1)”We are coming down to the short strokes” on this phase one deal says Larry Kudlow. Let’s hope so and that it includes substance and a roll back in at least some tariffs.
2)The producer price index in October rose .4% m/o/m headline and .3% core and both were one tenth more than expected. The y/o/y gains though did slow from September with the headline rate up by 1.1% and the core rate at 1.6%. The comparisons are tough as last October headline PPI was higher by 3.1% and the core rate was higher by 2.7%. Services prices rose .3% m/o/m due to a rebound in trade, transport and warehousing costs. Transport costs by truck, in particular, rose after 3 months of declines. Goods prices ex food and energy saw no change from September.
3)Import prices in October were benign but in line ex petro when taken with September revision.
4)The MBA said mortgage applications jumped by almost 10% w/o/w. Purchases rose 5.1% w/o/w and up by 15% y/o/y while refi’s were higher by 13% w/o/w and 188% y/o/y. With the help of lower rates and what happened last year in November and December, the comps are easy.
5)The October NFIB small business optimism index improved by .6 pts m/o/m to 102.4 after falling in the two prior months by a total of 2.9 pts. For perspective, this number has averaged 102.9 year to date and the peak in the expansion was 108.8 in August 2018 just as the tariff fight was about to intensify. The NFIB President is optimistic, “Small business owners are continuing to create jobs, raise wages, and grow their businesses, thanks to tax cuts and deregulation, and nothing is stopping them except for finding qualified workers.” With respect to this last point, “Firms are likely to continue to offer improved compensation to attract and retain qualified workers because the only solution in the short term to an employee shortage is to raise compensation to attract new workers and to train less qualified employees.” On the impact of tariffs, “30% of small firms reported negative effects from trade policy” and “Making major commitments about production and distribution will be more difficult until import and export prices are stabilized with trade agreements.”
6)The German economy in Q3 was up .1% q/o/q, two tenths better than expected but Q2 was revised lower by one tenth to a decline of .2%. Either way, its economy has basically flat lined over the past two quarters with manufacturing weakness offset by a better services side, particularly with consumer spending as the jobs market is still good with unemployment low.
7)The German ZEW index improved to -2.1 from -22.8 and that was better than the estimate of -13. Current Conditions though were little changed at -24.7 vs -25.3 in October. The estimate was -22.3. The ZEW said “There is growing hope that the international economic policy environment will improve in the near future..In the meantime, the chances for a agreement between Great Britain and the EU and thus for a regulated withdrawal of Great Britain have noticeably increased. Punitive tariffs on car imports from the EU to the US are also less likely than the projections a few weeks ago. An agreement in the trade conflict between the US and China is appearing more likely too.”
8)The Eurozone October CPI figure was left unrevised with a headline gain of .7% y/o/y and core rate of up 1.1%.
9)September industrial production in the EU rose .1% m/o/m, 3 tenths better than expected. It still fell though 1.7% y/o/y, the 11th month in a row of declines.
10)In the UK for the 3 months ended September, 58k jobs were lost after a drop of 56k in the prior month but not as bad as the forecast of a decline of 102k. The unemployment rate did tick down by one tenth to 3.8% which is still near the lowest since the 1970’s. Earnings growth was still good ex bonus’ but slowed to a 3.6% y/o/y increase from 3.8% in the prior month.
11)Indonesia said its October exports fell by 6.1%% y/o/y, better than the estimate of down 8.2%. but still lower for the 12th straight month y/o/y. Imports plunged by 16.4% y/o/y vs the forecast of down 15.4% in part to a drop in oil and gas imports but outside of that they were weak as well.
1)Core retail sales in October rose .3% m/o/m as expected but September was revised down a slight one tenth. If we take out just autos and gasoline and leave building materials in, the sales picture missed by more. Here sales were up just .1% m/o/m, two tenths light relative to expectations and September was revised down by one tenth. Sales ex auto’s and gasoline are dead flat over the past two months which is the slowest two month pace since Q4 2018.
2)The November NY manufacturing index, the 1st November industrial figure out, fell to 2.9 from 4.0. The estimate was 6.0. The internals were mixed. As for the 6 month outlook, it was little changed at 19.4 from 17.1 last month. The 6 month average is 22.1. Positively, capital spending plans on technology and capital equipment rebounded nicely.
3)The October Cass Freight index fell 5.9% y/o/y which is the 11th straight month of y/o/y declines. Cass Freight repeated what they’ve said for the past 5 months that “the shipments index has gone from ‘warning of a potential slowdown’ to ‘signaling an economic contraction.’” Here are the 3 main areas of concerns: 1)”We are concerned about the increasingly severe declines in international airfreight volumes (especially in Asia) and the ongoing swoon in railroad volumes, especially in auto and building materials; 2)We see the weakness in spot market pricing for transportation services, especially in trucking, as consistent with and a confirmation of the negative trend in the Cass Shipments Index; 3)As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the US increase…The trade war looks as if it has reached a ‘point of no return’ from an economic perspective, as the rates of decline are accelerating.” The underline is theirs.
