1)Green shoots for higher wages/salaries? From the Beige Book, “some Districts reported stronger wage pressures in certain sectors, including transportation and construction. Growing use of sign-on bonuses, overtime, and other nonwage efforts to attract and retain workers were also reported.” The negative of course are the profit margin implications.
2)The Senate gets us a step further in the legislative process in order to achieve tax reform/cuts. Now the hard part but hopefully not too hard.
3)Initial jobless claims totaled 222k, 18k less than expected and down from 244k last week. Go back to 1973 the last time we saw a claims figure this low. From DJ which quoted an economist at the Labor Department, “Many applying for unemployment benefits in Puerto Rico and the US Virgin Islands…must submit paper applications because power outages and infrastructure damage are disrupting the electronic process. This has slowed what would likely be an influx of unemployment applications to a trickle.” Claims in California rose by 4,500 as of October 7th. Continuing claims, delayed by a week, fell by 16k to the lowest since late 1973.
4)The October Philly manufacturing index rose to 27.9 from 23.8 and that was 6 pts more than expected. The internals though were very mixed as new orders, backlogs and shipments fell while employment spiked to the highest on record dating back to 1968. Prices paid rose while those received fell. As for the outlook, business activity expectations dropped by almost 9 pts but after rising by 13 pts last month. Capital spending plans fell by 1.3 pts m/o/m.
5)The October NY manufacturing index rose almost 6 pts to 30.2 and that was about 10 pts above the estimate. The index level also matches the best level in 8 years. Here to though we saw declines in new orders, backlogs and inventories. Shipments though did rise. Employment was higher but the workweek fell. The overall 6 month business activity outlook rose 5.5 pts after dropping by 5.9 pts last month. Capital spending plans fell by 2.5 pts after more than doubling last month. Tech spending plans fell slightly but also after jumping in September.
6)The NAHB builder sentiment index for October rose 4 pts to 68. The estimate was for no change. Both the present and future expectations components were up by 5 pts but Prospective Buyers Traffic was up just 1 pt and is still below 50 at 48. The NAHB said “This month’s report shows that home builders are rebounding from the initial shock of the hurricanes. However, builders need to be mindful of long term repercussions from the storms, such as intensified material price increases and labor shortages.” Lumber prices in particular are at a 13 year high.
7)The MBA said mortgage applications to buy a home rose 4.2% w/o/w and 8.7% y/o/y. As for refi’s, they were up 3% w/o/w after 4 straight weeks of declines and remain down 36% y/o/y.
8)September existing home sales totaled 5.39mm annualized, a touch above the estimate of 5.30mm and compares with 5.35mm in August which was the lowest level since August 2016. Months’ supply held at 4.2 for a 5th straight month. The average year to date is 5.53mm. The median home price was up by 4.2% y/o/y (slowest rate of growth since August 2014) to $245,100 which happens to be the cheapest since April. The real disappointment within the number was that only 29% of sales went to first time households vs 31% in August and 34% one year ago. That’s the lowest since September 2015.
9)US industrial production in September rose .3% as expected while August was revised to a less worse decline of .7% from -.9%. The manufacturing component was up just .1% vs the .2% rise that was forecasted (August revised up by one tenth so a push) and was down 2.2% y/o/y. As for the impact of mostly Harvey (lesser extent due to Irma), IP was negatively impacted by ¼ of a percent according to the Fed. Capacity utilization was 76%, around the estimate but still remains well below the long term average of 80%.
10)There was a modest increase of $11.5b of net buying of US notes and bonds in August. It brings the year to date total to $58.3b after net selling of $325b in 2016. Again, net selling was seen from central banks but was offset by a rise in private foreign buying. China increased their holdings of US Treasuries by $34.5b (of which $18.6 were in notes and bonds) while Japan sold $11.4b worth. Saudi Arabia was also a net seller continuing that trend of less petro dollars sloshing around.
11)As expected the Chinese economy backed into a 6.8% Q3 growth rate. Separately, retail sales and industrial production in September beat the estimates by one tenth.
12)It’s refreshing to hear a central bank head acknowledge the side effects of artificially cheap credit. PBOC Governor Zhou said “When there are too many pro cyclical factors in an economy, cyclical fluctuations will be amplified. If we’re too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a Minsky Moment. That’s what we should particularly defend against.” He particularly warned of the large credit and debt build up.
