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January 21, 2022 By Peter Boockvar

Succinct Summation of the Week’s Events – 1/21


Positives

1)The January Philly index rose to 23.2 from 15.4 and that was 4 pts better than expected. Looking at the coming 6 months, the business outlook got back what it lost last month. Inflation expectations grew further. For prices paid, the outlook jumped by 22.6 pts to the highest since 1988. For those received, expectations rose 7.7 pts to a 5 month high. Capital spending rose 6 pts but after falling by 11 last month.

2)Housing starts in December totaled 1.7mm, 50k more than expected and up from 1.678mm in November. The upside was all in multi family as single family starts fell by 17k m/o/m. Multi family was up by 51k m/o/m to the highest since February 2020 at 530k. Of note was the permit print of 1.873mm, 170k higher than forecasted and up from 1.717mm in November. Again, mostly led by multi family where permits here were up by 134k m/o/m. Single family permits were up a more modest 22k m/o/m.

3)With another jump in mortgage rates to 3.64% for the average 30 yr rate, the highest since March 2020, people got off the fence and locked in a mortgage as purchases rose 7.9% w/o/w. They are still though down 12.8% y/o/y.

4)As we are approaching a time when the Federal Reserve will stop adding to their balance sheet, in November foreigners bought a net $66.4b of US Treasuries after selling $43.5b in October.

5)South Korea said its exports in the 1st 20 days of January rose 22% y/o/y with a rush to China ahead of their holiday next week. Exports to China were up 19% y/o/y, to the US by 28% and to the EU by 16%. That in addition to the world’s need for more semi’s (exports up 30%) and cars (up by 23%). Imports were up by 38.4% y/o/y.

6)Singapore said its December non-oil exports rose 3.7% m/o/m, above the forecast of up .8%. They were up by 18.4% y/o/y.

7)Exports out of Japan in December were higher by 17.5% y/o/y, just above the estimate of up 15.9%. Imports jumped by 41% vs the forecast of up 43%. Not surprisingly auto’s and semi’s led the export strength.

8)Japan said its CPI in December rose .5% y/o/y ex food, one tenth less than expected and ex both food and energy they were down by .7%. You can add back about 150 bps after they recycle fully the sharp drop in mobile phone fees I believe in April.

9)China cut interest rates modestly.

10)China’s economy grew by 4% y/o/y according to their statistics bureau. The estimate was 3.3%. Retail sales though were weak in December relative to expectations, offset by a bounce in IP.

11)Australia added a bit more jobs than expected in December and its unemployment rate fell down to 4.2% from 4.6% with a 66.1% participation rate.

12)Hoping that this is the last covid wave of substance in terms of restrictions, the German ZEW investor confidence in their economy for January jumped to 51.7 from 29.9 and that was well better than the estimate of 32. Current conditions though remain tough as this component fell to -10.2 from -7.4 and less than the forecast of -8.8. ZEW said “The economic outlook has improved considerably with the start of the new year…It is likely that the phase of economic weakness from the fourth quarter of 2021 will soon be overcome. The main reason for this is the assumption that the incidence of Covid cases will fall significantly by early summer. The more positive economic expectations include the consumer related and export oriented sectors and thus a large part of the German economy.”


Negatives

1)As of Wednesday’s close, the CRB food price index rose to a record high, before pulling back a touch.

2)Initial jobless claims jumped to 286k from 231k in the week prior and that was well worse than the estimate of 225k. Smoothing out the influence of the holidays, the 4 week average rose by 20k to 231k. Delayed by a week, continuing claims totaled 1.635mm, about 70k more than expected and up from 1.55mm in the week prior.

3)From the weekly Langer weekly consumer confidence index: “The grip of decades high inflation pushed Americans’ ratings of the buying climate to a 9 year low this week and assessments of the national economy to their largest single week drop since the onset of the pandemic, leaving the overall Consumer Comfort Index its lowest since June 2020. Economic outlooks, for their part, turned acutely negative, deepening already pessimistic views. For the 1st time since May 2020, a majority now thinks the national economy is getting worse.”

4)The January NAHB home builder survey was down 1 pt m/o/m to a still very high 83. The estimate was for no change and compares with 83 in November and 80 in October. It peaked at 90 in November 2020. Present conditions were unchanged while future expectations slipped by 2 pts. Prospective Buyers Traffic gave back the 2 pt gain in December. According to the NAHB. “While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022.”

5)The January NY manufacturing index fell sharply to -.7 from 31.9 in December and that was well under the estimate of 25. That’s the weakest print since June 2020. The 6 month business outlook was little changed, down 1.3 pts m/o/m to 35.1 but that is the lowest since February 2021. Expectations for prices paid jumped 10 pts to 76.7, the highest on record dating back to 2001. Expectations for prices received also rose to a record high at 62.1, up almost 2 pts m/o/m. Capital spending plans, including tech, rose a touch m/o/m.

6)Existing home sales in December, measuring contract signings mostly in the late summer and into the fall, totaled 6.18mm, down 30k from November and below the estimate of 6.42mm. Blame high prices and little inventory. The median price rose 15.8% y/o/y and months’ supply fell to just 1.8 from 2.1 in the month prior. That is the lowest on record dating back to the record keeping that I’ve seen going back to the late 1990’s. The average in this time frame is 5.5 months. After a multi decade low seen in November at 26%, the number of 1st time buyers rose back to 30%.

7)That jump in mortgage rates led to a the 3.1% drop in refi’s and which are down 49% y/o/y. 

8)In its fight against inflation, the Federal Reserve took its balance sheet to a fresh record high of $8,829,738,000,000, up $88.6b on the week.

9)The UK said its December CPI rose 5.4% y/o/y, 2 tenths more than expected while the core rate was higher by 4.2%, 3 tenths above the estimate. The retail price index jumped by 7.5% y/o/y, 4 tenths higher than forecasted. The only respite was the less than expected output and input charges but they were still up 9.3% y/o/y and 13.5% respectively, with the difference being a margin squeeze.

10)The strain of falling real wages resulted in a 4 pt drop in UK consumer confidence for January to -19. The estimate was -15 and that is the lowest since February 2021 and compares with -7 in February 2020. GFK said “Despite some good news about the easing of covid restrictions, consumers are clearly bracing themselves for surging inflation, rising fuel bills and the prospect of interest rate rises. 

11)December UK retail sales number in the UK ex fuel fell 3.6% m/o/m, well worse than the estimate of down .8%. They are down 3% y/o/y. 

12)When including the downward revision for November, the UK December jobs increase was below expectations. Jobless claims though fell by another 43.3k and November was revised to a drop of 95.1k which is double expectations. Thru November, the unemployment rate fell to 4.1% and wages ex bonuses rose 3.8% y/o/y as expected but that is below the rate of inflation.

13)The German PPI for December spiked by 5% m/o/m, well more than the estimate of up .8% and up by 24.2% y/o/y. The German statistical office said they’ve never seen a print this high since the stats began in 1949.

14)French business confidence in January fell 2 pts to 107 and that was below the estimate of 109. That’s the weakest since April and we can blame omicron as services and retail fell while manufacturing rose to a 4 yr high and employment was unchanged.

15)Proving once again that the Bank of Japan will be the last central bank on earth to tighten policy, Governor Kuroda today said after their meeting that “We’re expecting long and short term policy rates to remain at the current low levels, or fall even lower. Raising rates is unthinkable.”

16)For those of us who grew up in the 1970’s and ‘80s, we lost a part of our childhood, //www.youtube.com/watch?v=C11MzbEcHlw.

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About Peter

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.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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