1).Payrolls in September grew by 136k, 9k less than expected but the two prior months were revised up by a net 45k. The private sector added 114k jobs vs the estimate of 130k and the two prior months were revised up by 17k. Thus, we can call the private sector data pretty much as expected when stretching out over 3 months, but averaging just 119k. It averaged 215k in 2018. Including government hiring has the 3 month average of job hiring at 157k vs the 6 month average at 154k, the 12 month average of 179k and 2018 average of 223k. The household survey added 391k and has well outperformed the establishment survey since June. Combined with an increase in the size of the labor force of 117k has the unemployment rate falling to 3.5%, the lowest since 1969. The participation rate held at 63.2% while the employment to population ratio rose one tenth to 61%, the most since 2008. Hours worked clocked in at 34.4 as expected.
2) The MBA said refi’s jumped w/o/w after declines in the prior two weeks. With the average 30 yr rate at 3.99% from 4.02% in the week prior, refi’s rose 14.2% but after falling by 15.2% last week. Either way they are still up 133% y/o/y. Purchases were up by .9% w/o/w and higher by almost 10% y/o/y.
3) The China state sector weighted manufacturing PMI in September rose to 49.8 from 49.5, a bit above the estimate of 49.6 though still remaining below 50. The services component fell a slight .1 pt to 53.7 where the estimate was for an uptick to 53.9. Combining the two puts the composite index at 53.1 vs 53 in August.
4) China’s private sector weighted Caixin manufacturing index rose 1 pt m/o/m to 51.4. The estimate was for a slight drop to 50.2. Caixin said “The latest upturn in news orders, though modest, was the quickest since March 2018. Underlying data continued to signal that the increase was supported by firmer domestic demand, as new work from abroad continued to decline.”
5) The Reserve Bank of India cut interest rates by 25 bps to 5.15% as expected. The Governor of the RBI said they will “continue with the accommodative stance as long as it is necessary to revive growth while enduring inflation remains within the target.” The RBI at least has notable room to cut unlike so many others.
6) In Australia, the services PMI got back above 50 at 52.4 from 49.1 in August and vs 52.3 in July. Markit said “Strengthening demand conditions, both abroad and at home, contributed to business activity returning to growth in September…Sales growth was linked to increased marketing activities and low interest rates while a weaker Australian dollar also boosted overseas orders, according to anecdotal evidence.”
7) Taiwan’s September manufacturing PMI rose to 50 from 47.9, Thailand’s to 50.6 from 50 while Indonesia was little changed at 49.1 and India at 51.4.
8) Japan’s Tankan report for Q3 was down across the board q/o/q with the main figure at a 6 year low but was a bit better than feared. Capital spending plans slowed to 6.6% from 7.4% and that was slightly below the estimate.
9) Are we seeing the beginning of the end of an extraordinary run of 20 years plus of Bank of Japan easing that has led to a near collapse in the equity value of its banking system (down 90% from its 1989 peak) as the BoJ now wants a steeper yield curve and we saw the worst 10 yr auction in 3 years?
10) The September Eurozone headline CPI saw a gain of 1% y/o/y was as expected vs .9% in August. The core rate was up by .9% y/o/y vs the estimate of up 1%.
11) In Germany, the number of those unemployed fell by 10k, much better than the forecast of a rise of 5k and their unemployment rate held at 5%, the lowest since reunification.
12) The unemployment rate for the entire Eurozone in August fell to 7.4% from 7.5% in July and that is just one tenth off the pre recession level in 2007.
1).Within the payroll data, average hourly earnings disappointed in seeing no gain m/o/m and the y/o/y figure slipped below 3% at 2.9%. Average weekly earnings y/o/y slowed to 2.6%.
2) The September ISM services index fell to 52.6 from 56.4 in August. That is 2.4 pts below the estimate of 55 and the lowest print since August 2016. Of the 18 industries surveyed, 13 saw growth vs 16 in August. Four now are reporting a contraction vs just 1 in the month prior. ISM bottom lined the report by saying “The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”
3) The September ISM manufacturing index fell further into contraction at 47.8 vs 49.1 in August and below the estimate of exactly 50. That is the weakest print since June 2009. The weakness in business was most obvious within exports which are down to 41 from 43.3 in August. That’s the lowest since March 2009. The breadth of the weakness was broad as only 3 industries of 18 surveyed saw growth vs 9 in August. Now 15 industries are seeing an outright decline in business, up from 7 last month. The ISM said simply and obviously, “Comments from the panel reflect a continuing decrease in business confidence…Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near term growth.”
