1)Initial jobless claims fell to just 199k, well below the estimate of 260k and down from 268k last week. That’s the lowest print since the summer of 1969. Delayed by a week, continuing claims fell by another 60k to a fresh post Covid low at 2.049mm.
2)Personal income in October rose .5% m/o/m, 3 tenths more than expected. Specifically looking at private sector wages/salaries (thus not including other benefits), saw a gain of 1% m/o/m and is running at a 11.8% annualized rate over the past 6 months. This, along with inflation, helped to lift personal spending by 1.3% m/o/m in October vs the 1% estimate. Spending again on goods led the way. To inflation adjust, personal spending (with retail sales a piece of this) since the March spike is up 5.4%. Headline PCE is up by 3.4%. CPI is up by 4.5%. The savings rate fell to 7.3% from 8.2% in September and 9.9% in August. For perspective, the 20 yr average is 6.8%.
3)Core durable goods orders in October rose .6% m/o/m, one tenth more than expected and September was revised up by 5 tenths to a 1.3% increase.
4)Likely boosting Q4 GDP estimates was the sharp fall in the goods trade deficit in October because of a jump in exports of 10.7% m/o/m relative to a .5% rise in imports. Exports of food/beverage, industrial supplies, and auto’s led the way. The deficit came in at $82.9b off the record high of $97b in September and vs the $95b estimate.
5)The MBA said the average 30 yr mortgage rate rose 4 bps w/o/w to 3.24%. Purchases though rose 4.7% w/o/w but remain down 4.4% y/o/y. Refi’s were little changed, up .4% w/o/w but are still lower by 34% y/o/y.
6)Existing home sales in October totaled 6.34mm, 140k more than expected and up a touch from the 6.29mm print in September. As this is measuring closings, assume most contracts were signed in the summer. Inventories remained lean at 2.4 months, the same pace seen in September. In turn, the median home price was up 13.1% y/o/y. First time buyers made up 29% of purchases vs 28% in September, 29% in August and vs 32% one year ago. All cash buyers are now 24% vs 19% one year ago and the ‘Investor’ category jumped to 17% from 13% last month and vs 14% last October.
7)Japan’s manufacturing and services November index from Markit rose to 52.5 from 50.7 with both components higher. With this improvement however, “Firms across the Japanese private sector reported intensifying price pressures. Input prices across the private sector rose at the fastest pace for over 13 years with businesses attributing the rise to higher raw material, freight and staff costs amid shortages and deteriorating supplier performance.” The growing vaccination rates and easing of economic restrictions resulted in “Japanese private sector companies that were strongly optimistic that business activity would rise in the year ahead.”
8)The Australian manufacturing and services index from Markit rose to 55 from 52.1 with services adding the most as Covid restrictions were further eased. The problem though remains, “supply chain issues featured strongly…as delivery times lengthened, widespread shortages were reported and price increases continued to be seen.”
9)South Korea said exports in the 1st 20 days of November increased by 27.6% y/o/y. They were helped by both chip and big ship exports. Imports were higher by 42%.
10)Hong Kong exports in October was up 21.4% y/o/y, just above the estimate of up 20.7%. Imports were higher by 17.7%, below the forecast of up 19.5%.
11)French business confidence in contrast rose to 114 from 112 with manufacturing, services, retail and employment all higher.
12)The UK November CBI industrial orders index saw a gain to 36 from 9 and that was well better than the estimate of 8. CBI said “It’s good to see strong order books and output growth in the manufacturing sector holding up as we head into winter. Output growth has been steady for 3 months now and remains quicker than its long run average” but here’s the now standard caveat, “intense supply side challenges continue to put pressure on firms’ capacity to meet demand. Alongside record order books, stock adequacy was the weakest on record in November and manufacturers are increasingly having to pass on significant cost increases to customers.”
13)The UK composite index was little changed with manufacturing slightly up but offset by a .5 pt drop in services. Manufacturing continues to deal “with supply shortages and falling exports.” The jobs market improved. On pricing, “A record increase in firms’ costs will meanwhile further stoke fears that inflation will soon breach 5%, with lingering near record supply delays adding to indications that price pressures may show few signs of abating in the near term.
