The Boock Report

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Succinct Summation of the Week’s Events – 9/10

Positives

1)The Atlanta Fed’s Wage Growth Tracker is finally catching up to the reality on the ground as it showed 3.9% y/o/y growth in August, matching the quickest since 2008. Great of course for employees.

2)Initial claims totaled 310k, 25k less than expected and down 35k from last week. This brings the 4 week average down to 340k from 356k.  Those initially filing for PUA fell to 96k from 103k. Continuing claims, right before the extended kind fully expires, were 2.78mm, 43k above the estimate but down from a revised 2.81mm last week. Delayed by two weeks, continuing PUA fell by 323k after last week’s 409k rise. There was a slight uptick in the number of people still receiving emergency benefits.

3)In July, so yes somewhat dated, there were 10.9mm job openings, a fresh record high. At the same time, hiring’s fell by 160k, although after a 850k increase in June and vs 10k in May. Layoffs picked up by 105k but very well could have been related to the work stoppages that many industries are seeing because there are not enough supplies and in turn the difficulty in fully staffing up which in turn reduces hours. See auto sector, construction and retail for example. Quitters totaled 107k and the quit rate held at 2.7%, just off the recent high of 2.8%.

4)The pass thru to the Chinese consumer of spiking wholesale prices remains muted as August CPI rose .8% y/o/y, two tenths less than expected and vs 1% in July. A factor here though was the 4.1% drop in food prices. Prices ex food and energy were up by a still modest 1.2% y/o/y.

5)Taiwan just can’t make enough semis but are still pumping out what they can. Aggregate exports in August rose 27% y/o/y, above the estimate of 23%. Imports jumped by 46%, well more than the forecast of up 30%. 

6)China also reported better than expected trade figures. Exports rose 25.6% y/o/y vs the estimate of up 17.3%. Imports grew by 33.1%, above the estimate of up 27%.

7)The ECB has finally decided to temper the pace of bond purchases.

8)The Reserve Bank of Australia chose to follow thru with its taper, cutting weekly bond purchases to A$4 vs A$5 currently and will extend this pace to February.

9)I’m posting this again in case you missed it in a sign that we’re going to continue to push thru Covid, //m.youtube.com/watch?v=SowZGXMuOac

10)Opening day of the NFL is finally here, //www.youtube.com/watch?v=etiXPf1op0U

Negatives

1)The Atlanta Fed’s Wage Growth Tracker is finally catching up to the reality on the ground as it showed 3.9% y/o/y growth in August, matching the quickest since 2008. Rising costs in the biggest expense line if not offset by productivity gains will lead to lower profit margins and/or higher prices to customers.

2)Headline PPI in August rose .7% m/o/m and .6% core. The core rate was as expected while the headline was one tenth more. Versus last year, headline PPI is up 8.3% and by 6.7% ex food and energy. Core goods price rose .6% m/o/m after 4 straight months of 1% increases and an .8% rise in March. Thus the annualized rate of PPI gain for core goods over the past 6 months is 10.8%. Services prices were up .7% m/o/m and rising at an 8.4% annualized rate over the past 6 months. We saw a 2.8% m/o/m increase in the ‘transportation and warehousing’ category after a 2.7% spike in July. This is running at a 25% annualized pace over the past half year. Inflation in the pipeline is still pretty robust. For processed goods, core prices rose 1.3% m/o/m and are up 26% annualized over the past 6 months. Unprocessed core goods prices were flat for the 2nd month but are still up 28% over the past 6 months annualized.

3)There was no change in the average 30 yr mortgage rate w/o/w at 3.03%. Purchases were basically flat, down .2% but are lower by 18.1% y/o/y on tough comps and for other reasons like inventory and that prices are up almost 20%. Refi’s fell by 2.8% and are down for the 3rd week in the past 4. They are also lower by 3.6% y/o/y.

4)With persistent global supply problems, China said its August PPI rose 9.5% y/o/y, above the 9% estimate and vs 9% in July. While some commodity prices have moderated, we still have aluminum, steel, nickel, and coal prices ripping higher along with transportation costs.

5)The Japan Economy Watchers survey fell sharply m/o/m but this you can blame on Delta because of the specific restrictions put in place in response. This index fell to 34.7 from 48.4 and that is the lowest since January. The outlook though only fell slightly.

6)In Japan, household spending in July rose .7% m/o/m, well below the estimate of up 2.4% and only partially offset by an upward revision of .8% to June.

7)The German ZEW September investor confidence index on their economy softened to 26.5 from 40.4 and below the forecast of 30.3. The Current Situation though rose to 31.9 m/o/m from 29.3 but just below the estimate of 34. It’s not Delta that is being blamed here for the fall in Expectations, it is the supply side. ZEW said “Global chip shortage in the auto sector and shortage of building material in the construction sector have caused a significant reduction in profit expectations for these sectors. This may have had a negative effect on economic expectations.”