1)The January US manufacturing and services PMI rose to 58 from 55.3 with both components higher. Markit said “US businesses reported a strong start to 2021, buoyed by hopes that vaccine developments will mean the worst of the pandemic is behind us, and that the new administration will provide a stable and supportive environment for stronger economic growth.” Inflation comments: “capacity constraints are biting amid the growth spurt. Not only have the last two months seen supply shortages develop at a pace not previously seen in the survey’s history, but prices have also risen due to the imbalance of supply and demand. Input cost inflation consequently also hit a survey high and exerted further upward pressure on average selling prices for goods and services.”
2)Initial jobless claims totaled 900k, 35k less than expected but comes after the jump to 926k last week (revised from 965k). Smoothing this out puts the 4 week average to 848k vs 825k last week. Those receiving Pandemic Unemployment Assistance jumped to 424k from 285k. Continuing claims, delayed by a week, fell to 5.05mm, about 250k below expectations and down from 5.18mm in the week prior.
3)The Philly manufacturing index for January saw a jump to 26.5 from 9.1 and that was well above the forecast of 11.8. The 6 month outlook jumped to 52.8 from 43.1 but just gets slightly above its 6 month average. Capital spending plans improved m/o/m. Of note were the spikes in price pressures. Prices paid rose to 45.4 from 24.9, and that is the highest since August 2018. Those received jumped to 36.6 from 16.1 and that is the most since 1981.
4)Housing starts in December jumped to 1.67mm, about 100k more than expected and November was revised up by 30k. All of the gain was in single family which is exactly where supply is needed most. Single family starts at 1.34mm are now at the highest level since August 2006. Multi family starts, more volatile month to month, fell to 331k from 383k.Permits also showed strength in single family with this component up to 1.23mm from 1.14mm in November. Permits for multi family construction were little changed.
5)Existing home sales in December totaled 6.76mm, 200k more than expected and up from 6.69mm in the month prior (revised from 6.71mm). Inventories fell again but they always do this time of the year. The median home price rose by a still robust 12.9% y/o/y but assume the aggregate price gains are around 8%. First time buyers, the most challenged by these persistent price increases, totaled 31% of purchases, back near the lows.
6)Purchase apps grew by 2.7% w/o/w and are up almost 15% y/o/y. Refi’s though fell 4.7% w/o/w but only after jumping by 20% last week. They are still up 87% y/o/y. The average 30 yr mortgage rate rose 4 bps w/o/w to 2.92%, the highest since late November coincident with the rise in the 10 yr Treasury yield.
7)Japan’s January CPI data was about as expected. The core/core rate (ex both food and energy) fell by .4% y/o/y vs down .3% in November. The headline drop of 1% was driven by lower energy prices. If you take out food, energy and travel discounts, prices actually rose .1% y/o/y.
8)Japan’s trade data for December was about as expected with exports up by 2% y/o/y but with imports falling by 11.6%. But, that y/o/y gain in exports is the first plus sign since November 2018 with help from shipments to China which were up 10.2% y/o/y. Semi strength was here too as they rose 10% y/o/y to the rest of the world. Vehicle exports though fell by 4.2%.
9)For the 1st 20 days of January, South Korean exports rose 10.6% y/o/y, up from 1.2% in December. Semi exports were up by 12% y/o/y. Exports to China and the US grew by 19% and to the EU by 16%. Imports were up by 1.5% after last month’s 8% drop.
10)Taiwan said its exports rose by 38.3% y/o/y in December. The estimate was for a rise of 30.4%. The exports of electronic products in particular spiked by 58% y/o/y.
11)Singapore’s December non oil exports rose by 6.6% y/o/y, almost double the estimate of up 3.5%.
12)China’s economy grew by 6.5% y/o/y in Q4, above the estimate of up 6.2% with better than expected strength in industrial production offsetting a slight miss to retail sales.
13)French business confidence in January rose a touch to 92 from 91 and that was as expected. Manufacturing again remains the standout relative to services as it rose 4 pts m/o/m vs little change in services and retail. Employment rose 1 pt.
14)There was no revision change to the Eurozone December CPI figure where the headline fell by .3% y/o/y and the core rate was up by .2%.
15)The January German ZEW investor confidence index of the German economy rose to 61.8 from 55 and that was a bit above the estimate of 59.4. The improving mood though was all in the expectations component as current conditions saw no change at -66.4 vs -66.5. The ZEW said “Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly.” I do want to point out what they said about inflation. “Inflation expectations are experiencing a strong increase. For the eurozone, expectations have risen by 10.9 points to a new indicator value of 51.6 points. The inflation indicator for Germany is at 58.2 points in January, 18.6 points higher than in December 2020.”
1)The Fed’s balance sheet jumped to a new record high at $7.4 Trillion, higher by $81b on the week.
2)The January NAHB home builder sentiment index slipped to 83 from 86 and that was 3 pts below expectations but remains well above 50. Both the current outlook and the expectation components fell 2 pts m/o/m. Prospective buyers Traffic was down by 5 pts to 68.On the demand side, the NAHB said “Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems.”On the supply side, “Builders are grappling with supply side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices. They are also concerned about a changing regulatory environment.”
3)Japan’s composite index slipped to 46.7 from 48.5 with it mostly due to services which fell by 2 pts to 45.7. Manufacturing was down .3 to 49.7. Again, lets blame covid for the drop in services. “Short term activity will undoubtedly be hampered by rising coronavirus disease cases, as the government declared a state of emergency in Tokyo and introduced further measures to curb rising infection rates.” Positively, “new orders in manufacturing recorded an expansion for the first time in two years.”
4)Australia’s manufacturing and services composite index fell to 56 from 56.6 but the components were mixed as manufacturing rose 1.5 pts m/o/m to 57.2 while services fell by 1.2 pts to 55.8. Markit said the growth momentum in services “was stymied by the Covid-19 pandemic and border restrictions.” With manufacturing, “Good producers enjoyed the fastest expansion in both sales and production in over 3 years.”
5)The Eurozone January manufacturing and services composite index fell to 47.5 from 49.1 but around the estimate of 47.6. With the lockdowns, services fell to 45 from 46.4 while manufacturing stayed well above 50 at 54.7 vs 55.2. Within manufacturing though, Germany is the clear standout which “contrasted with a renewed fall in production in France and a comparatively subdued rise in the rest of the Eurozone.” Looking forward, “The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull back in optimism.”
6)The UK composite index for January fell to 40.6 from 50.4 and that was well below the estimate of 45.5. Services plunged to 38.8 from 49.4 and manufacturing was lower too at 52.9 from 57.5. Manufacturing could also blame Brexit “which has led to increasingly widespread supply delays, rising costs and falling exports.” The positive, “Encouragingly, the current downturn looks far less severe than that seen during the first national lockdown, and businesses have become increasingly optimistic about the outlook, thanks mainly to progress in rolling out Covid-19 vaccines.”
7)The UK January CBI industrial orders index fell to -38 from -25 but not far from the estimate of -35. The new lockdowns seem to have mattered here. CBI said “Manufacturers across the board are continuing to battle major headwinds, with domestic and export orders notably falling.” On inflation, “With growing costs and materials shortages mounting further pressure on firms at a time when they’re experiencing much less demand, the Government must avoid tapering off existing business support with a cliff edge in March.”
8)In the UK, December CPI was up by .6% y/o/y, double the level of November and one tenth more than expected. The core rate was higher by 1.4% y/o/y vs 1.1% in November and also one tenth above the estimate. PPI also rose one tenth more than forecasted.