Positives
1)Initial jobless claims totaled 213k, 14k below expectations and vs 218k last week which was revised down by 4k. The 4k week average fell to 224k from 232k and that’s the lowest since mid June. Continuing claims were 1.403mm, well under the estimate of 75k and last week was revised down by 72k to 1.401mm.
2)The August Cass Freight Transportation Index showed shipments were up 3.6% y/o/y and by 5.5% m/o/m. Cass made it a point to highlight why this figure is better than other transportation data points that are out there by saying the spot market is where the real weakness is (which we’ve been hearing for many months now) and “to some extent, the stronger Cass data reflect the ongoing shift from spot to contract.” And their caveat to the strength and the factors for it, “The improvement may not be sustainable, especially as pressure increases on interest rate sensitive sectors like capital goods and housing, but the summer improvement likely reflects a combination of: successful discounting campaigns by retailers, seasonal inventory building ahead of the holidays, easing supply constraints, particularly in auto production, and reversal of China lockdown effects in June/July.” With respect to freight rates, they were up by 16% y/o/y in August but that is a sharp slowdown from the 26% y/o/y pace seen in July and they were down by 4.4% m/o/m. “Lower fuel prices were a factor in the decline, but with looser truckload market conditions, further deceleration is very likely. With the tight supply/demand balance in US trucking markets easing considerably this year, industry rates are topping out and set to slow sharply in the months to come.”
3)Rails and its union employees come to a tentative agreement.
4)With respect to rents, Apartments.com(different than Apartmentlist.com) said “After a 20-month run of positive monthly growth dating back to December 2020, the market finally witnessed negative asking rent growth on a monthly sequential basis from July to August, with rents down 0.1% in July,” said Jay Lybik, National Director of Multifamily Analytics, CoStar Group. “We’re seeing a complete reversal of market conditions in just 12 months, going from demand significantly outstripping available units to now new deliveries outpacing lackluster demand.”
5)The NY Fed’s inflation expectations survey saw a drop in one yr inflation expectations to 5.7% from 6.2% and the 3 yr going to 2.8% from 3.2%, it’s being attributed to lower expectations for gas, food, home prices and rental rates.
6)The NFIB August small business optimism index rose to 91.8 from 89.9. That happens to be exactly what the 6 month average is. Here was the bottom line from the NFIB, “The small business economy is still recovering from the pandemic while inflation continues to be a serious problem for owners across the nation. Owners are managing the rising costs of utilities, fuel, labor, supplies, materials, rent and inventory to protect their earnings. The worker shortage is impacting small business productivity as owners raise compensation to attract better workers.” As for the inflation, the NFIB said “Inflation remains the #1 problem for small business owners. Gas is cheaper, but not much else.”
7)Australia, whose economy is very sensitive to commodity prices and China, saw an increase in employment of 33.5k, about in line with the estimate of 35k. Their participation rate rose 2 tenths to 66.6% and their unemployment was up by one tenth to 3.5%.
8)On the wholesale PPI side in the UK for August, lower commodity prices, particularly brent crude, helped with the drop m/o/m in both output and input charges where increases were expected.
9)While this could go under the negative column because they’ll be missed, Roger Federer joins the other legend Serena Williams, in calling it quits and we celebrate instead their amazing careers. //www.youtube.com/watch?v=mExHw1oTP8Y, //www.youtube.com/watch?v=dsWAqcet4LU
Negatives
1)In nominal terms in August, core retail sales were unchanged m/o/m, well under the estimate of up .5%. July was revised down by 4 tenths to a .4% gain but June was revised up by .4%.
2)Headline CPI rose .1% m/o/m in August instead of falling by .1% as predicted. The core rate was higher by .6% m/o/m, double the estimate. Versus last year, headline inflation rose 8.3% y/o/y and the core rate was higher by 6.3%. While energy prices fell 5% from July (9% of CPI), food prices rose .8% (14% of CPI). Service prices ex energy rose .6% m/o/m and 6.1% y/o/y and is the main factor in the upside to the core print. On the goods side, core goods prices were up .5% after a .2% increase in July and .8% in June. They are up 7.1% y/o/y.
3)August PPI was down .1% headline as expected but up by .4% ex food and energy, one tenth more than forecasted. The headline gain was 8.7% vs 9.8% in July. The core rate was higher by 7.3% vs 7.6% in the month before.
