- The NAHB November home builder index rose 2 pts to 70 and that was 3 pts above the forecast. Its peak this cycle is 71 and reiterating that this is only a diffusion index, it got to 72 in June 2005. The present view was up by 2 pts but the outlook was down by 1 pt (but after rising by 5 last month). Prospective Buyers Traffic was up by 2 pts to 50, exactly the breakeven level. The NAHB said “Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory.” The caveat is that “our members still face supply side constraints, such as lot and labor shortages and ongoing building material price increases.”
- Housing starts in October totaled 1.29mm, 100k more than expected and up from 1.135mm in September (revised up by 8k). It’s the best in a year and was mostly driven by a rebound in multi family starts which spiked by 111k to 413, the most since January. Single family starts rose by 44k but after dropping by 38k in September. At 877k, it matches the highest level in this recovery but still remains 14% below the 25 year average and 52% less than the bubble peak in 2006. The hurricane rebound was certainly a factor as starts in the South rose by 90k to 621k vs the 611k level of July right before the storms. Single family starts fell in the Northeast and West and were up just 10k in the Midwest. As for permits, it again was led by multi family which rose by 56k after falling by 70k in the month prior (very volatile month to month). Single family permits were up by 16k, also the best in this recovery.
- US core retail sales rose .3% m/o/m exactly as expected for October. September was revised up by one tenth so a touch above the forecast when taken together. After the spike in sales of auto’s and building materials post hurricanes, there was some moderation in these categories in October. Core retail sales were up 3.4% y/o/y in October which is just about spot on with the 5 year average of 3.3% but below the 5%+ seen in the two prior expansions.
- Industrial production in October rose .9% m/o/m which beat the estimate of up .5%. A big 1.3% m/o/m increase in manufacturing production was a key main catalyst and September was revised up by 3 tenths. Hurricane rebuild helped as auto production rose 1% m/o/m and utility output rebounded by 2%.
- US mortgage applications rose 3.1% w/o/w and it was almost all due to a rise in refi’s which rose by 6.3% after 3 weeks of declines. It remains though down by 24.2% and that is shrinking as the comparisons get easier. Purchases were up by .4% w/o/w and higher by 17.1% y/o/y but that y/o/y rise is about to change as the comparisons get more difficult. If purchases don’t rise over the coming week, they will be down y/o/y.
- The NFIB small business optimism index for October rose to 103.8 from 103 in September (which was the lowest since November) and 105.3 in August. The components were really mixed. Of particular note on the labor market, tightness was clearly evident as Positions Not Able To Fill rose 5 pts to 35, matching the highest since November 2000. This resulted in current Net Compensation to rise 2 pts and Net Compensation Plans to rise 3 pts to 21, matching the most since March 2000. This potential squeeze on corporate profit margins led the Earnings Outlook to fall 3 pts to the weakest level since November 2016. Plans for Higher Selling Prices to offset this rose 2 pts to 8 after falling by 3 pts last month. The NFIB was overall positive in its commentary, “Owners became much more positive about the economic environment last month, which suggests a longer run view. In the nearer term, they are more optimistic about real sales growth and improved business conditions through the end of the year.”
- Treasury said that foreigners bought a net $12.7b of notes and bonds in September. That brings the YTD total to $71b after sales of $326b in 2016. China bought $1.1b of note and bonds while Japan purchases $470b worth, modest amounts for both but they were big sellers (or let their bill holdings mature without reinvesting) of t-bills which reduced their overall holdings of US Treasuries. There was a sharp increase in foreign purchases of US stocks which totaled $26.3b, the most since July 2016 and the 2nd highest print since July 2009 and December 2007 before then.
- While business inventories were flat m/o/m in September as expected, the 1.4% jump in sales sent the inventory to sales ratio down to 1.36 from 1.38. That is the lowest January 2015 with the storms having an impact. Specifically, retail inventories of autos/parts fell 2.4% m/o/m but are still up 4% y/o/y.
- Retail sales were again soft in the UK in October but a bit less than expected. Ex fuel they rose .1% m/o/m vs the estimate of no change and September was revised up one tenth to a drop of .6%. The y/o/y decline was still .3%, the first decline since March 2013.
- The October eurozone CPI figures were left unrevised with the initial print of up 1.4% headline and .9% at the core.
- The eurozone trade surplus hit a record in September at 25b euros as exports rose 1.1% m/o/m while imports were down by 1.2%.
- UK inflation in October held at its same level of growth in September. Headline CPI rose 3% y/o/y and 2.7% at the core level but both were one tenth less than expected. At the wholesale level, prices rose 1% m/o/m and 4.6% y/o/y (as comparisons get easier) about as expected if we include the prior month revision.
- Germany’s economy grew a better than expected 2.8% in Q3 y/o/y.
- Italy’s economy rose 1.8% y/o/y in Q3, the quickest rate since Q1 2011.
