Positives
1)Initial jobless claims fell to 712k from a revised 787k last week (from 778k originally). That is well below the estimate of 775k but as last week was Thanksgiving, it’s possible that depressed the number. Delayed by a week, Continuing Claims have fallen to 5.52mm from almost 6.1mm in the week prior. The estimate here was 5.8mm. Pandemic Unemployment Assistance fell to 289k from 319k with the continuing level at 8.9mm vs 9.2mm. Keep this in mind with all the data though, this week the Government Accountability Office said “The number of claims has not been an accurate estimate of the number of individuals claiming benefits during the pandemic because of backlogs in processing a historic volume of claims among other data issues.” They said the Labor Department “has reported flawed estimates of the number of individuals receiving benefits each week throughout the pandemic.”
2)At a record low average mortgage rate purchase applications to buy a home jumped 9% w/o/w and 28% y/o/y. I’m not sure how the Thanksgiving holiday impacted the seasonal adjustment here.
3)China said its November state sector weighted PMI data and both manufacturing and services rose m/o/m and were slightly above the estimate. With manufacturing, the PMI rose to 52.1 from 51.4 in October and vs 51.5 in the month prior. The services index rose to 56.4 from 56.2 but the expectations component did moderate by 1.7 pts.
4)China’s Caixin November private sector weighted PMI rose 1 pt m/o/m to 57.8 and that was above the estimate of 56.4. Inflation commentary: “Average operating expenses rose further in the latest survey period, with the rate of inflation picking up notably since October. The latest upturn in input costs was the most marked since August 2010 and sharp overall. Anecdotal evidence generally associated the rise to higher raw material and staffing costs. Firmer demand conditions enabled firms to partially pass on their increased cost burdens to clients in the form of higher output prices. Furthermore, the rate of charge inflation was the steepest for just over 10 1/2 years.”
5)China’s private sector weighted November manufacturing PMI rose 1.3 pts m/o/m to 54.9 and that was above the estimate of 53.5. Caixin said “the economy increasingly returned to normality as fallout from the domestic Covid-19 epidemic faded. Both demand and supply accelerated as the subindexes for total new orders and output reached 10 yr highs. Overseas demand improved substantially as the measure for new export orders stayed in expansionary territory for the 4th month in a row, rising from the previous month.” Just as we saw in the US though, “There are clear signs that manufacturers were adding to their inventories.” Also, all this growth came with rising cost increases. “Inflationary pressures grew as prices rose at a faster pace.”
6)China vehicle sales rose 11.1% y/o/y according to the China Association of Automobile Manufacturers.
7)Here are the other Asian manufacturing PMI’s: Australia revised to 55.8 from 56.1 initially but up from 54.2 in October. South Korea 52.9 vs 51.2, Taiwan 56.9 vs 55.1, Japan 49 vs 48.7, Philippines 49.9 vs 48.5, and Indonesia 50.6 vs 47.8.
8)Hong Kong’s November PMI recovered the 50 market at 50.1 vs 49.8 in October. That’s the 1st time with a 5 handle since March 2018.
9)Australia’s services PMI was revised to 55.1, up slightly from the 1st print and up from 53.7 in October. Japan’s came in at 47.8, up from the 1st read but little changed with October and thus still below 50. But, “Looking forward, firms in the Japanese service sector were confident that activity would rise over the coming year.”
10)The Japanese October employment data was as expected with an unemployment rate of 3.1% vs 3% in September as the rise in unemployed offset the job gain of 30k. The jobs to applicant ratio rose to 1.04 from 1.03. This was 1.57 in January though.
11)Both Japan and South Korea reported better than forecasted October industrial production figures.
12)The UK services PMI was revised to 47.6 from 45.8 initially but that compares to 51.4 in October and 56.1 in September also mostly due to the Covid spread. Also, “positive news in relation to vaccines and hopes of a better stage ahead in the pandemic situation led to much greater levels of business optimism in November.”
13)The UK manufacturing PMI was revised to 55.6 from 55.2 initially and that is up from 53.7 in October. Much of this was inventory restocking. “The weak point was the consumer goods industry, which saw lower output and new order intakes amid depressed household sentiment caused by mounting job losses and the UK re-entering lockdown.” With respect to price pressures, “Input cost inflation accelerated to a 2 yr high in November. Companies responded by raising their average selling prices to the greatest extent in the year so far.”
14)German October retail sales exceeded expectations with a 2.6% m/o/m gain after the drop of 1.9% in September. The estimate was up 1.2%. Household items and online sales led the way.
15)German factory orders in October rose 2.9% m/o/m, about twice the estimate.
16)Spain said its November jobless claims number was better than expected with an unemployment rise of 25.3k vs the estimate of up 55k.
17)The unemployment rate in the Eurozone in October was 8.4%, down one tenth from September and again, job saving programs in some countries have limited the pandemic damage.
18)The November Eurozone CPI print was down .3% y/o/y, the same fall as seen in October. The core rate was up by .2%.
Negatives
1)The implied inflation rate looking out over the next ten years in the TIPS market rose 14 bps in this one week alone. Let’s hope the market is wrong because the last thing an overindebted economy with very rich equity and credit market multiples is higher inflation and the higher rates that come with it.