4)The ports of Los Angeles and Long Beach said its inbound container loadings fell 14.1% y/o/y in October. These two ports handle 37% of US container import volume.
5)Initial jobless claims jumped by 14k w/o/w to 225k and that was a large 10k more than expected. That’s also the most since mid June and takes the 4 week average to 217k from 215k, the highest since mid July. Continuing claims, delayed by a week, fell by 10k off the highest since August.
6)The weekly Bloomberg consumer confidence index for the week ended November 10th has fallen for the 4th straight week and now sits at the lowest level since late January 2019. The 3 components, State of Economy, Personal Finances, and Buying Climate all fell w/o/w.
7)Headline CPI in October rose .4% m/o/m, one tenth more than expected while the core rate gain of .2% was as forecasted. The headline y/o/y print was 1.8% vs 1.7% in September while the core rate was higher by 2.3% y/o/y (vs the 2.4% estimate due to rounding), the 2nd highest level since 2008. Rent growth slowed but after a jump in September while medical care costs spiked by 1% in the month and 4.3% y/o/y.
8)The Atlanta Fed’s core Sticky CPI y/o/y rose to 2.74% in October, the highest since 2008.
9)The Cleveland Fed’s trimmed CPI rose 2.36% y/o/y in October, the highest since early 2012.
10)Industrial production in October was weak across the board. The headline figure fell .8% m/o/m, double the estimate of down .4% but the manufacturing softness was about as expected with a drop of .6% and is down for 3 months in the past 4. Auto production was the biggest reason for the weakness in manufacturing much in part due to the GM strike. Taking out auto’s saw a .1% m/o/m drop in manufacturing. Dragging down the headline figure was a drop in utility output. Mining production fell for the 3rd month in the past 4 as we see what’s going on in the oil and gas industry. Capacity utilization fell to 76.7% from 77.5%. That’s the lowest since October 2017.
11)Business inventories in September were flat after a one tenth decline in August, both one tenth less than expected which might lead to a slight tweak lower in Q3 GDP numbers.
12)As seen by the continued bazooka’s the Fed is firing into the short term repo market and the rather sharp increase in the size of their balance sheet, they still have not gotten full control of things. The effective fed funds rate is now slipping to just 5 bps from the lower end of their target.
13)China said its October retail sales, industrial production and fixed asset investment numbers were all below expectations. The retail sales figure grew at 7.2% y/o/y, matching the slowest pace since 2003. The industrial production increase of 4.7% was the 2nd slowest since 2002. Fixed asset investment is running at the slowest pace since 1998.
14)Loan growth in October in China slowed to a pace well below expectations. Aggregate financing totaled 619b yuan vs the estimate of 950b with bank lending making up 661b yuan of this vs the forecast of 800b. Thus, the shadow side saw an outright decline in credit extension. Total lending is down 16% y/o/y. October typically sees a decline relative to other months of the year because of a holiday but this was certainly more so than expected. Non financial business borrowing was the least since August 2016.
15)The Hong Kong situation continues to deteriorate. 3 month HIBOR has now rise for the 7th straight day to the highest level since mid July.
16)Australia, a China growth proxy, said its October jobs number showed an unexpected decline of 19k vs the estimate of up 15k. The unemployment rate ticked up by one tenth to 5.3%.
17)When taking the Q2 revisions into account, the Japanese economy in Q3 was about as expected but slowed to a pace of just .2% q/o/q annualized, the slowest since Q3 2018.
18)Japan’s core machinery orders in September, a very volatile figure month to month, fell 2.9% m/o/m, worse than the estimate of up .9% and follows a 2.4% drop in August. This is now the 3rd straight month of declines to close Q3.
19)France said its unemployment rose to 8.6% in Q3, up one tenth from Q2 and that was worse than the estimate of 8.4% as the number of unemployed rose.
20)UK retail sales in October ex auto fuel fell .3% m/o/m instead of rising by .2% as expected.
21)UK jobless claims in October rose to 33k, the most since March 2017.
22)While two Bank of England members voted to cut rates from the already low rate of .75%, October core CPI printed 1.7% y/o/y as expected and holding at a 3 month high.
23)The UK economy in Q3 grew by 1% y/o/y, one tenth less than expected, down from a 1.3% pace in Q2 and is the slowest rate of gain since Q1 2010. Versus Q2, growth was .3% vs the estimate of .4%. Consumer spending was good but offset by weakness in capital spending and inventories.
24)As a tell on the global IT spending outlook as I consider them a global bellwether, CSCO CEO Chuck Robbins said in its earnings conference call: “Just go around the world and you see what’s happening in Hong Kong, you look at China, what’s happening in DC, you’ve got Brexit, uncertainty in Latin America. Business confidence suffers when there’s a lack of clarity and there’s been a lack of clarity for so long that it’s finally come into play.”