1) The average 30 yr US mortgage rate was little changed w/o/w at 5.16%, just off the 8 1/2 year high of 5.17% last week. Purchases did rebound by 3.1% w/o/w off the lowest level since February 2017 but they are down 4.8% y/o/y.
2) Existing home sales in October totaled 5.22mm, a touch above the estimate of 5.2mm and up from 5.15mm in September. The m/o/m increase though is off the lowest level since November 2015. Reflecting the slowing pace of housing transactions, the 3 month average is 5.23mm vs the 6 month average of 5.31mm and the 12 month average of 5.42mm. The average pace in 2017 was 5.54mm. First time buyers continue to be stuck in the low 30% range as a percent of closings. They made up 31% of buying vs 32% in September and 31% in August. The average home price increase did moderate to a 3.8% y/o/y gain with single family up by 4.3%. The 3.8% increase was the same as September and which is the slowest rate of growth since June 2014 and I think that is a good thing. Because the number of homes for sale shrunk along with the slight uptick in home sales, months supply fell to 4.3 from 4.4 but versus 4.3 in the previous three months. The NAR is telling us what we already know, “Rising interest rates and increasing home prices continue to suppress the rate of first time homebuyers. Home sales could further decline before stabilizing.”
3) Housing starts in October totaled 1.228mm, exactly as forecasted. September was revised a hair higher to 1.21mm, up 9k from the first print. Underneath, it was multi family starts that lifted the total figure m/o/m as they rose by 34k to 363k vs the 6 month average of 354k and 12 month average of 375k. Single family starts were down by 16k to a 3 month low at 865k which compares with the 6 month average of 881k and the 12 month average of 887k. As for the forward looking permit side, single family permits fell 5k m/o/m to 849k, the least since May while multi family permits were little changed at 414k vs 416k last month. That multi family permit figure is the lowest since March 2016.
4) Oil and gasoline prices continue to crash, great for the consumer.
5) After two straight months of below zero prints, the UK CBI industrial orders index rebounded to +10 in November from -6. It’s the best in 4 months. Of the 17 industries surveyed, 13 saw output grow. The CBI said “We expect UK manufacturers to continue benefiting from ongoing global economic expansion and a lower sterling exchange rate, but overall economic growth is expected to remain subdued, reflecting weak household income growth and the drag on investment from Brexit uncertainty.”
6) While energy driven headline inflation in Japan accelerated to 1.4% y/o/y growth, the core rate held at 1% while the core/core rate was up just .4% y/o/y for a 3rd straight month.
7) Peter Navarro will not be attending the Trump/Xi meeting.
8) From a stock market sentiment contrarian standpoint, relevant for ONLY the very short term, the AAII of individual investor sentiment has gotten very bearish. Bears jumped 11.2 pts to 47.1, the most since mid February 2016 while Bulls fell by 9.8 pts to 25.3, the least since August 2017.
1) The OECD did lower their 2019 global economic forecast to 3.5% from 3.7% and did acknowledge that we are all growing aware of, “Should the soft landing turn out to be a sharper downturn then you need to cooperate together because there’s not much ammunition in the macro tool box.”
2) Initial jobless claims totaled 224k, 9k more than expected and up from 221k last week which was revised up by 5k. As a result, the 4 week average is up to 219k from 217k last week and 214k in the week before. This is the most since mid July.
3) Non defense capital goods ex aircraft orders in October, a core measure of capital spending ex software spending, was unchanged, two tenths less than expected and September was revised down by 4 tenths to a decline of .5% and after August saw a drop of .2%. Thus, after a 1.5% jump in July, capital spending has fallen since. The shipments of core goods of .3% was as expected while September was revised down one tenth.
4) Refi’s fell by 5%, down for a 4th straight week and to a fresh 18 year low. They are lower by 40% y/o/y.
