1)Delayed by a week in its reporting, continuing claims fell to 5.51mm from 5.76mm and that was 200k less than expected. Some though have benefits that are now expiring.
2)After falling 5% last week which followed a 9% rise in the week prior, the MBA said purchase applications rose 1.8% w/o/w and remain up a solid 27% y/o/y. Refi’s rose 1.4% w/o/w and are higher by 105% y/o/y with mortgage rates taking another leg lower at 2.85% for a 30 yr fixed vs 2.90% last week.
3)The Cass Freight index saw shipments rise 2.7% y/o/y in November “after turning positive in October for the 1st time in almost two years.” They said an easy comparison with November last year helped but they also said, “After declining in 20 of the 22 months thru August, recovery is under way in LTL with three straight months of accelerating growth.”
4)Housing starts in November totaled 1.55mm, above the estimate of 1.54mm vs 1.53mm in October which was left mostly unrevised. Single family starts were about unchanged m/o/m, rising by 5k to 1.19mm. Multi family starts were up by 14k m/o/m to a 4 month high. As for permits, single family rose by 15k m/o/m and multi family was higher by 80k m/o/m.
5)Core import prices in November fell .1% m/o/m but are still up 1.6% y/o/y and are also higher by 1.6% y/o/y ex petro. The headline figure of down 1% was all due to a 27% fall in petro import prices. The 1.6% y/o/y increase in import prices ex energy is just one tenth off the highest since May 2018.
6)US industrial production was up by .4% m/o/m in November, one tenth more than expected but October was revised down. Lower utility output was a drag while manufacturing was better than forecasted.
7)The German December IFO business confidence index rose to 92.1 from 90.9 and vs 92.5 in the month prior and that was 2.1 pts better than expected with both components up modestly. The IFO said succinctly “While the lockdown is hitting certain sectors hard, overall the German economy is showing resilience.”
8)The UK December CBI industrial orders index increased by 15 pts m/o/m to -25. The estimate was for no change. The CBI said “In a positive sign for the pipeline of manufacturing activity, total order books in December improved to their strongest since February. By contrast, despite a mild improvement, export order books remained poor. The rollout of the Covid vaccine brings hope that conditions for manufacturers will improve in the coming months.”
9)On the consumer side, December confidence in the UK rose by 7 pts m/o/m to a still below zero figure of 26. The estimate was -31. Vaccine optimism was the main help.
10)French business confidence in December jumped to 91 from 79 and that was well better than the estimate of 81. As the manufacturing component was little changed, the improvement was driven by services and retail as things reopened again after the November restrictions. The vaccine news also of course helps.
11)The Eurozone December composite PMI index, that came before the shutdowns Germany and some others have announced thru mid January, saw the services PMI jumped to 47.3 from 41.7 while manufacturing was higher by 1.7 pts to 55.5. This brought the composite index to 49.8 from 45.3 and above the estimate of 45.7. It looks like the vaccine news was what brought out the optimism, deservingly so. Markit said “Companies have become increasingly optimistic about the year ahead, with vaccine rollouts expected to help restore businesses to more normal trading conditions as 2021 progresses.” Here is the caveat though, not surprisingly, “However, while vaccines mean there’s light at the end of the tunnel, the near term still looks very challenging for many consumer facing companies. Although manufacturing is reporting strong growth, fueled by rising exports and a booming performance from Germany in particular, the service sector remains in decline amid ongoing social distancing restrictions.” With respect to the inflation commentary in the Eurozone PMI, “Average rates charged for goods and services meanwhile fell at the slowest rate since prices began falling back in March, linked in some cases to strengthening demand and improved pricing power, but also due to increased cost pressures in the manufacturing sector. Manufacturers’ input costs rose in December at the fastest rate for just over two years, linked in many cases to increasingly widespread shortages for many key raw materials.”
12)The UK December composite PMI rose to 50.7 from 49 with both manufacturing and services up m/o/m with the latter finally back to almost 50. Markit said that the data is “adding to signs that the hit to the economy from the 2nd wave of virus infections has so far been far less harsh than the 1st wave in the spring.” We also of course have vaccine optimism. Markit said manufacturing was helped by “reviving global trade and a temporary boost from Brexit-related stockpiling, which reportedly buoyed order books and exports during the month.” On inflation, “A robust and accelerated rise in input prices added to pressure on UK private sector firms during December. The latest increase in average cost burdens was led by the steepest rate of manufacturing sector input price inflation for 2 1/2 years.”
13)The UK jobs figure for the 3 months ended October saw a jobs loss of 143k but that wasn’t as bad as the estimate of -250k. About 1/3 of the lost jobs since March has been in the leisure and hospitality business. The unemployment rate ticked up by one tenth to 4.9% but the forecast was 5.1%. Earnings growth ex bonus’ was up 2.8%, an increase from 1.9% in the month prior but some of this is mix with lower paying leisure/hospitality jobs obviously hindered.
14)Japan said its November CPI fell .3% y/o/y ex food and energy as expected. This is due in part to the government’s discount program meant to incentivize travel. Hotel prices in response fell by 34%. Lower energy prices also weighed on the headline figure which fell by .9%.
15)While we don’t know what comes of it, the BoJ is reassessing current policy in order to make it “more effective and sustainable.” They’ve already broken the JGB market, killed its banks and own almost the entire stock ETF market so it would seem to be a good time to reevaluate.
