Positives
1)The December ISM services index rose to 57.2 from 55.9 and that was above an expected drop to 54.5. This is right in line with the 6 month average of 57.1. The breadth was the same as last month with 14 of 18 industries seeing growth and 4 seeing a contraction (leisure/hospitality and real estate/rental/leasing, likely office not surprisingly). Here is ISM’s bottom line: “Respondents’ comments are mixed about business conditions and the economy. Various local and state level Covid shutdowns continue to negatively impact companies and industries. Applicable human resources, production capacity and logistics have been more constrained than during the previous month. Most respondents are cautiously optimistic about business conditions with the recent approval and impending distribution of vaccines.”
2)The December ISM manufacturing index rose to 60.7 from 57.5 and that was above the estimate of 56.8. This is the highest level since August 2018. Of the 18 industries surveyed, 16 saw growth, the same number as in November. The ISM said “The manufacturing economy continued its recovery in December. Survey Committee members reported that their companies and supplies continue to operate in reconfigured factories, but absenteeism, short term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential. However, panel sentiment remains optimistic.” On prices, the ISM said “Aluminum, copper, steel, petro based products including plastics, transportation costs, electronic components, corrugate, temporary labor, wood and lumber products all continued record price increases.”
3)Markit’s US manufacturing PMI rose to 57.1 from 56.7. They said this on inflation, “The rise in input prices was substantial and the fastest since April 2018, driven by raw material shortages and supplier price hikes. Firms were able to partially pass on higher costs, however, as selling prices increased at the sharpest rate since May 2011.”
4)Initial jobless claims were little changed w/o/w at 787k vs 790k. That was a bit less than the estimate of 800k. Continuing claims fell again, to 5.07mm from 5.2mm and the estimate was for no change. Some of this was due to the expiration of benefits but we know they’ve since been extended again. The 4 week average for initial claims is now 819k vs 838k last week and vs 819k in the week prior. Pandemic Unemployment Assistance fell by almost half. Those continuing to receive these claims fell by 70k. Those continuing to receive emergency pandemic unemployment compensation fell by 293k to 4.52mm, a 6 week low.
5)Vehicle sales in December totaled 16.27mm at a SAAR vs the estimate of 15.8mm.
6)The tech heavy Taiwanese economy saw exports in December rise 12% y/o/y, above the estimate of 10%. Exports to China/Hong Kong grew by 20.5%, to US by 7.5% and Germany by 11%. Tech/electronics and plastics led the way. Imports though were higher by .9% y/o/y, below the estimate of up 4.3%.
7)Australia said its exports rose 3% m/o/m in November, well above the estimate of down 2%. Imports jumped by 10%, more than three times the forecast.
8)Singapore’s December PMI got back above 50 at 50.5 from 46.7.
9)Japan’s services PMI was revised to 47.7 from 47.2 but that is little changed with November. Australia’s services PMI was 57 from 55.1.
10)South Korea’s manufacturing PMI held at 52.9, Taiwan’s rose to 59.4 from 56.9, Vietnam’s to 51.7 from 49.9, Indonesia to 51.3 from 50.6, Thailand to 50.8 vs 50.4, India at 56.4 vs 56.3 and Malaysia at 49.1vs 48.4.
11)Germany and France both reported November industrial production figures that were slightly above the forecasts when including the upward revisions to October.
12)Germany said factory orders in November rose 2.3% m/o/m, above expectations of down .5% and October was revised up by 4 tenths.
13)Thanks to the job wage subsidization programs in many European countries, the November Eurozone unemployment rate was 8.3% vs 8.4% in October and vs 7.4% in late 2019.
14)Eurozone economic confidence index in December rose to 90.4 from 87.7 and vs 91.1 in October. That was a touch above the estimate of 89.8. Confidence specifically improved in manufacturing, the consumer and construction while weakening slightly in services and retail.
15)The Eurozone December CPI figure fell .3% y/o/y at the headline level and rose .2% y/o/y at the core. Both were as expected. A drop in energy and non energy industrial goods prices fell while the pricing of services was higher.
16)The UK services PMI was revised to 49.4 from 49.9 vs 47.6 in November and 51.4 in October.
17)The UK manufacturing PMI was revised to 57.5 from 57.3 and that is up from 55.6 in November.
