Positives
1)Initial jobless claims totaled 847k, down from 914k last week (revised from 900k) and that is 28k less than expected, thus about in line when the two weeks are taken together. The 4 week average did rise though to 868k from 852k as a print of 782k fell out. Those receiving PUA fell by about 20k to 427k. Delayed by a week, those receiving continuing claims fell by 203k w/o/w to 4.77mm and that is the lowest since late March 2020 and still moving towards the pre Covid level of around 1.7mm. As of the week before the continuing claims figure, those continuing to get PUA jumped by 1.63mm to 7.33mm and those getting continuing the Pandemic Emergency assistance was higher by 836k to 3.863mm.
2)Core durable goods orders in December was better than expected with a .6% increase, one tenth more than forecasted and off a higher than initial base as November was revised up by 5 tenths. Shipments, plugged into GDP, was as expected. Strength was seen in vehicles/parts as auto manufacturers continue to rebuild inventory. Orders here rose 1.4% m/o/m and 12.5% y/o/y. Machinery orders were also strong as they were for industrial commodities. Orders for computers/electronics fell .2% m/o/m but are still up 11.7% y/o/y. Electrical equipment orders were little changed but after two good months and are up 5.8% y/o/y.
3)The December personal spending figure was about as expected when we include the downward revision to November. The income figure was better than expected helped by a rise in government transfer payments (increase in unemployment benefits). Private sector wages/salaries rose by 3.2% y/o/y vs 2.9% in November. The differential between spending and income put the savings rate at 13.7% vs 12.9% in November and vs 13.6% in October.
4)The Q4 employment cost index rose .7% q/o/q, two tenths above expectations. Private sector wages/salaries jumped by .9% q/o/q and up by 2.8% y/o/y. Some of this is mix.
5)The January Chicago manufacturing index rose to 63.8 from 58.7 and that was above the estimate of 58.5.
6)The January KC manufacturing PMI rose to 17 from 14. The estimate was 13.
7)The January Conference Board Consumer Confidence index rose slightly to 89.3 from 88.6 last month and that was about in line with the forecast of 89. The components though were highly mixed as the Present Situation fell 6 pts offset by the increase in Expectations which rose by 5 pts. After rising to 6% from 5.7% last month, one yr inflation expectations fell back to 5.8%. It was 4.4% one year ago. Negatively impacting the current situation, the answers to the labor market questions saw some moderation with jobs Plentiful down and those Hard to Get up. Expectations though are for that to improve, likely thanks to the vaccine. Income expectations though moderated. Business expectations improved. With respect to spending intentions, we saw a rebound in auto’s and homes but only after the decline in December that was not fully recaptured. The auto print was 10.7 vs 9.8 in December and 11.1 in November. For buying a home, 7.2 said yes vs 6.0 in December and 7.5 in November. There was no change m/o/m in those that plan on buying a major appliance. The Conference Board said “Consumers’ appraisal of present day conditions weakened further in January, with Covid still the major suppressor. Consumer’s expectations for the economy and jobs, however, advanced further, suggesting that consumers foresee conditions improving in the not too distant future.”
8)In Europe, the January economic confidence index fell to 91.5 from 92.4 but that was above the estimate of 89.6. Manufacturing and construction continued to lead the way with its resilience but Covid and the new restrictions resulted in a decline in services, retail and consumer confidence.
9)Just as a renewed bout of shutdowns began in November, the UK’s job numbers were about as expected. For the 3 months ended November employment fell by 88k, a bit better than the estimate of -104k. The unemployment rate for this time frame was 5% vs 4.9% in the month prior but one tenth less than expected. Wage growth ex bonus’ was better than expected but helped by mix as restaurant/bars and other areas of leisure and hospitality were limited in their operations. The December jobless claims rise was only 7k vs the increase of 38k in November (revised from 64k) so that could have been worse.
10)There was an unexpected drop in German unemployment in January of 41k vs the estimate of up 7.5k. Their unemployment rate held at 6%.
11)Germany’s economy declined by 2.9% y/o/y in Q4, a bit better than the forecast of down 3.2%. France’s Q4 GDP fell 5% y/o/y vs the estimate of down 7.6%. Spain’s contracted by 9.1% y/o/y vs expectations of down 10.8%.
12)Thanks to the recovery in China, Hong Kong exports in December jumped by 11.7% y/o/y, above the estimate of 8.4%. Exports to China rose by 17.5%. Imports grew by 14.1%, almost double the forecast of up 8%. Hong Kong’s economy was lower by 3% y/o/y, more than the forecast of down 2.1%.
13)Singapore said its industrial production figure in December was higher by 14.3% y/o/y, above expectations of a gain of 12%. The increase was driven by semi production which offset a give back in pharma output.
14)South Korea’s economy grew by 1.1% q/o/q in Q4, slightly better than the consensus estimate of up .9%. Growth was still negative though y/o/y by 1.4%.
15)Taiwan’s December industrial production rose 9.9% y/o/y vs the forecast of up 6%. Tech led the way. Taiwan said its economy grew by 4.9% y/o/y in Q4, above the estimate of up 3.6%.
16)Vietnam reported January exports up 50.5% y/o/y, almost double the estimate of up 29.5%. Imports jumped by 41% vs the forecast of up 30%.
Negatives
1)As heard in his press conference this week, Jay Powell is either in denial or delusional in thinking that there is only passing impact between low interest rate policy and QE and the value of assets, including stocks and bonds over the past year. With everything going on in the bubblicious stocks, the WSJ editorial page today said this: “The government body that should come in for more introspection is the Federal Reserve.” With respect to nearly 10% y/o/y home price increases, Powell says no problem, it’s a “one time thing.”