- Credit growth slowed in October in China as total loans extended totaled 1.04T yuan, 50b below the forecast, down from 1.82T in September but still up 17% y/o/y. Of this, 663b were bank loans with most of the balance coming from corporate bonds and trust loans. Also of note was the 8.8% y/o/y increase in the M2 money supply. That was below the estimate of 9.2%, down from 9.2% growth in September and the slowest pace of gain since records were kept in 1996.
- Mr. Charlie Evans, voting member of the Federal Reserve, please call Mr. Bill Dudley, soon to be retiring Vice Chair so he can assuage your worries about low inflation. The NY Fed’s Underlying Inflation Gauge (UIG) reported this week: “The UIG estimated on the ‘full data set’ increased from a revised 2.84% in September to 2.96% in October. The ‘prices only’ measure increased slightly from 2.27% in September to 2.30% in October. While the 12 month change in the October CPI showed a slight decline from September, both UIG measures continue to indicate a firming in trend inflation.” Underline mine with both obviously above 2%. For those not familiar with this new figure, “The ‘prices-only’ underlying inflation gauge (UIG) is derived from a large number of disaggregated price series in the consumer price index (CPI), while the ‘full data set’ measure incorporates additional macroeconomic and financial variables.”
- Asset price inflation reaches new heights with a $450mm auction sale of a painting.
- US CPI in October rose .1% m/o/m and 2% y/o/y. The core rate was higher by .2% m/o/m and 1.8% y/o/y (6 month high). This was about in line with expectations.
- US PPI jumped more than expected in October. The headline print was up .4% m/o/m and 2.8% y/o/y vs the estimate of up .1% and 2.4% respectively. The core rate was up by .4% too m/o/m and 2.4% vs last year vs the estimate of up 2.2%. Also of note, some inflation is percolating in the pipeline as within intermediate demand, prices for processed goods rose by 1% m/o/m and services were higher by .3%. Prices for unprocessed goods though were unchanged.
- Import prices in October was up by .2% headline and .1% ex petro. With the upward revision to September, the figures were about in line. Versus last year, headline import prices were up by 2.5% and 1.4% ex petro. On the latter, that matches the quickest pace of gain since March 2012.
- Initial jobless claims totaled 249k, 14k higher than expected. This is up from 239k last week and the Labor Department said that “claims taking procedures continue to be severely disrupted in the Virgin Islands but Puerto Rico officials “are now processing backlogged claims” and maybe the latter is the reason for the upside surprise. The 4 week average did rise to 238k from 231k which was the lowest since 1973. Continuing claims, delayed by a week, fell by 44k to a level last seen also in 1973.
- The November Philly manufacturing index fell to 22.7 from 27.9 and that was 2 pts less than expected. This figure is at a 3 month low and below the year to date average of 27.4 but is still at a good level and this number is hugely volatile month to month. The internals were mixed. After falling about 9 pts last month, the business activity 6 month outlook was up by almost 4 pts. Capital spending plans fell 1 pt to a 5 month low.
- The NY manufacturing index for November fell to 19.4 from 30.2 and that was below the estimate of 25.1. This is a 4 month low. The components were also very mixed. Positively within the data was the 5.1 rise in the overall 6 month outlook which at 49.9 is the best since 2012. Capital spending plans rose 3.5 pts to the highest since April but technology spending plans fell by almost 6 pts.
- Last week’s C&I loan data saw just 1% y/o/y growth for the week ended November 1st.
- In China, retail sales rose 10% y/o/y in October, down from 10.3% in September and below the estimate of up 10.5%. Industrial production was higher by 6.2% y/o/y vs 6.6% growth last month and less than the forecast of 6.3%. Some of this is purposeful as pollution control during the Party Congress was an important objective. Foreign Direct Investment was up by 5% y/o/y, a highly volatile figure month to month. Lastly, fixed asset investment YTD y/o/y rose 7.3% as expected but down from 7.5% in September and is the slowest pace of gain since 1999.
- In Australia, employment grew by 3.7k vs the estimate of up 18.8k. This was only partially offset by a 6.8k upward revision to September. The unemployment rate though did tick down by one tenth to 5.4% as the participation rate fell by one tenth.
- The Japanese economy did grow again by 1.4% annualized in Q3 vs the estimate of up 1.5% but it was mostly export driven with a modest contribution on the capital spending side. Private consumption was down .5% and that remains the missing link to their recovery.
- In the UK, their unemployment rate held at 4.3%, the lowest since 1975 but for the 3 months ended September, an unexpected 14k jobs were lost vs the estimate of a gain of 52k. This is the first job decline since 2k were lost in October 2016 and the most since June 2015. The participation also fell which kept the unemployment rate unchanged. With respect to wages, they remained unchanged at 2.2% y/o/y growth ex bonus’ which combined with 3% consumer price inflation is a problem for many. The October jobless claims figure was up by 1.1k, down slightly from the 2.6k rise in September.
- Investor expectations of the German economy as measured by the ZEW index for November rose a touch to 18.7 from 17.6 but that was below the estimate of 19.5. Current conditions rose by 1.8 pts which is the best since July 2011.
- The French unemployment rate in Q3 rose to 9.7% from 9.5% and above the estimate of 9.5% as the number of unemployed rose by 62k.
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