1)Thanks to a much lower than expected price deflator, Real Q3 GDP beat estimates with a 2.6% increase vs the estimate of 2.4%. Looking at nominal growth, the estimate was 7.7% and we got 6.7%. Trade also was the main contributor to growth. The negative was that final sales to private domestic purchasers was up just .1%. That’s the slowest since Q2 2020.
2)September personal income was a touch above expected when we include the upward revision for August. Personal spending was above the estimate, nominally, and could lead to a tweak up in Q3 GDP forecasts at the next revision.
3)The Employment Cost Index for Q3 rose 1.2% q/o/q as expected and by 5% y/o/y (good for employees, not for corporate profit margins). Most importantly, private sector wages/salaries were up by 1.2% q/o/q and 5.2% y/o/y and total comp including benefits were up by 1.1% q/o/q and 5.2% y/o/y. That y/o/y figure is about double the 20 yr average leading into covid.
4)New home sales in September totaled 603k, 23k more than anticipated and vs 677k in August which was revised lower by 8k. Smoothing out this volatile data point has the 3 month average at 608k vs the 6 month average of the same 608k, the one yr average of 687k and the 2021 average of 769k. For perspective, it averaged 683k in 2019. Months’ supply (where not all of these homes are done) was 9.2, remaining very elevated. The median home price rose 14% y/o/y but also very volatile as mix skews it month to month.
5)According to S&P CoreLogic, home prices rose 13% y/o/y in August, a downshift from the 15.6% pace seen in July. It’s the 5th straight month of deceleration. The sunbelt cities continue to drive the price gains with Miami, Tampa, Charlotte, Dallas and Atlanta leading the way. The price gain laggards were San Francisco, DC, Minneapolis, Portland and Detroit.
6)The final October UoM consumer confidence index was slightly higher than the initial print at 59.9 vs 59.8 a few weeks ago. The estimate was for a slight drop. One yr inflation expectations were 5% from 4.7% in September but one tenth less than the preliminary read.
7)More central banks continued on with rate hikes in response to still high inflation. The BoC raised rates by an unexpectedly smaller 50 bps to 3.75%. The ECB did 75 bps as expected. Hints though are rising from some central bankers over worries about economic growth.
8)The German GFK consumer confidence index was up a touch to a still deeply negative -41.9 vs -42.8 last month. GFK said “It is certainly too early to speak of a trend shift at this time. The situation remains very tense for consumer sentiment. Inflation has recently risen to 10% in Germany, and concerns about the security of energy supplies continue to rise. Therefore, it remains to be seen whether the current stabilization will last or whether, considering the upcoming winter, there is reason to fear a further worsening of the situation.”
9)The German October IFO business confidence index was little changed at 84.3 vs 84.4 in September. The Current Assessment fell a touch while the Expectations component was down slightly. The IFO was pretty succinct today, “Sentiment in the German economy continues to be grim…The German economy is facing a difficult winter.”
10)Likely helped by the drop in energy prices, consumer confidence in France in October rose 3 pts to 82 and that was 5 pts better than expected.
11)The October UK CBI industrial orders index was -4 vs -2 in September but better than the feared print of -12. The CBI said “It’s a tough time for manufacturers. Price pressures remain acute, availability of materials is still a big issue – and it is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need. It’s really no surprise that sentiment has deteriorated further.”
12)Japan’s composite index rose to 51.7 from 51 solely due to a rise in services. That service figure was helped by a pick up in tourism in response to the ever weakening yen and “The recent easing in international border restrictions and the launching of the Nationwide Travel Discount Program” according to S&P Global. In contrast, “The manufacturing sector continued to struggle in the face of weak demand conditions and severe cost pressures.”
13)Hong Kong’s September trade data was weak but not as bad as expected. Exports fell 9.1% y/o/y after a 14.3% drop in August and vs the estimate of down 14%. Exports particularly to China were down by 8.5% and fell by 25% to the US. Imports were lower by 7.8% y/o/y, better than the forecast of down 16.4% and after a 16.3% decline in the month before. A spokesman in Hong Kong said honestly, “Looking forward, Hong Kong’s export performance will remain under immense pressure, as elevated inflation in major advanced economies and more aggressive monetary policy tightening in response continue to dampen global demand.”
