. Prices paid doubled to 31.5, the highest since March from 15.2 and those received more than tripled to 14.4 from 4.3. As for the forward looking components, the 6 month outlook fell to 23.6 from 26.1and capital spending plans moderated as well.
6)Initial jobless claims totaled 204k, 14k less than expected and down 10k from the week prior. Because a print of 235k dropped out of the averaged, the 4 week average in claims fell to 216k from 224k and that’s the lowest since early November. The other key aspect of the report which flashed yellow last week, continuing claims, delayed by a week, fell back to 1.767mm from 1.8mm last week which was the highest since April 2018. It still though is the 2nd highest print since February.
7)Both headline and core CPI rose one tenth less than expected, higher by .2% and .1% m/o/m respectively. The headline number though rose to 2.3% y/o/y from 2.1% and the core rate held at 2.3% y/o/y. Again, services inflation is being mitigated by the lack of goods inflation. Services inflation ex energy rose .2% m/o/m and 3% y/o/y again due to persistent gains in rent and medical costs.
8)December PPI rose .1% m/o/m both headline and core. The headline print versus last year is up 1.3% as expected while the core rate gain of 1.1% was two tenths less than expected. Also taking out trade has wholesale prices up 1.5% y/o/y.
9)December import prices were as expected when November revisions are included.
10)With people back from their holiday vacations or whatever they were doing, the MBA said mortgage apps bounced by 30%. Purchases were higher by 15.5% w/o/w and 8% y/o/y while refi’s jumped by 43% w/o/w and 109% y/o/y. As things always fall in the last few weeks of December and then rebound in early January, throw this data out the window.
11)Growth in Q4 in China magically grew by 6% y/o/y, the same pace as in Q3 but which is the slowest since at least the early 1990’s. For all of 2019, growth was 6.1% with consumption making up just below 60% of it. The data for December specifically was this: Retail Sales up 8% y/o/y vs the est of 7.9%, IP was higher by 6.9% vs the est of 5.9% and fixed asset investment ytd was up by 5.4% vs the est of 5.2%.
12)Aggregate financing in December in China grew by 2.1 Trillion, well more than the estimate of 1.65 Trillion and all was on the non bank side as bank loan growth was about as expected. That non bank side includes local government borrowing which has been ramping up and more than doubling the pace seen in November. One thing of interest within the loan data was the growing pile of debt the Chinese are writing off. “Loans written off” totaled 302b yuan vs 64b in November, 42b in October and 169b in September.
13)The December trade data from China was better than expected. Exports jumped 7.6% y/o/y, above the forecast of up 2.9%. For the full year, exports were above flat from 2018. Exports to Europe and Asia offset a decline to the US. Imports grew by 16.3% y/o/y, higher than the estimate of 9.6% and helped by a 67% spike in soybean imports. Imports of iron ore also jumped.
14)Singapore, a great proxy for global trade, saw its December non oil exports rise 2.4% y/o/y, above the estimate of -1% driven by a 35% spike in pharma shipments. Exports of electronic products fell 21%. This y/o/y gain in exports follows 9 months in a row of declines.
15)In the very volatile Japanese machinery order number, we saw quite a snap back in November as they spiked by 18% m/o/m, well better than the estimate of up 2.9%. A government spokesperson though is saying that much was related to a ramp up in orders within the transportation area, particularly for infrastructure projects like railways.
16)Pointing to easy comps and maybe a sign of stabilization in global trade, Indonesia said exports rose 1.3% y/o/y, better than the estimate of down 1.9%.
17)The UK CPI headline rate rose 1.3% y/o/y vs the estimate of 1.5% and the core rate was higher by 1.4%, 3 tenths less than expected. Benign inflation helps to raise real wages.
16)Pointing to easy comps and maybe a sign of stabilization in global trade, Indonesia said exports rose 1.3% y/o/y, better than the estimate of down 1.9%.
17)The UK CPI headline rate rose 1.3% y/o/y vs the estimate of 1.5% and the core rate was higher by 1.4%, 3 tenths less than expected. Benign inflation helps to raise real wages.