13)China reported a 6.9% y/o/y rise in PPI in September, above the estimate of up 6.4% and vs 6.3% in August. The consumer price index in China was higher by 1.6% y/o/y as expected in September, basically in line with the 6 month trend. Keeping a lid on it was the decline in food prices but if we take out food and energy, prices were up 2.3% y/o/y, the most since January.
14)Australia saw more job gains than expected in September and their unemployment rate fell one tenth to 5.5%, the lowest since February 2013.
15)The final print of September CPI for the eurozone was left unchanged with the preliminary one at 1.5% headline and 1.1% core.
16)At least in August the stronger euro had little impact on eurozone exports which rose 2.5% m/o/m and because imports were higher by just .4%, the surplus rose again (and another reason why the euro trades so well) to 21.6b euros. The peak was seen back in May 2016 at 24.8b.
1)From the Fed’s Beige Book, “Labor markets were widely described as tight. Many Districts noted that employers were having difficulty finding qualified workers, particularly in construction, transportation, skilled manufacturing, and some health care and service positions. These shortages were also restraining business growth. Firms in several Districts reported that scarcity of labor, particularly related to construction, would be exacerbated by hurricane recovery efforts.” The underline is mine.
2)September housing starts totaled 1.127mm annualized, 50k less than expected and down from 1.183mm in August (revised up by 3k). There was a 40k m/o/m start drop for single family homes to 829k and that is a 4 month low. The hurricanes had an obvious impact as we saw a sharp drop in starts in the south. Multi family starts fell by 16k to 298k and that is a one year low. Looking forward, single family permits rose by 19k after falling by 12k in August while there was a sharp drop in multi family permits of 76k.
3)Import prices rose .7% m/o/m in September and .3% ex petro. The y/o/y gain was 2.7%, a 5 month high. Prices ex petro were up a more modest 1.2% y/o/y.
4)Fixed asset investment in China in September ytd y/o/y was higher by 7.5%, 2 tenths less than expected and it’s the slowest pace of gain since 1999.
5)At least in these numbers there is no such thing as deleveraging in China. Aggregate financing totaled 1.82T yuan in September, well more than the forecast of 1.572T and that’s up 6.4% y/o/y. Of that bank loans made up 1.27T, slightly more than thought so it was the shadow side (entrusted loans, trust loans and bankers acceptance bills) that really surprised to the upside. Money supply growth picked up to 9.2% y/o/y after touching 8.9% in August which was the slowest since at least 1996 that I have records on. Maybe this was a Party Congress induced splurge and we’ll see a hangover next but talk of deleveraging right now is just talk.
6)President Xi made it clear again who’s in charge. While we heard this, “We should endeavor to develop an economy with more effective market mechanisms, dynamic micro entities, and sound macro regulation,” he also said he wants to make China a “great modern socialist country…with Chinese characteristics.” Whatever that means.
7)The UK unemployment rate held at the lowest level since 1975 at 4.3% for the 3 months ended August but the number of those employed rose less than expected at 94k vs the estimate of 148k. The more timely September jobless figure saw a slight rise of 1.7k and August was revised to a decline of .2k vs the original print of -2.8k. August wage growth ex bonus’ rose just 2.1% vs 2.2% in July.
8)UK September CPI rose 3% y/o/y as expected, a level last seen in April 2012. The core rate remained at 2.7% also as forecasted. As for wholesale prices, they were up by 8.4% y/o/y while output prices were up just 3.3% and the combined is otherwise known as margin pressure.
9)In the UK, falling real wages caught up to the September retail sales data. Sales ex auto fuel fell .7% m/o/m, well worse than the estimate of down .2% and the y/o/y gain slowed to 1.6%. For perspective on the slowing rate of growth in sales, the average y/o/y gain in 2017 ex fuel is 2.5 vs 4.6% in 2016 and 3.7% in 2015.
10)The German ZEW (asking investors their viewpoint of the German economy) October index was 17.6, below the estimate of 20 but up from 17.0 in September. The Current Situation was down slightly at 87 from 87.9 last month and a touch below the forecast of 88.5. The ZEW index for the eurozone as a whole fell 5 pts m/o/m to 26.7, a 6 month low.
11)German PPI accelerated to a .3% m/o/m gain vs the estimate of up .1% and the y/o/y gain of 3.1% is a 5 month high. Higher energy prices was a main factor but ex this prices were still up 2.6% y/o/y.