1)Pending home sales in September fell 10.2% m/o/m and that was more than double the estimate of a drop of 4%. That’s the 10th month in the past 11 that has seen m/o/m declines and sales are down 30.4% y/o/y. The NAR said it well, “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”
2)With another jump in the average 30 yr mortgage rate to 7.16% from 6.94% in the week before, purchase apps fell 2.3% w/o/w to the lowest since 2015 and are now down 42% y/o/y. Refi’s were flat w/o/w but lower by 86% y/o/y.
3)Initial jobless claims rose to 217k from 214k last week. That is 3k below the estimate. The 4 week average rose to 219k from 212k, a 6 week high. Of note, continuing claims jumped above 1.4mm at 1.44mm, about 50k more than expected and up from 1.38mm in the week before.
4)The PCE inflation stats for September were as expected with the m/o/m gains of .3% and .5% for headline and core. The y/o/y gains were 6.2% and 5.1% for each.
5)The US savings rate in September was 3.1% from 3.4% in August and that is one tenth from matching the lowest since April 2008.
6)We now have four October regional manufacturing indices that are below zero with the Richmond and KC manufacturing indices below zero and joining NY and Philly.
7)The S&P Global October US PMI remained below 50 for a 4th straight month at 47.3 from 49.5 in September and vs 44.6 in August and 47.7 in July. Services dropped to 46.6 from 49.3 and manufacturing declined a hair under 50 at 49.9.
8)Annualize what the US government paid in interest payments in Q3 and it’s now over $700b.
9)Core durable goods in September were down .7% m/o/m vs the estimate of up .3% and August was revised down by 6 tenths.
10)The October Conference Board’s consumer confidence index fell to 102.5 from 107.8 and that was below the estimate of 105.9. Most of the decline was in the Present Situation but Expectations slipped too. One yr inflation expectations rose 2 tenths to 7% after falling by 2 tenths in September with the price of gasoline and food being the major influences. The 20 yr average with inflation expectations is 5.3%. Those that said jobs were Plentiful fell 4 pts to the lowest since April 2021. Those that said they were Hard to Get rose to the most since September 2021. Expectations on jobs and income were more mixed. Expectations for ‘More Jobs’ did improve to the best since January 2022 and expectations for an ‘Increase in Income’ was the highest since fall 2021. This for both was mitigated by a rise in expectations for ‘Fewer Jobs’ and a ‘Decrease in Income.’ Interestingly, spending intentions improved for autos, homes, and major appliances but they did slip for vacation intentions.
11)German CPI for October rose 11.6% y/o/y, above the estimate of up 10.9%. The m/o/m gain was 1.1%, double the estimate. France and Spain also reported elevated CPI figures, but the latter was below expectations. All these countries have energy subsidies they are handing out so that makes it that much more difficult in trying to forecast headline rates of change.
12)The October Eurozone PMI fell 1 pt to further below 50 at 47.1. The estimate was 47.6. Services dropped by .6 pts to 48.2 while manufacturing dropped by almost 2 pts to 46.6. So, there should be little doubt that the Eurozone economy is in a recession. S&P Global said “While the rising cost of living remains the predominant cause of the economic slowdown, the region’s energy crisis remains a major concern and a drag on activity, especially in energy intensive sectors. Price pressures meanwhile remain stubbornly elevated, as rising energy and staff costs, and the weakened euro, offset any lowering of commodity prices linked to improving supply conditions.”
13)The UK PMI declined to 47.2 from 49.1 and below the forecast of 48 with also both components below 50. We can certainly blame the political turmoil, among other things like the energy price crunch and expect a negative Q4 GDP print here too when it comes.
14)Tokyo said October CPI for this city rose 2.2% y/o/y, 2 tenths more than expected and up from 1.7% in September. It was last here in 1990 not including VAT influences.
15)The BoJ just won’t stop with its current monetary stance and Kuroda doesn’t think his policies are why the yen is near a 24 yr low vs the dollar as inflation is rising. He of course didn’t try to give another reason why.
16)Australia’s October PMI fell under 50 at 49.6 from 50.9 in September with both components lower m/o/m. S&P Global said “A fall in demand for services was underpinned by higher interest rates and prices, altogether reflective of the detriments of aggressive monetary policy tightening and capacity constraints upon business activity.”