1)Possibly influenced by the MLK holiday, initial jobless claims fell under 200k at 190k vs the estimate of 214k and down from 205k last week. The 4 week average fell to 206k from 213k in the week before. Delayed by a week, continuing claims rose 17k to 1.647mm but after falling by 67k in the week before.
2)Headline PPI fell by .5% m/o/m in December, more than the estimate of down one tenth. The core rate rise of .1% was as forecasted but November was revised lower by two tenths. The y/o/y headline gain slowed to 6.2% from 7.4% while the core rate was up by 5.5% vs 6.2% in the month prior.
3)Within the negative Philly manufacturing index, the 6 month outlook, after 7 months in a row in expected contraction, rose to +4.9. Expectations for pricing declined as did capital spending plans.
4)The 6 month outlook in the NY manufacturing survey rose 1.7 pts to 8, so assumes some improvement over this time frame from what was seen in January but not much. Capital spending plans fell a touch but did rise for tech spending by 5 pts to the best since last June.
5)When we include the November revision, housing starts in December was about as expected. Single family starts rebounded to a 4 month high at 909k vs 817k in the month before. Multi family starts slowed to 473k from 584k.
6)After falling in all 12 months of 2022 by a total of 53 pts to 31, the NAHB home builder sentiment survey rose 4 pts in January to 35, but remaining well below the 50 breakeven between expansion and contraction. Present conditions rose by 4 pts while the outlook was up by 2 pts. Prospective Buyers Traffic remained very low but a bit less so at 23 vs 20 in December. The bottom line according to the NAHB, notwithstanding the modest uptick in January, is that “sentiment remains in bearish territory as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions.” In order to move product, “many builders continue to use a variety of incentives, including price reductions, to bolster sales.”
7)Helped by another drop in the average 30 yr mortgage rate to 6.23%, a 4 month low but mostly is post holiday behavior which the MBA poorly seasonally adjusts for, purchase applications jumped 25% w/o/w while still 35% lower y/o/y. Refi’s spiked by 34% w/o/w, though still down 81% y/o/y. Wait until next week to get a better gauge of the market.
8)Somewhat old data because it measures closings, existing home sales in December totaled 4.02mm, above the estimate of 3.95mm but down from 4.08mm in November. Months’ supply fell to 2.9 from 3.3 while home price gains slowed to ‘just’ 2.3%. The first time buyer made up 31% of purchases which is good to see, up from 28% in the two prior months. Cash buyers increased their presence as they are immune from mortgage rates changes. Homes are sitting longer though, and not surprisingly, as it was 26 days on the market on average vs 24 in November, 21 in October, 19 in September, 16 in August and 14 in July. Assuming many contracts were signed in the 3-4 months before December closings, mortgage rates ranged between 5.5-7.15%. The NAR said “December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates. However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year.” I’ll say though, they remain still high relatively to where they were.
9)In the November TIC data, foreigners bought a net $54.2b of US notes and bonds but again, most of it is coming from the Cayman Islands and via banks in the UK. I’m guessing hedge funds and insurance companies. Japan sold a net $20b, further reducing their holdings and China a net $2b. Foreign central banks continue to be sellers of US Treasuries in the aggregate.
10)The Bank of Indonesia raised rates by 25 bps to 5.75% as expected and hinted they may now pause. Pausing was the Malaysian central bank who unexpectedly did not raise rates by 25 bps and instead kept its benchmark rate at 2.75%. Norway held rates unchanged at 2.75% but that was expected.
11)China reported Q4 GDP that surprised to the upside and also December figures like retail sales, industrial production and fixed asset investment that all exceeded expectations. We should take all of this with a grain of salt however and I still treat it as old news as the analysis on China really only now matters in Q1 as the country fully opens up.
12)Hopes for a China recovery and much lower than feared energy costs has the German ZEW investor confidence in their economy rising a lot in January. The index rose to +16.9 from -23.3 and that was well better than the estimate of -15. The Current Situation though in contrast only saw a slight gain to -58.6 from -61.4.
13)The UK unemployment rate held at 3.7% for the 3 months ended November as expected and job growth was better than feared.
14)Germany’s PPI in December was up 21.6%, above the estimate of up 20.7% but a slowdown from the 28.2% spike in November.
1)Core retail sales for the key November and December time frame were soft, falling two tenths in November and by another 7 tenths in December. That December print was 4 tenths worse than expected. Sales weakness was broad based as they fell in both holiday months in autos/parts, furniture, electronics, building materials, clothing, department stores, and restaurant/bars. As for online retailing, after a 1% rise in October, they fell one tenth in November and by 1.1% in December. Retail sales ex gasoline in dollar terms are at the lowest since July.
2)The January NY manufacturing index plunged to -32.9 from -11.2 and that was well worse than the estimate of -8.6. If you take out covid, this is the worst print since March 2009.
3)The January Philly manufacturing index remained below zero for a 5th straight month and the 7th in the past 8. At -8.9 it still though is up slightly from the -13.7 in December and a bit better than feared.
4)Offsetting the bounce in single family starts is continued shrinkage in the number of single family permits which slowed to 730k in December, the least since July 2016 when not including covid. Multi family permits rose 30k m/o/m after falling by 100k in the month prior.
5)There was a 7 tenths m/o/m drop in December for US industrial production and November was revised down by 4 tenths. Manufacturing softness led the way with a 1.3% m/o/m drop, well worse than the expected down .2%. November was revised lower by 5 tenths. The weakness in manufacturing production was across the board and the index itself fell to the lowest level since September 2021. The only thing keeping IP from coming in worse was the 3.8% increase in utility output in the month. Mining production fell for a 2nd month. Capacity utilization fell to the lowest since December 2021.
6)The BoJ did nothing even as inflation continues to accelerate.
7)Japan said its CPI in December rose 4% headline and also ex food as expected. The core/core rate that also takes out energy was higher by 3%, one tenth less than the forecast but up from 2.8% in November. That’s also a 41 yr high if we take out the influence of VAT changes.
8)PPI in Japan in December rose 10.2% y/o/y, up from 9.7% in November.
9)Understanding that Japanese trade data is highly influenced the yen moves and the price of energy, exports in December rose 11.5% y/o/y, just above the estimate while imports were up by almost 21%, just under the estimate.
10)Singapore exports in December non-oil fell 20.6% y/o/y, more than the estimate of down 16%.
11)Taiwan’s economy contracted y/o/y in Q4 by .9% vs the estimate of growth of 1.2%.
12)The UK finished the holiday season with softer than expected retail sales in December. Ex auto fuel they fell 1% m/o/m instead of rising by .5% as forecasted. The 6.1% y/o/y drop is the most on record dating back to 1989 according to the ONS. The ONS said simply, “consumers cut back on spending because of increased prices and affordability concerns. This was due to increased food prices and the rising cost of living.”
13)The December inflation data out of the UK was about as expected. Headline CPI was up 10.5% y/o/y vs 10.7% in the month before. The core rate was unchanged with November, up by 6.3% y/o/y. The retail price index which is included in the linker calculation saw prices up by 13.4% y/o/y. While inflation in the UK too is likely topping out, these are painful figures. The chief economist of the ONS said “Inflation eased slightly in December, although still at a very high level. However, this was offset by increases for coach and air fares as well as overnight hotel accommodation. Food costs continue to spike with prices also rising in shops, cafes and restaurants.”
14)UK jobless claims rose by 19.7k in December, the most since late 2019 not including covid