2)The December headline PCE rose .4% m/o/m, above the estimate of up .3% and follows no change in November. The y/o/y increase was 1.3% vs 1.1% in the month prior. The core rate rose .3% m/o/m, higher than the one tenth expected increase. That brings the y/o/y gain to 1.5% vs the estimate of 1.3% and vs 1.4% in November. Food prices were up 3.9% y/o/y while energy prices were down by 7.6% but that will soon change. Services inflation grew by 1.9% y/o/y, the same pace as in November. Durable goods prices rose 1.3% y/o/y, the highest level in years. This though was offset by a .9% y/o/y drop in nondurable goods pricing in part because of gasoline prices which are now inflecting higher.
3)With another modest lift in mortgage rates to 2.95%, up 3 bps w/o/w (but down from 3.81% one yr ago), the MBA said purchases fell by 4% w/o/w and refi’s were lower by 5%. They are both still up solidly though from a yr ago with purchases higher by 16% and refi’s by 83%.
4)Pending home sales in December fell .3% m/o/m, just a hair more than the estimate of down .5% while November was revised up one tenth to a drop of 2.5% m/o/m. After strong increases in May thru August, sales are now down for 4 straight months m/o/m. The NAR said “This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future.”
5)New home sales in December rose to 842k from 829k in November but that was 28k less than expected and last month was revised down by 12k. The recent peak was 979k back in July. Regionally, there were gains in the Midwest and West and declines in the Northeast and South. Inventories remained lean with months’ supply at 4.3 vs 4.2 in November and vs 3.6 in October. The long term average is about 6.0. The y/o/y median price gain was 8% as the price of $355,900 is a record high even though the number of homes sold above $500k fell m/o/m.
6)This is great for homeowners but tough for 1st time buyers and is an unstainable rate of gain. S&P CoreLogic said home prices rose 9.5% y/o/y in November. The 20 city index saw a 9.1% y/o/y jump.
7)US GDP in Q4 grew by 4% q/o/q annualized, just below the 4.2% expectation. This comes after the 33.4% rebound in Q3. Personal consumption was higher by 2.5%, below the estimate of 3.1% but adding 170 bps to GDP. Residential construction remained solid, as we know, with its 33.5% rise, adding 129 bps to GDP. Spending on IP and equipment was also up, adding a combined 165 bps. Inventory increases added 104 bps to GDP. Exports were a drag of 152 bps as the jump in imports far exceeded the increase in exports. Government spending was a slight drag. The price deflator was up 2%. Core PCE q/o/q was higher by 1.4%, two tenths more than expected. Nominal GDP in Q4 totaled $21.48 Trillion, 1.2% below the peak of Q4 2019.
8)The January Richmond manufacturing index fell 5 pts to 14. The estimate was for no change and it compares with 15 in November.
9)The January Dallas manufacturing index fell for the 3rd straight month to 7.0 from 10.5 in December. The estimate was 12.0. There is still optimism with the vaccine rollout as the outlook 6 months ahead rose to 29.6 from 17.8. Expectations for prices, both paid and received, are now well above the 6 month average. Prices paid expectations rose to 53.9 vs the 6 month average of 39.3. That is the highest since March 2012. Those received jumped almost 10 pts to 41.2 vs the 6 month average of 24.7. That’s the most since December 2017 and just below the highest since July 2008.
10)The final read of the UoM consumer confidence index was little changed at 79 with the initial print of 79.2. That was a touch below the estimate of 79.4 and this compares with the December level of 80.7. Both Current Conditions and Expectations fell m/o/m. One year inflation expectations were 3% vs 2.5% in December. The important internal components were not much different than the initial prints seen a few weeks ago.
11)Reflecting the covid flare up and selective restrictions, Japanese retail sales in December fell .8% m/o/m after a 2.1% drop in November but these numbers are about as expected. Industrial production in December was a touch below the estimate.
12)German business confidence in January as measured by IFO fell to 90.1 from 92.2 and that was a touch below the estimate of 91.4. Both the Expectations and Current Assessment components fell m/o/m. The IFO said succinctly, “The 2nd wave of coronavirus has brought the recovery of the German economy to a halt for now.”
13)The new rounds of Covid restrictions led to declines in both the consumer confidence of Germans and the French. The GFK German index fell to -15.6 from -7.5 and that is the weakest since June. The Covid low was -23.1 and the February print was +9.1. In France, its index was down by 3 pts m/o/m to 92. The estimate was 94.
14)Germany reported January CPI yesterday that rose 1.6% y/o/y, well above the estimate of up .5% and vs -.7% in December. It is though being rationalized away because the sales tax rose and a carbon tax was initiated on some energy products. A minimum wage increase was also cited as a reason by the Statistics Office.
15)Headline CPI rose .6% y/o/y in Spain, well more than the estimate of a decline of .5%. Higher power prices and food and beverage prices led the way.
16)Due to the new restrictions in the UK, the CBI retail sales index plunged to -50 from -3 and well worse than the estimate of -33. CBI said “Today’s data brings home the ongoing challenges of lockdown for the retail sector, as sales volume weaken once again. On the upside, while the headline balance points to a fall in sales across many sub sectors, the experience of the past few months suggests the decline won’t be anything like as severe as in spring 2020.”
17)The January Tokyo CPI saw prices ex food and energy rose .2% y/o/y, vs -.4% in December and vs the estimate of no change. The increase was led by housing, furniture, food, and recreation.
18)Here’s an Ameritrade commercial from 2014, //www.youtube.com/watch?v=e2LSyiYjbcg.