Positives
1)Moderna’s vaccine has 95% efficacy and Pfizer confirmed that theirs does too.
2)While no government program or new Fed facility ever really dies, it was good to see some temporarily put to bed.
3)Continuing claims fell to 6.37mm from 6.8mm in the week prior and that was slightly less than the estimate of 6.4mm. Continuing claims for PUA fell by 751k to 8.68mm for the week ended October 30th.
4)The November Philly manufacturing index fell 6 pts to 26.3 but that was about 4 pts better than estimated. The 6 month business outlook fell 18.4 pts to a 3 month low.
5)After declines in 6 of the past 7 weeks, the MBA said purchase applications rose 3.5% w/o/w, getting back some of what it lost over the prior two weeks. They are still up by 26% y/o/y.
6)The October Cass Freight Shipments Index rose 2.4% y/o/y, the 1st positive read since November 2018. Much of the strength is due to the rise in imports. “The Port of Long Beach announced a 19.4% y/o/y increase in October in import volume, and we expect November to be up y/o/y as well. We have written the last few months about this ‘West Coast port dump’ due to low inventory levels, where large US importers are bringing in a disproportionate amount of their containers to SoCal and then moving truck or rail around the US to avoid stockouts. It has not stopped. This results in higher transportation costs, but it’s been necessary to keep goods in stock.”
7)The October Architecture Billings Index remained below 50 but did rise .5 pt to 47.5 and AIA said “Though still in negative territory, the moderating billings score along with the rebound in design contracts and inquiries provide some guarded optimism. The pace of recovery will continue to vary across regions and sectors.”
8)The November NAHB home builder survey jumped another 5 pts to 90 from 85 in October and above the estimate of 85. Almost all of the gain was in the Present Situation which rose 6 pts to 96 while the Future Outlook was up 1 pt to 89. Prospective Buyers Traffic was up by 3 pts to 77. The NAHB said what we know, “Historically low mortgage rates, favorable demographics and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17% in 2020 on a y/o/y basis.” They also included these caveats that we are also aware of, “Though builders continue to sign sales contracts at a solid pace, lot and material availability is holding back some building activity. Looking ahead to next year, regulatory policy risk will be a key concern given these supply side constraints.” the NAHB also added “affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front.”
9)October housing starts totaled 1.53mm, above the estimate of 1.46mm and September was revised up by 44k to 1.46mm. The m/o/m gain was solely driven by single family as multi family was unchanged for a 3rd month. Permits on the other hand were slightly less than expected at 1.55mm, unchanged with September. Single family was up a touch while multi family fell a hair.
10)Existing home sales in October, likely reflecting contract signings done in the summer, totaled 6.85mm, above the estimate of 6.47mm and up from 6.57mm in September. That is now quickly approaching the 2005 peak of 7.25mm. All four regions saw m/o/m increases. The number of days on the market was just 24 vs 26 in September and 27 in August. The problem remains inventory as months’ supply fell to just 2.5 from 2.7 and relative to the long term average of about 6 months. Growing affordability issues are apparent with both the median and average home price (the latter more skewed by mix) rising to a record high. The median price is now up 15.5% y/o/y and the average price by 12.3%. The last NAR’s Metro Median Area Prices and Affordability quarterly report saw home price gains “in all of the 181 metropolitan areas NAR tracks. 65% of those metros show double-digit price increases.” First time buyers made up 32% of total purchases vs 31% in September and 33% in August.
11)US import prices in October were unchanged ex petro, 3 tenths less than expected but comes after a 6 tenths rise in September and 8 tenths gain in August. Prices ex petro are still up 1.8% y/o/y.
12)US industrial production in October rose 1.1% m/o/m, one tenth more than expected and September was revised up by 2 tenths. Manufacturing was better than forecasted when we include the upward revision to September. Capacity utilization also rose to 72.8% from 72%.
13)In China, industrial production in October held at a 6.9% y/o/y gain, two tenths more than expected. Fixed asset investment ytd y/o/y was 1.8% higher, also two tenths more than forecasted.
14)Japan’s October CPI ex food and energy fell .2% y/o/y vs the estimate of a .3% drop and vs flat in September. A key factor in the y/o/y decline was the comparison as last October included the VAT hike. Also, the core/core rate includes the travel discounts that have been implemented. To this, hotel prices fell 37% y/o/y and took away almost .5 percentage point from headline CPI. Either way, prices are little changed which is TRUE price stability.
