Positives
1)The January unemployment rate declined to 6.3% but for good and bad reasons as the household survey said 201k jobs were added while the size of the labor force fell by 406k. The more comprehensive U6 rate dropped by 6 tenths to 11.1%. Of note was the jump in average hours worked to 35 from 34.7 which then mitigates the need to hire if your existing work force is handling more load. Combine this with a .2% rise in average hourly earnings and out comes a 1.1% m/o/m increase in average weekly earnings and a 7.5% y/o/y jump. Helping too was the mix. There was a decline in those working part time due to economic reasons like not enough work to do or they can’t find full time spots. Temp jobs improved by 81k after a 64k gain in December and hopefully that’s a precursor to permanent hiring soon.
2)Initial jobless claims fell to 779k from 812k (revised from 847k) and that is 50k less than expected. That is also the lowest since late November but the 4 week average was little changed at 848k vs 850k last week. PUA fell to 349k from 404k. Continuing claims totaled 4.59mm vs the estimate of 4.7mm, the lowest since the spike in late March. Continuing PUA, delayed by 2 weeks, fell by 126k after the jump in the week prior. Also delayed by 2 weeks, those continuing to receive pandemic emergency assistance fell by 290k.
3)The January ISM services index rose 1 pt m/o/m to 58.7 and that was 2 pts better than expected. Of the 18 industries surveyed, 14 saw growth, the same number seen in December. Four reported a contraction, also the same amount as seen last month. ISM said “There was continued growth in the services sector for the month of January. Respondents’ comments are more optimistic about business conditions and the economy. Various local and state Covid 19 restrictions continue to negatively impact companies and industries. Production capacity and logistics issues continue to cause supply chain challenges.”
4)Vehicle sales in January totaled 16.63 at a SAAR, above the forecast of 16.15mm and vs 16.27mm in December.
5)The MBA said purchase applications were flat w/o/w but still up 16% y/o/y. All of the gain in mortgage apps on the week was in refi’s which jumped by 11.4% w/o/w and higher by 60% y/o/y. The average 30 yr mortgage rate gave back the 3 bps it gained last week.
6)Japan’s services PMI was revised to 46.1 from 45.7 but that is still down from 47.7 in December.
7)Japan’s final manufacturing PMI January read was 49.8, up .1 from the initial and little changed from the 50 seen in December. With prices, “Input cost inflation strengthened further in January. The pace of inflation was solid overall and was the strongest since May 2019. Manufacturers often linked a rise in average cost burdens with higher raw material and logistics costs. Concurrently, average output charges rose at a quicker pace in January, as firms sought to partially pass on some of the increases in input costs to clients. Supply chain disruptions continued to build during January with average lead times lengthening to the most marked degree since last June.”
8)South Korea’s manufacturing PMI went to 53.2 from 52.9. On inflation, “Latest data pointed to an acceleration in input cost inflation faced by South Korean manufacturers. Input price pressures intensified in January, and rose at the steepest pace for three years. Manufacturers widely reported sharp rises in the cost of raw materials and logistics. Concurrently, output prices increased at the quickest pace since June 2018 as firms sought to pass higher costs on to clients.”
9)Taiwan’s PMI, driven by strength in tech, rose to 60.2 from 59.4. On prices, “Manufacturers signaled the sharpest increase in operating expenses for nearly a decade in January. Survey respondents frequently mentioned that stock shortages and higher transportation costs had driven up input prices. As part of efforts to protect operating margins, companies raised their prices charged at the fastest rate on record.”
10)India’s manufacturing PMI was higher at 57.7 from 56.4, Indonesia’s PMI rose to 52.2 from 51.3 and the Philippines to 52.5 from 49.2.
11)India’s services PMI rose .5 pt m/o/m to 52.8. Hong Kong’s was 47.8 vs 43.5 and Singapore’s improved to 52.9 from 50.5. With Singapore, a growing bellwether in the region particularly as it benefits from those leaving Hong Kong, Markit said “After enduring difficult business conditions throughout 2020, January data brought some positivity as domestic led demand supported the strongest rise in output since April 2019. Policymakers will welcome the expansion, which followed the movement into phase 3 restrictions (resumption of domestic flights).”
12)Australia’s manufacturing PMI was left unrevised at 57.2 vs 55.7 in December. With respect to inflationary pressures, “the restocking of warehouses at a time of constrained supply came at a cost of higher input prices, which rose to the greatest extent recorded in the survey’s history. Average selling prices also increased, the rate of inflation gathering pace slightly to register the largest monthly rise since March, as producers sought to pass these higher costs on to customers.”
13)The January final read of the Eurozone services PMI was 45.4 vs 45 initially but down from 46.4 in December. The last time we saw a print above 50 was back in August. The selective shutdowns can be blamed of course. Though, “Looking ahead to the coming 12 months, confidence about the future dipped since December but remained comfortably in positive territory. Optimism was highest in Italy, followed by Spain.”
14)The January Eurozone manufacturing PMI was revised to 54.8 from 54.7 but down a touch from 55.2 in December. “Supply chain delays worsened during the month to a degree only exceeded once, during the global lockdowns early last year, in more than two decades of survey history.” In response, “prices paid for inputs increased markedly. January’s survey showed that input costs rose to the greatest degree in nearly three years with Germany, the Netherlands and Italy recording the sharpest monthly increases. Whilst firms sought to pass on these higher costs on to clients, the overall rate of inflation was modest and noticeably weaker than input costs.”