4) Initial jobless claims totaled 219k, 4k more than expected and up from 215k last week (revised up by 2k). Because a 219k print came in and a 219k print came out, the 4 week average stayed at 213k. For perspective, claims have averaged 218k over the past 12 months. Continuing claims, delayed by a week, fell by 5k.
5) Construction spending in August rose .1% m/o/m, 4 tenths less than expected and July was revised down by one tenth. Private nonresidential was particularly weak for a 2nd month, falling by 1% but residential was up by .9%.
6) Japan’s services PMI fell .5 pt from August to 52.8 as expected. This remains well better than manufacturing but “underwhelming new business growth suggests that downside risks in the service sector are appearing.” Their manufacturing index was 48.9, a multi year low.
7) Ahead of the October 1st rise in the value added tax to 10%, consumer confidence in Japan fell to 35.6 from 37.1. That’s the lowest since June 2011 and keep in mind that Abenomics kicked in late 2012.
8) Singapore’s PMI remained in contraction falling to 48.3 from 48.7, marking the 2nd month below 50. Markit equates this level of the index to “a very slight contraction in GDP between 0-.5% on an annual basis.” They went on to say “While the woes of the global tech sector are too well known, survey data has shed light on the impact that the deteriorating global picture has had on the domestic economy. Weak demand was attributed to local and export markets.”
9) South Korea’s September manufacturing PMI fell to 48 from 49 and Vietnam’s PMI dropped to 50.5 from 51.4.
10) Marred by the protests, Hong Kong’s September PMI remained well below 50 but at 41.5 is up slightly from the 40.8 print in August. Tourism and retail are of course the most impacted and Markit equates this currently level of activity with a contraction of about 3% in Q3 at an annualized rate. Looking forward, “Business expectations about the year ahead outlook sank to their lowest for 7 1/2 years.”
11) The services side of the Indian economy in September fell below 50 at 48.7 from 52.4. The composite index combining this with manufacturing has it in contraction for the 1st time since February 2018. The outlook for business sentiment is near a 3 year low. Markit explained the services weakness by saying “Panelists indicated that the downturn stemmed from weak demand, competitive pressures and challenging market conditions.”
12) The Reserve Bank of Australia as expected cut rates again by 25 bps to .75% and after 25 years plus have tossed out the belief that positive real interest rates is a good thing to my dismay.
13) The Eurozone services PMI was 51.6, down from 53.5 in August, below the estimate of 52 and its the weakest since January. Markit said “New business volumes also rose at a slower rate during September, increasing only marginally as demand faltered, especially from foreign clients. Services exports declined in September for a 13th consecutive month and at a series record rate.” As to where the notable weakness is, “The deteriorating picture is being led by a downturn in Germany, but France and Italy are also close to stalling and Spain has seen growth slow to the joint lowest in around 6 years.”
14) The Eurozone manufacturing PMI for September was basically left unrevised at 45.7 with the initial print of 45.6. That’s the weakest level since October 2012 and down from 47 in August. Markit said “Germany is leading the downturn, with the PMI down to levels not seen since 2009, but Italy and Spain are also in deepening downturns, whilst France’s manufacturing sector has stalled.” Also of note, “jobs are now being cut at the fastest rate since early 2013.”
15) The September Markit UK construction index fell to 43.3 from 45 while the estimate was for no change. This is the worst level since April 2009. Markit said “A historically steep drop in new orders was also registered, while firms trimmed employment at the fastest rate since the end of 2010 due to unfavorable demand, client hesitancy and low confidence.” The commercial sector was a particular area of weakness.
16) The UK manufacturing index stayed below 50 in September but was up at 48.3 vs 47.4 in August due in part to inventory building ahead of the October 31st Brexit deadline.
17) The UK services index fell below 50 at 49.5 from 50.6. The estimate was 50.3. So now we have manufacturing, services and construction all printing below 50 for September. Markit said “Brexit related concerns dominated the September survey responses, linked by companies to falling sales, cancelled and postponed projects, a lack of investment and job losses.”