Negatives
1)Upon the signing of the trade deal, we are still stuck with almost all of the tariffs that American companies pay for with the hope that some day likely after the election they will come off when, if, a Phase Two deal is signed.
2)Core retail sales in December rose .5% m/o/m, one tenth more than expected but offset by a 2 tenths downward revision to November to -.1% and a 3 tenths lower revision to October.
3)Housing permits in December fell to a 3 month low with a 5 month low in multi family, down by 53k m/o/m while single family was down a modest 5k m/o/m.
4)Industrial production in December fell .3% m/o/m, one tenth more than expected and November was revised down by 3 tenths. A sharp drop in utility output was an area of weakness because of the mild weather. Manufacturing though unexpectedly rose by .2% m/o/m instead of falling by one tenth as forecasted due to a bounce in computer/electronics. The production of motor vehicles was soft, down 8.3% y/o/y.
5)The Cass Freight December shipments index fell 7.9% y/o/y, “the steepest decline since the Great Recession of 2008-2009.” I will give this a partial pass though because of the timing of Christmas and New Year’s basically wiping out the last two weeks of the year in terms of business activity. But to this Cass Freight said “Regardless of the holiday effect, the freight market is weak, largely due to higher inventories and contraction in the manufacturing economy, as noted by December’s 2019 low ISM reading of 47.2 (the lowest since June 2009). We saw corroborating evidence from the rail data, which showed deceleration through the end of the year as well. And while we expect comps to ease and volumes to flatten out, we are not forecasting much growth in terms of freight volumes in 2020…And the tariff relief from the Phase 1 deal seems to be just that, a relief for some, but not a stimulus.”
6)The preliminary January UoM consumer confidence index fell a touch to 99.1 from 99.3. The estimate was for no change. The internals though were mixed as Current Conditions rose slightly while Expectations fell slightly. One year inflation expectations rose to 2.5% from 2.3%. That is likely due to the sharp jump in those expecting higher gasoline prices, likely in response to the Iran spat. Expectations for Net Income fell to a 4 month low but on the other hand employment expectations jumped 13 pts to the highest since November 2018. Spending intentions were mixed. Those that plan on buying a vehicle fell to a 5 month low but those that said it’s a good time to buy a house rose to the highest since April 2018 at 143. It peaked this cycle at 168 in December 2014 when prices were cheaper. There was slight rise in those planning on buying a major household item. In a gauge of stock market sentiment, those that think stock prices will be higher over the coming 12 months rose to the most since January 2018.
7)The NFIB small business optimism index for December slipped 2 pts m/o/m to 102.7 after rising by 2.3 pts last month. It’s just below the monthly average in 2019 of 103, down from 106.7 in 2018 and vs 104.9 in 2017.
8)For the week ended January 1st seen this past Friday, commercial and industrial loans outstanding fell to the lowest level since March.
9)Foreigners continued to sell US notes and bonds in November. The net selling totaled $41.5b taking the year to date liquidation of $140b. Thanks to the Fed though monetizing US T-bills where in turn banks are buying notes and bonds, along with other domestic buying, the exploding budget deficit is being financed at current rates.
10)The Fed’s balance sheet rises to the highest level since October 2018 and now again has become a prisoner of the markets.
11)The UK economy outright shrank .3% in November in the month leading up to the general election. The estimate was for no change. Manufacturing was weak not surprisingly but the services side contracted as well. Construction rebounded after a drop in October. For the 3 months ended November, growth was up .1% as September and October were revised slightly higher.
12)In the UK, December retail sales ex auto fuel were soft, falling .8% m/o/m, well below the estimate of up .8%.
13)Germany said its economy grew by .6% y/o/y in 2019, the slowest pace of gain since 2013 with weakness in manufacturing offsetting strength in consumer spending and construction.
14) Job openings in November fell to 6.8mm from 7.36mm and that is the least amount since February 2018.
15)”All the world’s indeed a stage and we are merely players, performers and portrayers. Each another’s audience outside the gilded cage.” Thank you Neil Peart for lyrics and music like this. You will be greatly missed. //www.youtube.com/watch?v=ZiRuj2_czzw