14)The November Eurozone manufacturing and services composite index rose to 55.8 from 54.2 and that was better than the estimate of 53 with most of the gain in services. The caveat though is business optimism about the future fell to the lowest since January. Markit hit on all the themes we are fully aware of: “The manufacturing sector remains hamstrung by supply delays, restricting production growth to one of the lowest rates seen since the 1st lockdowns of 2020. The service sector’s improved performance may meanwhile prove frustratingly short lived if new virus fighting restrictions need to be imposed. The travel and recreation sector has already seen growth deteriorate sharply since the summer.” With respect to prices, “With supply delays remaining close to record highs and energy prices spiking higher, upward pressure on prices has meanwhile intensified far above anything previously witnessed by the surveys.”
15)French consumer confidence in November held at 99 from October and that was 1 pt above the estimate.
16)Adding levity to a tough market day, and staying on the Cheers theme, here was another great scene, //www.youtube.com/watch?v=O3glUDo2EfA
1)Another variant with a lot of mutations a reminder again that Covid will just not go away yet. That said, let’s have confidence in the vaccines and in our ability to live with and power thru Covid. After all, we have 20 months of ‘practice.’
2)The November US Markit manufacturing and services composite index fell to 56.5 from 57.6 with a m/o/m gain in manufacturing offset by a drop in services. For perspective, the 56.5 print compares with the 6 month average of 58. With manufacturing, “the rise in output accelerated from October, as inflows of new orders expanded at a sharper pace” but “As numerous critical components remained in short supply, many goods producers noted dwindling stocks of finished goods, with post production inventories falling at the quickest pace since May 2020. A sustained period of marked upturns in input purchasing led to a strong increase in pre-production inventories. Some companies noted that stocks of common items were boosted to avoid future shortages.” Backlogs jumped as delivery times continued to increase. On pricing, “In line with difficulties sourcing inputs and finding affordable transportation for goods, cost burdens rose at a series record pace in November. In an effort to pass on higher costs to customers, firms increased their selling prices at the 2nd steepest pace in over 14 ½ years of data collection.” Shifting to the services sector, “Many firms noted that the uptick in business activity was supported by greater travel both domestically and internationally and the further easing of Covid restrictions.” On pricing, “Inflationary pressures continued to soar midway through the 4th quarter, as the rate of increase in input prices quickened to a 6 month high. A combination of marked supplier price hikes and vast increases in wage bills reportedly drove cost burdens up. Firms were able to partially pass on higher costs though, as the rate of charge inflation reached a fresh series high.” The capacity to deliver is still being hindered by labor shortages. “Firms sought to expand their workforce numbers, but employment growth was held back by challenges finding suitable candidates.”
3)The final read of the UoM consumer confidence index was 67.4 vs the preliminary one at 66.8 but this compares with 71.7 in October and is the lowest in 10 years. Both Current Conditions and Expectations fell m/o/m. One year inflation expectations were 4.9%, up one tenth m/o/m and the highest since 2008. The 5-10 yr inflation estimate was 3% vs 2.9% in the month prior, that’s the highest since 2011. Income expectations rose while employment was little changed. Spending intentions further deteriorated from October because of sticker shock. The UoM’s bottom line: “The decline was due to a combination of rapidly escalating inflation combined with the absence of any federal policies that would effectively redress the inflationary damage to household budgets.”
4)The October PCE headline figure was as expected when we include the one tenth upward revision to September. Versus last year it was up 5%. The core rate was higher by 4.1% y/o/y as forecasted. Goods prices jumped by 7.5% y/o/y while service prices were higher by 3.7%. Energy was up by 30% y/o/y and food by 4.8%.
5)New home sales in October totaled 745k, 55k less than expected and September was revised down by 58k to 742k. The average year to date is 779k. Months’ supply was 6.3, about in line with the long term average but this calculates homes that haven’t been built yet or finished but there is a contract.
6)The Strategic Petroleum Reserve was created to absorb shocks in the crude oil supply chain, not to manipulate prices. By doing so it will instead lead to eventually higher prices as producers again are discouraged to drill more and consumers are encouraged to consume more via lower prices.
7)Germany’s IFO business confidence index fell to 96.5 from 97.7 and that was just under the estimate of 96.7. Both Expectations and the Current Assessment declined m/o/m. The IFO said simply, “Supply bottlenecks and the fourth wave of the coronavirus are challenging German companies.”
8)Taiwan’s exports rose by 14.6% y/o/y in October, though below the estimate of up 23%.
9)Thanks to the rise in energy prices, the headline CPI in Tokyo in November rose .5% y/o/y, one tenth more than expected. The core/core rate though was down by .3% and all because of the sharp drop in mobile phone fees.
10)The Turkish lira plunges further.