Negatives
1)The storming of the US Capital and the lost lives as a result.
2)December payrolls declined by 140k vs the estimate of up 50k but this was mostly offset by an upward revision of 135k to the two prior months. The private sector shed 95k jobs vs the estimate of up 25k but November alone was revised up by 73k. The household survey said 21k jobs were added and when combined with a similar rise in the labor force, the unemployment rate held at 6.7%. The all in U6 rate fell 3 tenths to 11.7%. The participation rate along with the employment ratio each were unchanged m/o/m. The decline in jobs was all in the service sector and pretty much ALL driven by leisure and hospitality which lost 498k jobs. Average hourly earnings really surprised to the upside with an .8% m/o/m increase, well above the estimate of up .2% and the y/o/y gain was 5.1%. A large part of this though is definitely mix where many leisure and hospitality jobs were lost. With hours worked down .1 to 34.7, average weekly earnings rose by .5% m/o/m and 6.3% y/o/y. Those discouraged workers not in the labor force rose again and the duration of unemployment 27 weeks and over was higher as well (considered longer term unemployment). There is now a record amount of people not in the labor force and a rise of them m/o/m that want a job.
3)Markit’s US services PMI for December was 54.8 vs the initial print of 55.3 and vs 58.4 in November. They said, “Rising virus case numbers took an increasing toll on the US economy in December, with business activity, order books and employment all growing at much reduced rates. The slowdown was especially steep in the service sector, where stricter social distancing measures hit consumer facing businesses in particular.” With respect to the inflation comments: “service providers noted a substantial increase in input prices during December. The rate of cost inflation accelerated again and was the fastest since data collection began in October 2009. Higher cost burdens were often linked to greater PPE and packaging prices, amid supplier shortages and rising demand. Despite a record rise in input prices, firms registered a softer increase in output charges at the end of 2020. The rate of charge inflation eased from November’s recent peak, but remained sharp and quicker than the series trend. The moderation in selling price rises was commonly attributed to efforts to boost sales and attract new clients amid challenging demand conditions.”
4)The US trade deficit in November widened to within a whisker of a record high at $68.1b vs $63.1b in October. Exports grew by 1.2% m/o/m offset by a 2.9% rise in imports. For perspective, exports totaled $184.2 vs $209.6b in February. Imports came in at $252.3b, exceeding the February level of $246.7b and vs $252.6b in January.
5)In Europe, with selective shutdowns increasing, the December services PMI was 46.4 vs 47.3 in the 1st print but up from 41.7 in November and vs 46.9 in October. Markit said “While the data indicate a renewed decline in Eurozone GDP in the 4th quarter, the downturn appears to have been far less severe than seen in Q2, thanks to sustained strong manufacturing growth, rising global trade and lockdowns having been less onerous than earlier in the year.” The caveat, “Worse may be yet to come before things get better, especially as the latest survey data were collected before the news of the new, more contagious, strain of the virus.”
6)The Eurozone manufacturing PMI was revised to 55.2 from 55.5 initially but up from 53.8 in December. Markit said “The strong manufacturing growth is thanks to a large extent on booming demand for German goods, which drove most of the increase in Eurozone production during December, in turn buoyed by rising exports.”
7)China’s private sector weighted Caixin services PMI for December slipped to 56.3 from 57.8. The estimate was 57.9. Caixin said “The softer rise in overall activity coincided with a slower expansion of total new work at the end of 2020…The slowdown occurred alongside a weaker upturn in foreign demand…Panel members indicated that the pandemic, and the recent resurgence of the virus in key export markets, continued to limit growth of overseas business.”
8)China’s Caixin manufacturing PMI fell to 53 from 54.9. The estimate was 54.7. Caixin said “Firms signaled slower, but still steep, expansions of output and total new work, while export sales rose modestly. At the same time, companies took a more cautious approach to employment levels amid an accelerated rise in overall input costs, as workforce numbers were broadly unchanged. Looking ahead, firms were still optimistic that output would increases over the next year, though overall confidence dipped to a 3 month low.”
9)Hong Kong’s PMI fell right back down again, to 43.5 from 50.1.
10)Australia’s manufacturing PMI was revised slightly lower to 55.7 from 55.8 in November.
11)India’s services PMI for December fell to 52.3 from 53.7.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.