2)The US dollar index is at the lowest level since April 2018. The only entities that want a weaker dollar are those that export but source their COGS domestically and the Federal Reserve. As for everyone else, it reduces the purchasing power of our consumer dependent economy and imports inflation.
3)November payrolls came in at 245k, well below the estimate of 460k. The two prior months were revised up by a combined 11k. It’s key to look at the private sector because the government shed 99k people after their temporary census work was complete. The private sector added 344k jobs vs the estimate of 540k. After a big upside in October of 2.2mm, the household survey said 74k jobs were lost and joined with the 400k drop in the labor force, the unemployment rate actually ticked down to 6.7% from 6.9%. Thus, a drop for the wrong reasons. The all in U6 rate fell one tenth to 12%. The participation rate fell two tenths to 61.5% but the workweek was unchanged at 34.8. With the help of mix, average hourly earnings surprised to the upside with a .3% m/o/m and 4.4% y/o/y gains. Combine this with hours worked and average weekly earnings were higher by .3% m/o/m and 5.9% y/o/y.
4)The negative in the weekly claims data continues to be the rise in continuing claims for Pandemic Emergency Unemployment Compensation which was up another 60k to 4.57mm.
5)The November ISM services index fell slightly to 55.9 from 56.6 as expected but that is a 6 month low. Prices paid rose to the highest in 8 years. With respect to breadth, 14 of 18 industries saw growth vs 16 in the two prior months. The rest saw a contraction vs two in October, including not surprisingly Art, Entertainment & Recreation. ISM said “In November, there continued to be a slight pullback in the rate of growth in the services sector. Respondents’ comments are mixed about business conditions and the economy. Restaurants continue to struggle with capacity constraints and logistics. Most companies are cautious as they navigate operations amid the pandemic and the aftermath of the US presidential election.”
6)The November ISM manufacturing index fell to 57.5 from 59.3 and that was .5 pt below the estimate. While the number moderated m/o/m, the breadth was a touch better with 16 industries seeing growth vs 15 in October. ISM said simply “The manufacturing economy continued its recovery in November.”
7)Here is what Markit said on prices in their services PMI: “Service providers registered a substantial rise in input prices during November…The rate of input price inflation was the quickest on record. Firms sought to pass on higher input costs to clients through an accelerated increase in selling prices. The rise in output charges was the sharpest since the series began over 11 years ago.”
8)Here is what they said for manufacturing: “Supply chain disruptions led to a sharper and marked rise in input costs during November, as raw material shortages and Covid-19 restrictions pushed prices higher. The rate of cost inflation was the fastest since October 2018. Stronger demand conditions allowed firms to partially pass-through greater costs burdens on to clients, as selling prices rose at the steepest pace for over two years.”
9)Refi’s fell 4.6% w/o/w after a similar rise in the week before. They are up 102% y/o/y. One year ago the average mortgage rate was 3.97% vs 2.92% now.
10)The October Pending Home Sales index fell 1.1% m/o/m, below the estimate of a gain of 1% and follows a 2% drop in September. Versus last year though sales are still strong with an almost 20% rise. Almost all of the m/o/m drop came from the Northeast which saw sales fall by 5.9% m/o/m while the other regions were little changed. In the month prior, the Northeast was the only to see a gain while the other 3 regions fell. The NAR said “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.” With low inventory and historically low mortgage rates, that “has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment.”
11)US vehicle sales in November totaled 15.55mm at a SAAR, below the estimate 16.1mm.
12)The November Eurozone services PMI was revised to 41.7 from 41.3 but that is still well below the 46.9 print in October, 48 in September and 50.5 in August. Blame the selective shutdowns for that.
13)The November Eurozone manufacturing PMI was revised up slightly to 53.8 from 53.6 initially but that is down 1 pt from October. Markit said “Although the rate of expansion cooled from October’s 32 month high amid new lockdown measures, the sustained expansion should help to soften the economic blow of Covid 19 restrictions, which have hit the service sector hard. The survey therefore adds to evidence that the region will avoid in the final quarter of the year a similar scale of downturn recorded in the 2nd quarter.” Germany was the main driver of growth as “Excluding Germany, output growth came close to stalling, and new order inflows fell for the 1st time since June. The resulting divergence between Germany and the rest of the region in terms of production growth is now the widest on record.” On inflation, “Shortages of inputs are meanwhile contributing to higher price pressures, with suppliers’ increasingly able to raise prices amid a sellers’ market for many key inputs. Such a restoration of pricing power bodes well for profits and helps ease broader deflationary concerns.”
14)Singapore’s November PMI slipped to 46.7 from 48.6. India’s services PMI was 53.7 vs 54.1.
15)Thailand’s manufacturing November PMI fell to 50.4 vs 50.8. Vietnam 49.9 vs 51.8, Malaysia 48.4 vs 48.5 and India 56.3 vs 58.9.
16)South Korean said in November exports rose 4% y/o/y, about half the estimate of up 7.5% while imports fell 2.1% as expected. When looking at the value of daily shipments saw export growth was even better, up by 6.3% y/o/y. Tech exports led the growth.