Positives
1)Existing home sales in September totaled 6.54mm, above the estimate of 6.3mm and up from 5.98mm in August. That is the most since May 2006 with a rise m/o/m in all 4 regions. With the decline in the number of homes for sale, months’ supply fell to just 2.7 from 3.0, the lowest in data going back to 1999. The median home price was up 14.8% to a new record with the average price higher by 11.6% both in part due to mix. The first time buyer made up just 31% of purchases vs 33% in August, 34% in July, 35% in June and 33% in September 2019. All cash buyers held at 18% of purchases as some of these are buyers of vacation homes.
2)The NAHB October home builder sentiment index rose 2 pts m/o/m to a robust 85. The estimate was for no change. This is another fresh record high. Present Conditions are now at 90 out of 100 with 50 being the breakeven. That is up 2 pts from September. The Future Outlook was up by 3 pts to 88 while Prospective Buyers Traffic was unchanged at 74. The NAHB said “Traffic remains high and record low interest rates are keeping demand strong as the concept of ‘home’ has taken on renewed importance for work, study and other purposed in the Covid era.” They also cited an NAHB analysis that they released last week that “showed that new single family home sales are outpacing starts by a historic margin.”
3)Initial jobless claims fell to 787k from 842k last week (revised from 898k) and that is well below the estimate of 870k. Also positively, continuing claims fell to 8.37mm from 10mm and that was less than the forecast of 9.63mm. After weeks of estimating, California reported actual figures.
4)The US Architecture Billings Index rose 7 pts to 47 in September. The AIA chief economist said “Despite the multi family residential sector showing signs of improvement, overall business conditions are recovering at a disappointingly slow pace. Other sectors may begin to stabilize in the coming months, but across the board improvement shouldn’t be expected until the economic impact of the pandemic subsides significantly.”
5)The October KC manufacturing index rose 2 pts m/o/m to 13. The 6 month outlook rose as well. Of note in the outlook was the 22 pt spike in ‘prices paid’ to 55, the most since September 2018.
6)The September Cass Freight shipments index fell by 1.8% y/o/y but the best comparison since November 2019. Cass Freight said “we see it staying strong through year end, as inventories remain relatively lean, and we expect freight to keep moving.”
7)The October UK CBI industrial orders number rose to -34 from -48 and that was 16 pts better than expected. That is the least negative since March. CBI said “Conditions remain tough in the manufacturing sector, with output and orders still down on the quarter, albeit to a lesser degree. The government must stay on the front foot when it comes to providing support for the sector and wider economy.” Also, “almost a third of manufacturers are concerned that access to materials or components may limit their output over the quarter ahead.”
8)September headline CPI in the UK rose .5% y/o/y from .2% but was one tenth less than expected. The core though was in line with its 1.3% y/o/y gain.
9)Exports in the 1st 20 days of October out of South Korea fell 5.8% y/o/y after a 3.6% gain in September but there were less business days compared to October 2019. If you just look at the average number of daily shipments, that was up 6% with particular help from China, South Korea’s largest trading partner. Semi shipments were up by 12%. Imports fell by 2.8% vs -6.8% last month.
10)Australia’s October manufacturing and composite index did improve to 53.6 from 51.1 with all of the contribution from the services side as manufacturing fell 1.2 pts m/o/m.
11)Japan actually has price stability as prices in September ex food and energy were unchanged y/o/y after the .1% y/o/y decline in August.
Negatives
1)As of October 2nd, the number of those continuing to receive pandemic emergency unemployment benefits rose to a new high of 3.3mm.
2)For the 4th straight week the MBA said mortgage applications to buy a home fell for a 4th straight week, by 2.1% but still remains higher by 26% y/o/y. Refi’s were little changed w/o/w but are still up 74% y/o/y with the help of record low rates.
3)September housing starts totaled 1.415mm, 50k less than expected and August was revised down by almost 30k to 1.388mm. The slippage from the estimate and in the revision was all in the multi family category as single family remained strong. Single family starts grew 8.5% m/o/m to 1.108mm from 1.021mm in August and 992k in July with particular strength in the Northeast. Multi family starts moderated to 307k from 367k in August and 495k in July. Evidence that this single family strength will continue for now, as supply is needed, permits rose to 1.119mm from 1.038mm in August and 977k in July. Multi family starts were little changed m/o/m and remains in its range this year.
4)The Fed’s balance sheet has started its next ascent, rising for the 3rd straight week to a record high.
5)There was almost no change in business activity in Japan in October remaining below 50 where its composite index was 46.7 vs 46.6. They said “the recovery is slow going.” That said, Markit said “the survey also revealed some bright spots. The labor market stabilized in October, with employment broadly unchanged from September. Business sentiment also improved to the strongest for over two years as firms highlighted expectations of economic recovery as well as planned business investment.”
6)Japanese trade in September still has minus signs but less so. Exports fell 4.9% y/o/y vs the 15% drop in August but that was more than the estimate of down 2.4%. A sharp increase in Chinese exports, along with a slight increase to the US helped to mitigate the declines to other places. Imports fell by 17.2% vs 21% in August but not as bad as the expected decline of 21.4%.
7)The third quarter GDP figure for China was well below (relatively speaking) the estimate at 4.9% y/o/y growth vs the forecast of 5.5%. The q/o/q annualized change was up 2.7% vs the estimate of 3.3%. The quarter though seemingly closed better than it began as retail sales and industrial production exceeded expectations in September. For fixed asset investment year to date, it was up .8%, about as expected.
8)The October Eurozone PMI fell back below 50 to 49.4 from 50.4 but all due to the services sector as its component fell to 46.2 from 48. Manufacturing improved to 54.4 from 53.7. Markit called it a “tale of two economies, with manufacturers enjoying the fastest growth since early 2018 as orders surged higher amid rising global demand, but intensifying Covid restrictions took an increasing toll on the services sector, led by weakening demand in the hard hit hospitality industry.” The manufacturing side continues to be helped by the need to restock inventories. To my inflation theme, “Signs of underlying price pressures building were evident via the largest rise in input costs since February. Increases were reported in both manufacturing and services.”
9)The UK PMI fell where both components drove that with manufacturing down to 53.3 from 54.1 and services lower by almost 4 pts to 52.3. Markit said “Not surprisingly the weakening is most pronounced in the hospitality and transport sectors, as firms reported falling demand due to renewed lockdown measures and customers being deterred by worries over rising case numbers.” With manufacturing, while still expanding, “Sharper falls in job numbers as a result of redundancies and reduced customer demand along with higher prices for raw materials means the sector is still under pressure.”
10)The UK consumer confidence index fell to -31 from -25 and that was 3 pts worse than expected and that’s the lowest since May.
11)German consumer confidence fell to -3.1 from -1.7 and that is a 4 month low. It was +9.1 in February.
12)French business confidence in October slipped by 2 pts m/o/m to 90. The estimate was for no change. In response to that rise in Covid spread the decline was led by a 5 pt drop in the services component. Manufacturing was down by 1 pt, retail trade confidence was unchanged and employment was lower by 3 pts.
13)The NY Jets are now 0-6, the only team in the NFL not to have won a game yet.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.