15)The October Japanese trade data was mixed as exports, while down by .2% y/o/y, was better than the estimate of down 4.5% while import dropped by 13.3%, more than the forecast of an 8.8% decline. Exports to China grew by 10.2% y/o/y and rose by 2.5% to the US while falling by 2.6% to the EU.
16)Japan’s economy in Q3 rose 21.4% q/o/q annualized after the 28.8% contraction in Q2. That is above the 18.9% estimate and was mostly driven by private spending and exports but business spending fell again. The expectation is that the Japanese economy gets back to its pre Covid level in early 2022 as we see a Q4 slowdown due to the virus flare up but then a 2021 further rebound.
17)Australia reported a much better than expected jobs number for October with a gain of 178.8k vs the estimate of down 27.5k with both full time and part time jobs being added helped by the reopening of the Victoria region.
18)October retail sales in the UK ex fuel oil rose 1.3% m/o/m, above the estimate of no change but this was pre restrictions where some people stocked up on things.
19)The lack of inflation in the Eurozone in October was confirmed with the final read that was the same as the initial. Headline CPI fell .3% y/o/y and rose .2% at the core. Lower energy prices kept a lid on the headline while little change in services and non energy industrial goods limited the price gain at the core.
20)Turkey seems to be getting its economic act together after the Finance Minister resigned a few weeks ago, Erdogan expressed an interest in regaining the trust of investors and its central bank this week hiked rates to 15% in order to control inflation.
21)It was refreshing to hear this from a central banker. The council member of the Polish central bank who currently has rates at .1% said on NIRP, “A negative rate would be economically unjustified and bad for the financial system stability. It could even be questionable in light of the constitution and the central bank charter.”
Negatives
1)The daily Covid case count continues on its sharp ascent. //covidtracking.com/data/charts/us-daily-positive
2)Initial jobless claims rose to 742k from 711k last week (revised up by 2k) and that was 42k more than expected. This is for the week ended November 14th. Those receiving Pandemic Unemployment Assistance (for those that don’t normally qualify for initial claims) rose by 25k to 320k. While for sure some are finding new jobs after their claims expired, some are not as measured by the continuing claims for Pandemic Emergency Unemployment Compensation which rose another 233k to 4.38mm, a new high.
3)Refi’s fell by 1.8% w/o/w but are still up 98% y/o/y with record low mortgage rates.
4)Core retail sales in October rose just .1% m/o/m, below the estimate of up .5% and September was revised down by 5 tenths to a gain of .9%.
5)The November NY manufacturing index fell to 6.3 from 10.5 and that was about half the estimate of 13.5. As for the outlook 6 months ahead, it rose a touch, by 1.1 pts m/o/m to 33.9 but it was 40.3 in September. Of note, the outlook for prices paid rose to the highest since January 2019. The expectations for prices received are at the most since January 2020. Positively, capital spending plans, including technology, both rose by 8 pts m/o/m.
6)Japan’s manufacturing and services PMI for November slipped one point to 47 with both components down a touch. While things have stabilized in Japan, this is still contractionary behavior. Markit said “The Japanese private sector economy continued its struggle to gain recovery momentum midway through the 4th quarter…Demand conditions continued to weaken, with inflows of new business falling for a 10th month in a row, weighed down by a further drop in export orders.”
7)Retail sales in October in China rose 4.3% y/o/y vs 3.3% in September but that was below the estimate of up 5%.
8)Singapore’s October non-oil exports fell 5.3% m/o/m and 3.1% y/o/y, below the estimate of up 2.7% and 5.1% respectively. We can blame a slowdown in electronics but that comes after a solid few months and is likely due to a slowdown in semi shipments to Huawei. Pharma remained a consistent contributor to exports but did see slower growth. Petrochemical exports slid too. Exports to China rose 5.3% y/o/y after a .1% drop in September. To the US, they rose 13.2% y/o/y.
9)November consumer confidence in the UK fell 2 pts to -33, about as expected but is near the lows seen in April.
10)The UK saw headline CPI in October higher by .7% y/o/y and the core rate up by 1.5%, both up 2 tenths from September and both 2 tenths more than expected. PPI also was up more than estimated.
11)In the UK, with more selective restrictions, the CBI industrial orders index fell to -40 from -34 but that was as expected. CBI said “Output volumes have declined at their slowest pace in over a year in our November survey. But order books have softened again as global demand has been hit by intensified lockdowns, and manufacturers have trimmed their expectations.”