5) Home builder sentiment in November plunged by 8 pts to 60 and that was well below the forecast of a 1 pt drop to 67. That’s the lowest since August 2016 and the weakness was across all three components. The present situation was down by 7 pts to 67, the outlook was down by 10 pts and Prospective Buyers Traffic softened by 8 pts and is back below 50 at 45. That is also the lowest since August 2016. The NAHB said “Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices.” This combination “has caused housing demand to stall.”
6) The final November UoM consumer confidence index fell to 97.5 from 98.6 in October. That was below the estimate of 98.3 and the preliminary print of 98.3. Both Current Conditions and Expectations fell m/o/m. One year inflation expectations fell one tenth to 2.8% from October and vs 2.7% in September. Higher income expectations rose 1 pt m/o/m while employment expectations fell 1 pt. Buying intentions were mixed but didn’t change month from October.
7) Markit’s US manufacturing November PMI fell to 55.4 from 55.7 and that’s a 3 month low. New orders though did rise to a 6 month high and employment rose to an 11 month high. The negative, “goods exports appear to be coming under increasing pressure, often linked to trade wars having dampened demand.” The services PMI dropped to 54.4 from 54.8 and vs 53.5 in September with employment falling to the weakest since June 2017. Price pressures moderated. Overall, Markit estimates this level of activity equates to about 2.5% GDP growth.
8) Foreigners were net sellers again in September of US Treasury notes and bonds. This in a month where the 10 yr yield jumped to 3.06% from 2.86%. The selling totaled $11.5b which brings the net year to date buying to $90.5b, which if it holds would be the most since 2014 but as a percent of supply is much smaller. China really picked up the pace of selling as it shed $18.5b of notes and bonds. The buying of bills reduced the net amount of selling to $13.7b which marks the 5th month in the past 6 they’ve reduced their US bond position. At $1.15 Trillion, China holds the least amount of US Treasuries since June 2017. We saw the pace of Japanese purchases pick up in September, by a net $16.1b of notes and bonds but that was completely offset and then some by the maturation and/or selling of bills. Japan’s holdings stand at the least since 2011.
9) Corporate bonds continue to join the weakness seen in equities, with the latter leading the former. It makes sense that if a major worry is the state of corporate balance sheets, equities are at the bottom of the capital structure.
10) Oil prices continue to crash, awful for the producers and many companies that service them. Heading into the winter, the spike in natural gas prices isn’t helpful for consumers.
11) The Atlanta Fed’s GDPNow Q4 forecast is down to 2.5%. The NY Fed’s estimate is 2.6%. St. Louis Fed is at 2.7%.
12) The Eurozone Markit manufacturing and services November PMI softened to 52.4 from 53.1 and that was below the estimate of 53. That is also 4 year low. Markit said “Manufacturing remains the main area of weakness, linked in part to having been hit hard once again by deteriorating exports. The slowdown is also being temporarily exacerbated by persistent disappointing car sales.” With services, “consumer and corporate demand was often reported to have weakened in the face of headwinds such as rising political uncertainty, tighter financial conditions and higher prices.”
13) France reported that its mainland unemployment rate in Q3 was 8.8%, unchanged with Q2 and just off the lowest level in 7 1/2 years. It’s pretty much as expected. Unfortunately youth unemployment remains a problem as the rate for 15-24 yr olds was 20.6% vs 20.2% in Q2 and 20.8% in Q1, although jobs were created for this demo in Q3 (offset by rise in unemployed).
14) French business confidence held at the lowest level since January 2017 but as expected.
15) Energy drove a 3.3% y/o/y increase in German PPI in October. Ex energy it was up just 1.6%.
16) South Korea, a very good proxy on global trade, saw exports in the first 20 days of November rise 5.7% y/o/y, the slowest since June. Exports fell to China and semiconductor exports to the world moderated to growth of just 3.5%.
17) Japan’s exports in October rose 8.2% y/o/y, slightly below the forecast of up 8.9%. This was a rebound still from the natural disasters that plagued September that closed an airport and impacted factory production and distribution. Imports jumped by 20%, well more than the forecast of up 14%, boosted by higher energy prices.