16)The Japanese quarterly Tankan report saw definite improvement from Q3. The large company manufacturing index rose to -10 from -27 and that was 5 pts better than expected. The outlook was higher by 9 pts. The services side also saw a gain, of 7 pts q/o/q and also for the outlook. Smaller companies both in manufacturing and services saw better confidence as well. The only fly was the capital spending plans which went negative unexpectedly from the positive print in the quarter before.
17)China’s November data was all in line with expectations with modest improvement from October. Retail sales rose 5% y/o/y vs 4.3% in October. Industrial production was higher by 7% y/o/y vs 6.9% in the month prior. Fixed asset investment grew by 2.6% ytd y/o/y.
18)Job growth in November in Australia jumped by a net 90k and that was more than double the estimate of up 40k with most of the contribution from full time hiring. The unemployment rate fell by 2 tenths to 6.8% and the participation rate rose to 66.1% from 65.8%.
19)Australia’s composite index rose to from 55.1 and it was basically all from the services side which rose by 2.3 pts m/o/m to 57.4. Manufacturing was little changed at 56 vs 55.8.
1)My readers know my thoughts on Fed policy but to summarize I feel like they are now driving 150 mph in a 30 mph speed zone. It’s ok until it isn’t.
2)The size of the Fed’s balance jumped by $119b w/o/w to a fresh record high of $7.36 Trillion. That is the biggest one week increase since May even though we now have highly effective vaccines with mass inoculation just a few months away.
3)Initial jobless claims rose again to 885k from 853k last week and that was well above the estimate of 818k. That’s also the highest since early September. The 4 week average rose to 813k from 778k. Pandemic Unemployment Assistance rose again to 455k from 415k and those continuing to receive it was higher by almost 700k to 9.2mm. Those continuing to receive Pandemic Emergency Unemployment Compensation rose another 268k to 4.8mm. Totaling all of those receiving continuing claims of some sort came in at 19.5mm.
4)The US December manufacturing and services PMI from Markit fell to 55.7 from 58.6 with most of the weakness in services as this component fell to 55.3 from 58.4. Manufacturing was little changed at 56.5 from 56.7. With services, “As reported virus cases increased once again, firms stated that restrictions and softer demand weighed on total activity. The rate of expansion in new business also lost momentum as clients, especially those of consumer facing firms, reportedly expressed greater hesitancy in placing orders. Moreover, reimposed lockdowns in many key export markets led to the first fall in exports since May.” On inflation, “Meanwhile, service providers registered previously unseen increases in input prices during December. The rate of cost inflation accelerated once again to a new record high, as supplier prices and the soaring cost of PPE pushed cost burdens up. Firms only partially passed on higher prices, however, in an effort to boost sales.” With manufacturing, “Although expansions in output and new orders remained strong overall, the headline figure was broadly sustained by the greatest deterioration in vendor performance since data collection began in May 2007. Supplier delivery times were extended following severe raw material shortages and supplier capacity and logistical constraints. Consequently, input prices increased further in December, and at the sharpest rate since April 2018. Firms were able to partially pass on higher costs to clients, however, as selling prices rose at the steepest pace since April 2011.”
5)The December Philly manufacturing index fell about 15 pts m/o/m to 11.1, almost half the estimate of 20. That’s the lowest level since it was negative in May. Looking at the 6 month outlook saw a moderation in business expectations to 39.2 from 44.3 and vs 62.7 in October. Capital spending plans fell to a 4 month low. The Philly Fed said, “Responses to the Manufacturing Business Outlook Survey suggested a slower expansion for the region’s manufacturing sector in December.”
6)The NY manufacturing index for December fell slightly to 4.9 from 6.3. The estimate was for no change. The 6 month business outlook rose 2.4 pts to 36.3 but that just puts it back to the 6 month average. After jumping last month, expectations for tech spending gave back almost all of that rise while cap ex on other things fell slightly.
7)The December NAHB home builder index moderated from a very hot record high of 90 to a still hot 86. The estimate was 88 and the breakeven between expansion and contraction is 50. Both the Present Situation and Expectations components fell 4 pts m/o/m. Prospective Buyers Traffic slipped by 4 pts too. The NAHB said “Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising. Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction.” Also lifting construction costs are “material availability and a persistent skilled labor shortage.”
8)Retail sales in November at the control group level (ex auto’s, gasoline and building materials) fell .5% vs the estimate of a .2% gain. Also, October was revised down by 2 tenths. From October, the sales decline was broad based.
9)Foreigners resumed their selling of US Treasuries in October, by $20b and one has to wonder with the persistent weakness in the dollar whether this pace will accelerate as any benefit of a higher coupon for those unhedged gets offset, and then some, from the lower dollar.
10)Japan’s manufacturing and services PMI in December was flat at 48 vs 48.1 with manufacturing up a touch while services fell a bit. With Japan Markit said “The Japanese private sector continued to struggle in December, with flash PMI survey data signaling a further deterioration in business activity in the final month of the year. New orders also declined amid a further reduction in new export orders.” There is hope though with the vaccine upon us as “Japanese private sector businesses were optimistic that business conditions would improve in the year ahead.”
11)The UK November jobless claims figure rose 64.3k after falling by a like amount in October.