1)Within the housing starts data, single family permits rose 7k m/o/m to 882k which is the highest since February 2018 and just shy of the most since 2007.
2)The about 100 bps y/o/y decline in mortgage rates continues to lift the spirits of home builders as the October NAHB builder survey rose 3 pts m/o/m to 71 (the breakeven is 50), the best level since February 2018. Notably, Prospective Buyers Traffic rose 4 pts to 54, also the best since February 2018. Regionally, it’s all about the South and West as the index fell in the Northeast and Midwest. The overall main caveat is that “builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.”
3)Initial jobless claims totaled 214k, about as expected and up from 210k last week. The 4 week average was up by 1k to 215k. Continuing claims, delayed by a week, fell by 10k.
4)The October NY manufacturing index printed +4 vs +2 in September and 4.8 in August. The estimate was +1. The internals though were pretty mixed. With respect to the 6 month outlook, it rose 3.4 pts m/o/m but off the lowest level since April and is the 3rd weakest print since early 2016. Capital spending plans on both equipment and tech rose slightly from September but in September fell sharply from August. Capital spending on equipment was 8.8 vs the 15.4 6 month average while technology expenditures was also at 8.8 and 5 pts below the 6 month average.
5)The October ZEW German investor confidence index in their economy was little changed at -22.8 vs -22.5 in September but that was better than the estimate of -26.4. The Current Situation weakened to -25.3 from -19.9, the worst since April 2010. ZEW said “The slight decrease in both the ZEW Indicator of Economic Sentiment and the situation indicator shows that financial market experts continue to expect a further deterioration of the German economy. The recent settlement in the trade dispute between the US and China does not seem to diminish economic skepticism at this stage.”
6)Hopefully there is a successful vote tomorrow approving Brexit with the question of whether Johnson can offset the loss of votes from the DUP.
7)The UK CPI stats for September were about as expected with a 1.7% y/o/y gain for both the headline and core level. Wholesale prices are now falling after years of intense price pressures driven by the weak pound.
8)Japanese September CPI ex food and energy rose .5% y/o/y as expected and down from .6% in August. Low inflation with an aging population, shrinking savings rates and modest wage growth is desperately needed.
9)It’s great to finally see the Montreal Expos, I mean Washington Nationals, go to the World Series.
1)The core rate of retail sales in September was unchanged m/o/m after a .3% rise in August. The estimate was for another .3% gain. Even online retail sales fell m/o/m but still remain up a pretty strong 15.6% y/o/y. Spending on restaurants and bars rose just .2% and marks two straight months of little gain. Department stores remain a mess with another m/o/m decline and 7.3% y/o/y fall. Likely to rebound in October via the sales of the new iphone, electronics sales saw no growth and are down 1.7% y/o/y. Building materials sales fell too. Sales rose for furniture and clothing.
2)The September Cass Freight Shipments index saw volumes down y/o/y for a 10th straight month with weakness in demand “being seen across most modes of transportation, both domestically and internationally, with many experiencing increases in the rates of decline.” There is also continued weakness in pricing as too much capacity came on line in 2018 and now combined with less shipments. Cass Freight said “we see a growing risk that GDP will go negative by year’s end.” Here are their 3 main areas of concern:
a)”We are concerned about the increasingly severe declines in international airfreight volumes (especially in Asia) and the ongoing swoon in railroad volumes, especially in auto and building materials;
b)”We see the weakness in spot market pricing for transportation services, especially in trucking.”
c)”As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the US, and the trade dispute reaching a ‘point of no return’ from an economic perspective grow.”
3)Business inventories in August saw no change m/o/m vs the estimate of up .2% and July was revised down by one tenth. The inventory to sales ratio held at 1.40, matching the most since November 2016.
4)US industrial production in September fell .4% m/o/m, twice the estimate of a .2% decline but offset by a 2 tenths upward increase to August. The manufacturing component fell .5% m/o/m, 2 tenths more than expected while August was revised up by one tenth. The particular area of weakness, most likely related to the GM strike, was auto production which fell 4.2% m/o/m.
5)Housing starts in September totaled 1.256mm, well below the estimate of 1.32mm, partially offset by an upward revision to August of 22k. The differential was all due to the multi family side which is extremely volatile month to month and which fell to 338k from 471k in August and vs 333k in July. Single family starts rose 3k m/o/m, a modest increase but at 918k it’s the most since January and with particular strength in the South and no growth in the Northeast. Permits for multi family construction fell 45k m/o/m but at 505k is still pretty solid.
6)The Philly manufacturing index fell to 5.6 from 12 and that was 2 pts below expectations. The internals were both mixed and very volatile. After falling by 12 pts in September, the 6 month business activity outlook rose by 13 pts. Capital spending plans improved by about 10 pts and back to where it was a few months ago.
7)Foreigners resumed their selling of US Treasuries in August by a net $30.5B, bringing the year to date level of selling at a total of $47b. China ramped up its pace of selling of notes and bonds to $32b. Bottom line, we now have to finance our exploding debts and deficits by ourselves.
8)China’s economy continued to decelerate in Q3 as they reported GDP up 6% y/o/y vs 6.2% in Q2 and vs the estimate of 6.1%. This is the slowest pace of growth since at least 1992. Retail sales in September rose 7.8% y/o/y as expected but up slightly from the 7.5% pace in August. Industrial production off the slowest pace since 2002 in August, rose 5.8% y/o/y in September, above the estimate but likely stimulus juiced. Fixed asset investment ytd up 5.4% was about in line with the estimate but that’s a growth rate that is one tenth from the lowest since at least the late 1990’s.
9)Total loans given in China in September was 2.27 Trillion yuan, above the estimate of 1.9 Trillion and with the upside driven by bank loans as the credit spigot continues to flow. Higher corporate bond issuance also added to the total. I’m sure there was some front loading ahead of the 70th anniversary of the CCP festivities on October 1st and the subsequent holiday.
10)Chinese consumer prices rose 3% y/o/y in September, the most in 6 years and driven by the 11.2% spike in food prices because of the issue with pork. Ex food and energy however saw prices rise 1.5% y/o/y, the same pace as seen in August. PPI fell 1.2% y/o/y but off a tough comp of a 3.6% y/o/y rise in September 2018.
11)China’s exports in dollar terms in September fell 3.2% y/o/y vs the estimate of down 2.8%. Exports specifically plunged by 22% to the US and were down by 5% to both Japan and South Korea. They rose to Southeast Asia and were flat to the EU. Imports, many of which make its way into exports, dropped 8.5% y/o/y, more than the forecast of a decline of 6%.
12)Singapore’s non oil exports fell 8.1% y/o/y in September vs the estimate of down 7.2%. It’s the 8th month in the past 9 that has seen a decline and 6 of them were double digit declines.
13)Singapore’s economy in Q3 saw almost no growth y/o/y with a .1% increase for the 2nd straight quarter. This is the slowest two quarter performance since the 1st half of 2009. Manufacturing, not surprisingly, was the main area of weakness. In response the Monetary Authority of Singapore did ease policy for the 1st time since 2016.
14)In the UK for the 3 months ended August, there was an outright decline in hiring’s of 56k, well below the estimate of up 26k and the unemployment rate ticked up by one tenth to 3.9%. The bright spot continues to be wages as they rose 3.8% y/o/y ex bonus’. As for jobless claims in September, they rose by 21.1k.
15)The Eurozone August IP figure rose .4% m/o/m, about as expected but fell by 2.8% y/o/y, the 10th month in a row with y/o/y declines.