1).The Markit US manufacturing and services composite index in October rose a touch to 51.2 from 51 in September. Manufacturing rose .4 pts to 51.5 and services went to 51 form 50.9. Market said the lift in manufacturing was “helped by stronger growth of output, new orders and employment” and also “an increase in new export sales for the first time in four months.” Also helping was the possible truce with China. The one area of continued weakness though was in auto’s, obviously in part to GM, but also with “concerns about the demand outlook in domestic and export markets.” With services, “new business intakes stagnated in October, which ended a ten year period of sustained expansion. Anecdotal evidence pointed to subdued demand conditions and weaker business investment spending.” Also, “staffing numbers decreased for the 2nd month running in October. Although only modest, the rate of decline in employment levels was the largest recorded by the survey since December 2009.” With respect to the impact of tariffs, “There were widespread reports from service providers that trade tariffs had led to price rises among suppliers.”
2) The October Richmond manufacturing index rebounded nicely to +8 from -9 and that was well better than the estimate of -7. Smoothing out the extreme monthly volatility though puts the 3 month average at zero vs the 6 month average of -1. The internals were mixed as new orders, backlogs and employment all bounced but capital spending plans went to zero from +7 and spending on equipment and software fell to 7 from 18. Six month plans for capital spending on equipment, software and other also fell sharply. Prices paid and received fell m/o/m.
3) The final October UoM consumer confidence index was 95.5 and while below the first print of 96 and where the estimate was for no change that was up from 93.2 in September. Most of the m/o/m gain was in the Current Conditions component as Expectations was up a touch. Income expectations jumped 9 pts from September but employment expectations were little changed. Spending intentions improved from last month, helped by lower inflation expectations one year out to 2.5% from 2.8%. Yes, lower prices in a consumer dependent economy are an economic stimulant.
4) The German IFO business confidence index for October was unchanged at 94.6 vs the estimate of 94.5, holding a hair above the lowest since November 2012. The current assessment fell slightly while the expectations rose slightly. The IFO is hopeful that “the German economy is stabilizing.”
5) The Swedish Riksbank has had enough with negative interest rates. While they kept rates today unchanged at -.25%, they said they are “probably” hiking in December. Governor Ingves in his press conference actually said “We are aware that many think negative rates are strange.”
6) Industrial production in Singapore in September surprised to the upside with a 3.7% m/o/m gain, well better than the estimate of down .9% but it was predominantly due to a spike in pharma products. Also helping was a less weaker print for electronics production.
7) Mario Draghi will no longer be a member of the ECB telling us how successful negative interest rate policy has been.
1).That the Fed is now having to finance (monetize) an ever larger supply of T-bills in order to fill the hole left by our primary dealer system along with the lack of help from foreigners and others tells us that the current regulatory structure is broken as well as the ever exploding debts and deficits now all of a sudden really matters.
2) Core durable goods orders in September fell .5% m/o/m, 4 tenths more than expected and August was revised down by two tenths. Core orders are now down 1.1% over the past 3 months and are up just .2% y/o/y. Also of note and which will lead to lower Q3 GDP forecasts is that shipments of core goods dropped .7%, 5 tenths more than forecasted and August was revised down to no growth from the last estimate of up .3%. With inventories rising by .5% and shipments falling, the inventory to shipments ratio rose to 1.70, the highest since mid 2016.
3) Initial jobless claims totaled 212k, 3k less than expected but offset by an upward revision of 4k to 218k last week. The 4 week average was little changed at 215k vs 216k last week and that compares to the one year average of 218k.
4) New home sales totaled 701k in September, as expected while August was tweaked lower by 7k to 706k. Months’ supply held at 5.5 while the median home price fell by 8.8% y/o/y but due to mix as more lower priced homes were sold. Smoothing out this volatile data point puts the 3 month average at 691k vs the 6 month average 676k and the 12 month average of 650k.
5) Existing home sales in September totaled 5.38mm, below the estimate of 5.45mm, down from 5.50mm in August and with declines in all 4 regions. The 3 month average is now 5.43mm and the 6 month average is 5.36mm. As there was no change m/o/m in the number of homes for sale, months’ supply ticked up by one tenth to 4.1 and remains in the low 4’s range over the past 6 months. Home price gains accelerated by 5.9% y/o/y. First time buyers took 33% of purchases vs 31% in August and compares with 32% one year ago. Investors remained at 14%.
6) Following the rise in US Treasury yields, the average 30 yr mortgage rate jumped 10 bps w/o/w to back above 4% at 4.02%. That drove a 17% w/o/w decline in refi’s but they are still up 126% y/o/y as the average mortgage rate one year ago was at 5.11%. Purchase applications fell for the 4th week in the past 5 and are quietly at an 8 week low. They are still up 5.8% w/o/w.
7) The KC manufacturing index for October declined to -3 from -2 but as expected. This is now 4 months in a row below zero.
8) German consumer confidence dropped to match the lowest level since November 2016 while business expectations within this GFK survey fell to the weakest since January 2012.
9) The October Eurozone manufacturing and services composite index was little changed around flat line, coming in at 50.2 vs 50.1 last month. The estimate was 50.3. Manufacturing stayed at 45.7 while services rose a touch to 51.8 from 51.6. Highlighting the stagnation, Markit estimates Q4 GDP growth of just .1% q/o/q. They said “The manufacturing downturn remains the fiercest since 2012, and continues to infect the service sector, where October saw the smallest increase in new work for almost 5 years…The labor market is meanwhile being hit as firms retrench amid signs of excess capacity and uncertainty about the year ahead intensifies.”
10) The October French consumer confidence index fell 1 pt to 105 with particular weakness in the manufacturing component which dropped 3 pts to the lowest level since March 2015. Confidence in the services, retail, employment and construction components were unchanged m/o/m.
11) The October CBI industrial orders index fell to -37 from -28 and that was below the estimate of a slight gain to -30. That is the lowest print since January 2010. The CBI Chief Economist said what we already know, “A combination of Brexit uncertainty and weaker global growth are clearly hitting sentiment and export prospects, with job prospects at their weakest since the global financial crisis.”
12) The manufacturing and services composite index in Australia fell to 50.7 from 52. “The trade war and other uncertainties mean businesses are deferring capex and consumers are putting off spending.”
13) Japan’s manufacturing and services composite index fell below 50 at 49.8 with manufacturing going to 48.5 from 48.9 and services now at 50.3 from 52.8. Japan has had the hike in the value added tax to deal with and a typhoon along with the challenges we know about. On the that last point, “Manufacturing new orders declined at the fastest rate in almost 7 years as trade tensions and global economic weakness restricted exports.”
14) Japanese exports in September fell 5.2% y/o/y, more than the forecast of a 3.7% drop. This is the 10th straight month of y/o/y declines and driven by auto’s and semi equipment. Exports to the US fell by 8%. Imports fell by 1.5% but not as weak as the 2.8% that was estimated.
15) Hong Kong’s September trade data was weak but about as expected. Exports fell 7.3% y/o/y (11 straight months of declines) while imports were lower by 10.3%. Exports to the US tanked by 24.3% y/o/y. Imports from China (many of which get re-exported) fell by 9.2% y/o/y.
16) Taiwan’s September exports fell 4.9% y/o/y vs the estimate of a 4.6% drop. That’s the 11th straight month of declines.
17) For the first 20 days of the month South Korean exports fell 19.5% y/o/y, not much different than the 21.8% fall in September. Exports specifically to China fell by 20% too. Product wise, the exports of semi’s dropped by 29% and autos’s were lower by 6.5%. Imports plunged by 20.1% y/o/y after an 11.1% decline last month.