4)Both the NY and Philly September manufacturing surveys are in contraction. The NY figure was -1.5, after the disaster August print of -31.3, but that wasn’t as bad as the estimate of -12.9. The Philly print of -9.9 is after a +6.2 read in August and that was below the estimate of +2.2. It’s negative for the 3rd month in 4.
5)The preliminary September UoM consumer confidence index rose to 59.5 from 58.2 but just below the estimate of 60. Expectations rose by 1.9 pts and the Current Conditions component was up by .3 pts. One yr inflation expectations moderated to 4.6% from 4.8% which is back to where it was last August. It got as high as 5.4% in March and was at 2.50% in January 2020. Inflation expectations 5-10 yrs out fell one tenth to 2.8%. That’s also back to the level seen last summer. It peaked at 3.10% in January and was at 2.50% in January 2020. Employment expectations did improve by 5 pts to 91 and off the July low of 77 but it was 109 six months ago. The income component fell 7 pts but after rising by 6 last month. Interestingly, and in the face of evidence growing otherwise, business expectations improved. Spending intentions were unchanged m/o/m across the board for vehicles, homes and major household items. The bottom line from the UoM, “All told, the tentative slowdown in inflation last month has not, as of yet, translated to meaningful improvements in how consumers feel about their financial situations. About 42% of consumers continue to cite high prices eroding their living standards, down from a peak of 49% in July but more than double the 18% from a year ago.”
6)The number of earnings pre-announcements are picking up the pace.
7)The Business Roundtable said that its Q3 2022 CEO Economic Outlook Survey dropped 12 pts from Q2 to 84, the lowest since Q2 2020 but which is still well above the 50 level that is breakeven between expansion and contraction. Plans for hiring dropped 11 pts, those for capital investments declined by 11 pts and expectations for sales fell by 12 pts. The Roundtable said “The results are consistent with domestic economic conditions, including high inflation and higher interest rates, and persistent global headwinds from the war in Ukraine, including elevated global energy prices and the unfolding energy crisis in Europe.”
8)With the average 30 yr mortgage rate now above 6% according to the MBA at 6.01%, refi’s fell again by 4.2% and are down 83% y/o/y. Purchase apps were flat w/o/w and now lower by 29% y/o/y.
9)US import prices fell in August but not as much as expected.
10)US IP for August was down by .2% m/o/m vs the forecast of flat and July was revised down by one tenth. Manufacturing in particular was about as expected when including the revisions. Capacity utilization was at 80% vs 80.2% in the month prior.
11)In July business inventories data, the inventory to sales ratio rose to 1.32, the highest since February 2021.
12)Singapore said its August non-oil domestic exports fell by 3.9% m/o/m, more than the forecast of down 3%. Shipments to China fell as they did for pharma and electronic products.
13)How do you get your imports to rise by 50% y/o/y? Let your currency sharply depreciate and then import most of your energy needs. This is what happened in Japan in August. Exports, also boosted by the weak yen and higher auto shipments, rose by 22%, just under the estimate of up 24%. The combination drove a record high trade deficit in August for Japan.
14)Japan said that PPI rose 9% in August y/o/y from 8.6% last month. On a rate of change basis, it peaked at 9.8% in April.
15)Weighed down by falling real wages, UK retail sales ex fuel oil in August fell by 1.6% m/o/m, worse than the estimate of down .7%. They are down 5% y/o/y. The ONS said “All main sectors (food stores, non-food stores, non-store retailing and fuel) fell over the month.”
16)The UK said headline CPI rose 9.9% y/o/y in August, about as expected and vs 10.1% in July. Volatility in energy prices are certainly the swing factor here. The core rate was higher by 6.3% y/o/y, one tenth more than expected and up from 6.2% in July. The retail price index, which gets used for pricing inflation linkers, was higher by 12.3% y/o/y.
17)Also in the UK, we saw weaker than expected July job growth and a rise in August jobless claims. Earnings growth though continued to improve but at 5.2% y/o/y ex bonuses, it still is about half the rate of inflation. Also, the unemployment rate fell to the lowest since 1974 but all because of a sharp drop in the size of the labor force.
18)The German ZEW survey weakened to -61.9 from -55.3 and that was 2.4 pts softer than expected. Current Conditions fell a sharp 13 pts. The ZEW stated the obvious challenges, “The prospect of energy shortages in winter has made expectations even more negative for large parts of the German industry. In addition, growth in China is assessed less favorably.”