15)The UK manufacturing PMI was revised up to 54.1 from the 1st print of 52.9. The estimate was for no change but that is still down from 57.5 in December. UK manufacturers had success in passing on input price inflation that rose to a 4 yr high as “increased costs were passed on to clients leading to the steepest inflation of selling prices for 28 months.” The rise in input costs reflected “raw material shortages, transport delays and market forces.”
16)Putting together all the Eurozone GDP reports has the Q4 number at down .7% q/o/q and by 5.1% y/o/y vs the estimate of down .9% and 5.3% respectively.
17)//www.youtube.com/watch?v=JVQbWNgvNgo
Negatives
1)Payrolls in January grew by 49k, about half the estimate of 105k with the private sector contributing just 6k vs the forecast of 163k. Also of note, the two prior months were revised down by a combined 159k. Keeping the headline number above zero was the hiring in public education. The participation rate fell one tick to 61.4% while the employment to population ratio rose one tick to 57.5%. The diffusion index, which nets out the number of industries adding jobs relative to those shedding, fell below 50 at 48.1 from 61.9 in December. There was another rise in the long term unemployed, those still looking more than 27 weeks which now is above 4mm. Manufacturing shed 10k after a gain of 31k in December. Construction also lost jobs, by 3k after a 42k person increase in the month prior. Jobs were lost in retail and leisure/hospitality for obvious reasons.
2)While Markit too said the US service sector improved further in January, inflationary pressures intensified too. Markit said “Service providers registered another marked increase in input prices at the start of 2021. The rise in cost burdens was the sharpest since data collection began, and the rate of increase has now accelerated for three successive months. Higher input prices were reportedly linked to greater fuel, transportation and supplier costs, especially for PPE. In line with strong client demand and a spike in input prices, service providers recorded a steep increase in selling prices during January. The rate of charge inflation was the 2nd quickest on record, only slower than the peak seen in November.”
3)The January US ISM manufacturing index fell to 58.7 from 60.5. The estimate was 60. Price pressures intensified as prices paid rose another 4.5 pts to 82.1, around a 10 yr high. “Aluminum, brass, copper, chemicals, steel, soy and corn products, petroleum based products including plastics, transportation costs, electrical and electronic components, corrugate, wood and lumber products all continued to record price increases.” Of the 18 industries surveyed, 16 saw growth, the same number seen in December. For the 2nd month, all 18 industries saw higher prices paid. The ISM said “The manufacturing economy continued its recovery in January. Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential. However, panel sentiment remains optimistic, similar to December levels.”
4)Q4 productivity fell 4.8% q/o/q annualized, below the estimate of down 3%. This follows a rebound in the two prior quarters. On a y/o/y basis, productivity did rise by 2.5% as while output fell, hours worked fell by more. Because of the drop in productivity vs Q3, unit labor costs jumped by 6.8% but after the 7% drop in Q3.
5)Off a record high in absolute terms, the US trade deficit in December narrowed by $1.5b but that wasn’t as much as expected.
6)Charlie Evans would welcome a 2.5% inflation rate and said 3% is “not a problem.” The 10mm that haven’t gotten their jobs back and those living paycheck to paycheck would beg to differ.
7)The December German factory orders figure missed the mark with its 1.9% m/o/m drop vs the estimate of down 1%. This follows a 2.7% gain in November (revised up by 4 tenths). We know there was a new round of covid restrictions in December which impacted business. Orders though were still up 6.4% y/o/y.
8)Headline CPI in the Eurozone for January rose .9% y/o/y, above the estimate of up .6% and the core rate jumped by 1.4% y/o/y, well more than the forecast of up .9%.
9)The Eurozone retail sales figure for the December holiday month was a bit light relative to expectations. Sales grew 2% m/o/m vs the estimate of 2.8% and that is after a 5.7% drop in November (though revised up by 4 tenths).
10)China’s state sector focused manufacturing PMI fell to 51.3 from 51.9. The estimate was 51.6. Services dropped to 52.4 from 55.7 and less than the forecast of 55. China’s private sector weighted manufacturing PMI fell to 51.5 from 53. With prices, “Low stock availability and higher raw material prices drove a further increase in operating expenses. Moreover, the rate of inflation eased only slightly from December’s 3 yr high. As part of efforts to protect operating margins, manufacturers raised their selling prices at the steepest rate since June 2018.”
11)China said its January Caixin services PMI fell to 52 from 56.3 and that was 3.5 pts below expectations. This is a 9 month low and taken with the state sector PMI and the Caixin manufacturing index all show a moderation in growth in January. Looking ahead, “Although business confidence regarding the 12 month outlook for activity remained strong in January, the degree of positive sentiment weakened since December. Notably, the level of optimism was the lowest recorded since last September. Firms widely expect customer demand to recover and activity levels to expand once the Covid-19 pandemic comes to an end. However, uncertainty over the trajectory of the virus weighed on overall confidence.”
12)Vietnam’s January PMI slipped to 51.3 from 51.7, Malaysia’s to 48.9 from 49.1 and Thailand to 49 from 50.8.
13)Australia’s January services PMI was 55.6 from the initial print of 55.8 and while down from 57 in December is still well above 50 as Covid almost doesn’t exist in Australia.
14)The Reserve Bank of Australia kept interest rates unchanged as expected at essentially zero but did instead add $100b of QE at a rate of $5b per month. This even as Governor Lowe said their economic recovery was “well under way and has been stronger than was earlier expected.”