The November ISM manufacturing index rose to 59.3 from 57.7 and that was better than the expected decline to 57.5. The index reached a high this year in August at 61.3 and was at 59.8 in September. After falling by 4.4 pts in October, new orders rebounded by 4.7 pts in November. Backlogs were up by .6 pts. Export orders held at 52.2, the lowest since November 2016, …
Punting for another 3 months
Detente for 3 months and we'll take it. I'm particularly happy for the American farmer of soybeans as they've been a sacrificial lamb in this spat but the 25% tariff on soybean imports into China still remains for now. I'll take this line from an article from the South China Morning Post last night, "The 90 day ceasefire gives Beijing time to tackle some of …
Succinct Summation of the Week’s Events – 11/30
Positives 1) There is an opportunity Saturday night to at least postpone further tariffs as both sides seem interested in some détente. Even Robert Lighthizer is optimistic. 2) Jay Powell gave himself some breathing room and flexibility in terms of the timing of achieving his goal of an eventual 3%-ish fed funds rate. 3) The headline PCE inflation deflator …
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The same movie keeps playing/Overseas data
After hearing from Jay Powell and reading thru the FOMC minutes, keep in mind the negative feedback loop that is modern day monetary policy. 1)The Fed keeps rates at zero for 7 years helping to drive 6% annual home price gains, more than 3 times the rate of inflation. That is called tinder and the spark that lights it into a problem is when interest rates rise. The …
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Home sales fall again
Pending sales of existing homes in October fell 2.6% m/o/m, well worse than the estimate of up .5%. On a y/o/y basis, contract signings have fallen in 9 of the 10 months so far this year. The seasonally adjusted index is at the lowest level since the summer of 2014. Most of the decline was seen out West as sales there fell 8.9% m/o/m and the NAR said “The West region …
Inflation, spending, income and claims
The headline PCE inflation deflator rose .2% m/o/m in October as expected and 2% y/o/y. The core rate though was up .1% m/o/m which was one tenth below the estimate as was the 1.8% y/o/y increase. Higher energy prices (which have since changed for gasoline on the downside and natural gas on the upside) drove a rise in non durable goods prices as it offset a decline in …
Are we there yet?
For a market that is so beholden to monetary policy and desperately wanting to know 'are we there yet?' in terms of ending the tightening, I only thought of this yesterday after Powell basically said we are: https://www.youtube.com/watch?v=18AzodTPG5U. BUT, as long as QT is still in place, we really aren't there just yet. Their balance sheet is still expected to …
Powell
The markets are latching on to two words in the Jay Powell speech, “just below” referring to where he thinks the neutral rate is. We know that no one really knows what the neutral rate really is but I “just below” is different then what he said in October when he said “we’re a long way from neutral at this point, probably.” Of course we’re playing a game of …
Home sales/Mfr’g
New home sales in October totaled 544k, 30k less than expected, the least since March 2016 but that was offset by a 44k upward revision to September to 597k. Smoothing out the monthly noise in this volatile data point puts the 3 month average at 577k vs the 6 month average of 601k, the 12 month average of 629k and the 2017 average of 616k. There is now an issue …
Inventories jump ahead of yr end/Record trade deficit
Likely the rush to procure goods before a potential spike in tariff rates at year end was reflected in the jump in inventories in October. Wholesale inventories rose by .7% m/o/m, almost double the estimate of up .4% and September was revised up by two tenths. It was a 1.7% durable goods boost in inventories (those items most impacted by tariffs) that drove it while …
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Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.