Positives
1)The preliminary September UoM consumer confidence index rose 4.8 pts m/o/m to 78.9 and that was above the estimate of 75. Both Current Conditions and Expectations were higher. One year inflation expectations moderated by 4 tenths to 2.7% but that is still above where it was in February at 2.4%. The internal components were mixed with employment expectations better but income weak. Spending intentions were uneven. Attention is shifting towards the election and that is influencing the answers to questions asked.
2)Continuing claims, delayed by a week in its reporting, fell to 12.6mm from 13.5mm last week as we have another week without the extra $600 of benefits which hopefully is encouraging people to take one of the 6mm+ jobs that are available as seen in the July JOLTS data. Those receiving PUA fell to 658k from 868k in the week prior, also hopefully helped by the reduced incentive to collect benefits.
3)Home builder sentiment got more giddy in September with the NAHB builder survey index rising to 83 from 78 and 5 pts better than expected. It’s a record high. The Present Situation rose 4 pts to 88, the Future Outlook was up by 6 pts to 84 and Prospective Buyers Traffic was up by 9 pts to 73. The positive: “the suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates.” The negative: “Lumber prices are now up more than 170% since mid April, adding more than $16,000 to the price of a typical new single family home.”
4)The September NY manufacturing index rose to 17 from 3.7 and that was well better than the estimate of 6.9. As for the 6 month outlook, this component rose to 40.3 from 34.3 and vs 38.4 in July and 56.5 in June. Positively, capital spending plans got back to its March levels.
5)US industrial production in August when including the upward revision to July was about as expected with the manufacturing component up for a 4th month after the tough March and April.
6)The new Japanese PM seems less concerned about the BoJ’s maniacal obsession with achieving an inflation rate of 2% and is more focused on generating stronger economic growth.
7)Thanks in part to lower travel prices, encouraged by the government to encourage tourism, Japanese August CPI ex food and energy fell by .1% m/o/m as expected but comes after a .4% jump in July.
8)The Japanese trade data for August remained weak but a bit less so from July. Exports fell 14.8% y/o/y, a touch better than the estimate of a 16.1% y/o/y decline. Auto exports fell by 19.4% but not as bad as the 30% plunge in July. Exports to the US and EU fell about 20% but rose by 5.1% to China. Imports were down by 20.8% y/o/y, more than the forecast of a 17.8% drop.
9)Chinese retail sales in August rose .5% y/o/y vs the estimate of no change but that comes after a 1.1% drop in July. Industrial production also beat by 5 tenths with its 5.6% y/o/y gain as factories are reopened. Fixed asset investment ytd y/o/y though fell by .3% but about as expected. Property remains strong though with a 4.6% y/o/y increase vs the 4.1% expected gain and vs 3.4% in July.
10)Singapore, a good proxy for global trade, saw non oil exports rise 10.5% m/o/m, well better than the estimate of up 2.2%.
11)Thanks to both part time and full time hiring and the full reopening of China, Australia said its August jobs number was well better than expected, rising by 111k vs the estimate of a decline of 35k. The unemployment rate fell to 6.8% from 7.5%.
12)CPI in the UK in August rose more than expected both headline and core but are still benign. Headline CPI was up .2% y/o/y vs the estimate of no change while the core rate was higher by .9% y/o/y, almost twice the consensus of up .5%. The modest reads were kept in check by the government’s subsidization of meals in the Eat Out to Help Out campaign. On the other hand, PPI fell more than estimated.
13)For the 3 months ended July in the UK 12k jobs were lost instead of the estimate of -118k. Much of this is due to the job subsidization program in place that has kept about 10mm employees on the payroll. It is also why the unemployment rate was only 4.1% but that is up from 3.9% in the month prior.
14)The Bank of France’s business sentiment index for August jumped to 106 from 99. The estimate was 100. The internals though were mixed. Industrial activity slowed from July but where strength was still seen in autos as inventories are rebuilt. Also, “Services sector activity continued to firm, but at a slower rate than the previous month. Growth was seen almost across the board, and particularly in the transport and temporary work sectors. Publishing and IT activities nevertheless lost ground.” Construction “remained buoyant.”
15)Industrial production in the Euro area in July was about as expected with the m/o/m recovery continuing but activity still down 7.7% y/o/y after a 12% drop in June.
16)Happy new year to those that celebrate.
Negatives
1)The Fed’s new forward guidance of zero rates for the next three years is not ‘powerful’ stimulus and instead is the exact opposite as it delays economic behavior due to the lack of urgency to do business. I’ll leave it to the WSJ editorial board on the balance with respect to rates and inflation: “The Fed’s forecast sees healthy growth continuing for three more years, with unemployment falling to 4% in 2023, GDP growing at 2.5%, inflation at 2% but interest rates still at zero. Huh?… Mr. Powell is now the anti-Volcker, who will do whatever it takes to spur inflation.”
2)The BoE is contemplating installing negative interest rate policy. The UK bank stock index in response closed the week down 5%.
3)The CRB foodstuff index is at a 13 month high. The CRB raw industrials index is 2% from a 16 month high.
4)Initial jobless claims totaled 860k, 10k more than expected but down from 893k last week (revised from 884k).
5)The September Philly manufacturing index fell slightly to 15 from 17.2 in August but that was as expected. Lean inventories is leading to higher new orders. Prices Paid jumped almost 10 pts to the highest level since September 2019 and those received were 6 pts higher to 18.4, the most also since September 2019. Capital spending plans rose 8 pts.
6)In the first month without the added unemployment benefits of $600 per week, August retail sales fell .1% ex autos, gasoline and building materials. That was below the estimate of up .3% and July was revised down by 4 tenths to a gain of .9%.
7)Mortgage applications were down slightly on the week. Purchases fell .5% w/o/w and the y/o/y gain slowed to 6%. Refi’s fell by 3.7% w/o/w and the y/o/y gain moderated to 30%.
8)Housing starts in August totaled 1.42mm, about 70k less than expected and down from 1.49mm in July. The decline though was all in multi family as starts here fell by 116k m/o/m after jumping by 137k in July. Single family starts however rose above 1mm for the 1st time since February at 1.02mm from 981k in July. With respect to permits, the story was the same with a rise in single family, also above 1mm and a drop in multi family after a July jump.
9)In August, import prices jumped by .9% m/o/m after a 1.2% rise in July. Ex petro they were up by .7%, more than twice the estimate of up .3%. On a y/o/y basis, prices ex energy are higher by 1.1% which is the most since July 2018. This comes as the euro heavy dollar index has fallen for 5 straight months, particularly lower by 1.3% in August and 4.2% in July.
10)In Europe, we saw a poor auto sales number for August as they fell 19% y/o/y.
11)The German September ZEW index saw a gain to 77.4 from 71.5 and that was well better than the forecast of 69.5. Also, the Current Situation component rose to -66.2 from -81.3 and that was 6 pts better than forecasted. ZEW said that this data is “signaling that the experts continue to expect a noticeable recovery of the German economy. Stalled Brexit talks and rising COVID cases could not dampen the positive mood. However, the still negative outlook for the banking sector reveals fears of a rising number of loan defaults in the coming six months.”
12)In the UK, August jobless claims jumped by 74k after a rise of 70k in July (but revised down by 24.5k). Also, about 700k jobs have been lost since March thru August and those collecting unemployment benefits is now 2.7mm, twice the pre pandemic level.
13)Can there be a more pathetic organization than the New York Jets. Ugh.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.