After the mixed bag seen in the regional manufacturing indices, the January Chicago index was the worst of them all coming in at 42.9, 6 pts less than expected and the weakest since December 2015. This brings the 3 month average to 45.9 vs the 50 breakeven level.
So no trade deal enthusiasm here as new orders fell 6.1 pts to 41.5 while production fell to the lowest since July 2019. Backlogs, the precursor to orders and production, fell to a 4 yr low at just 34.6. Inventories fell to the least since May 2016 at 40.2, below 50 for 6 straight months. Employment stayed below 50 at 47.
With all the excitement over the USMCA, this question was asked: “Will the signing of the USMCA agreement improve your supplier lines? The majority (60%) anticipate no improvement at all, while 40% expect little changes.
Bottom line, this number was awful and maybe that means it can only get better from here but with the virus stopping many things in their tracks in Asia, it certainly makes it more uncertain when.
CHICAGO MNI
The final January UoM consumer confidence index did rise by .7 pts to 99.8 which was better than the initial print of 99.1 and up .5 pt from December. The components though were mixed as Current Conditions fell 1.1 pts while Expectations were higher by 1.6 pts. Inflation expectations out one year were 2.5% vs 2.3% in December and 2.5% in November.
Disappointingly, the Net Income component did soften to match the lowest since January 2018 but “Consumers continued to favorably assess recent changes in their personal finances.” To this, employment expectations are the best since November 2018.
Spending intentions were mixed as those planning on buying a vehicle and major household item fell m/o/m while those wanting to buy a home rose helped by lower mortgage rates.
Lastly, and likely helping confidence but should be taken with other sentiment gauges, the level of bullishness on the stock market is at the highest level since January 2018 as respondents said there is a 65.6% chance of higher stock prices in the next year. That is the 2nd highest print since this question was first asked in 2002.
Bottom line, a tight labor market, confidence with personal finances and ebullience with the stock market is why consumer confidence is where it is for this coincident indicator.
BULLISHNESS on STOCKS
UoM CONSUMER CONFIDENCE
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.