1).Pending home sales in August rose 1.6% m/o/m, a touch above the estimate of up 1%. This follows a 2.5% drop in July and 2.8% rise in June. Sales gains were led by a jump out West.
2) New home sales in August totaled 713k which was well above the forecast of 659k and July was revised up by 31k to 666k and which compares with 729k in June. All of the upside m/o/m was seen in the South and West. As the number of homes for sale slipped, months’ supply fell to 5.5 from 5.9. The median home price, which jumps around a lot month to month, rose 2.2% to a 4 month high at $328,400. Of note, all of the gains in sales came at the price point above $400k, in particular those priced above $500k. The area of the market that needs it the most in terms of where the most demand is, below $300k, saw a decline in sales m/o/m. Smoothing out this volatile number has the 3 month average at 703k vs the 6 month average of 676k and the 12 month average of 643k.
3) Home prices in July rose 3.2% y/o/y, the 6th straight month with a 3 handle, the slowest pace since 2012 which just maybe can give the first time buyer a chance to get back into the market.
4) The Markit US manufacturing and services composite index for September rose a touch to 51 from 50.7 with manufacturing up ticking to 51 from 50.3 and services up by .2 pts to 50.9. Markit equates this level of activity to GDP growth of only about 1.5% in Q3 and the weakness in manufacturing is now filtering into services. “Prospects also look gloomy, with inflows of new business down to the lowest since 2009 and firms’ expectations of growth over the coming year stuck at one of the most subdued levels since 2012.” Of particular note, “Jobs are now also being cut across the surveyed companies for the first time since January 2010, as firms have become more risk averse and increasingly eager to cut costs. At current levels, the survey employment index is indicative of non farm payroll growth falling below 100,000.”
5) The KC manufacturing September index remained below zero but improved by 4 pts to -2 and vs the estimate of -4.
6) Personal income growth in August rose as expected. Looking specifically at private sector wages and salaries saw a gain of 5.8% which is basically in line with the 6 month average and thus the best trend in this cycle. This drove a rise in the savings rate to 8.1%.
7) The final September UoM consumer confidence index ended up at 93.2 vs the initial print of 92 and vs 89.8 in August and 98.4 in July. Both current conditions and expectations rose from August. One yr inflation expectations was 2.8% vs 2.7% last month. Income expectations fell while employment was unchanged. Spending intentions were mixed. The UoM said “The overall trends in the sentiment index remain quite favorable, but show signs of a slow erosion. Some of these concerns are rooted in partisanship, some due to conditions in the global economy.”
8) Japanese CPI in September in Tokyo rose .6% y/o/y ex food and energy vs .7% in August and as expected. The .6% rise happens to be the exact average seen over the past 5 years and is at least one definition of ‘price stability.’
9) Consumer spending in August in France saw no gain from July and that is below the forecasted increase of .3%. But, a decline in energy usage was the main reason. Spending on durable and manufactured goods was higher.
10) UK CBI’s retail sales retail sales index for September was less bad, rising to -16 from -49 and that was better than the estimate of -25. CBI said “Five successive months of falling volumes tells its own story about the tough conditions retailers are having to operate in. Add to this the pressures of Sterling depreciation and the need to plan for potential tariffs and supply issues in the event of a no-deal Brexit and you get a gloomy picture for the sector.”
11) French business confidence in September improved by 1 pt to match the best since June 2018. Weakness in manufacturing was offset by gains in services, retail, employment and construction.
12) French consumer confidence is at the best level since January 2018.
13) German consumer confidence rose to a 4 month high and is hanging in there in the face of their economic slowdown because of a still low unemployment rate.
14) Off the lowest level since November 2012 at 94.3, Germany’s IFO business confidence index for September did tick up to 94.6. The internals though were mixed as Expectations fell .5 pt m/o/m while the Current Assessment was up by 1.1 pts. The IFO said “The downturn is taking a breather” but “In manufacturing, the business climate has only one direction: downward.” As for maybe this is a sign of stabilization? The IFO didn’t think so as they said “This is not the start of a change of trend. The slowdown is only taking a break.”
15) Hong Kong’s trade data for August was weak but about as expected. Exports fell 6.3% y/o/y, marking the 10th straight month with y/o/y declines but that was a bit better than the estimate of a 7.4% drop. Imports were down by 11.1%, about in line and with China making up about half their imports and which were lower by 12.5%.
16) The Australian PMI data for September was mixed as manufacturing fell below 50 at 49.4 from 50.9 but the services side got back above, rising to 52.5 from 49.1. The manufacturing weakness is for reasons we know while “There are early signs that the combination of rate cuts, tax rebates and rising dwelling prices is having a positive impact on the services sector.”
1).Core durable goods orders in August were a bit weaker than expected, falling .2% m/o/m instead of seeing no change as forecasted and July was revised down by 2 tenths. Versus last year, core capital spending is down 1.7%.
2) Core PCE rose .1% m/o/m and 1.8% y/o/y, about as expected. That’s the highest core rate this year on a y/o/y basis and is running 6 tenths below core CPI. Services inflation rose 2.3% y/o/y (partly suppressed by government price fixing Medicare and Medicaid reimbursements) while goods prices fell .5% y/o/y (core goods in CPI was up). Don’t root for higher inflation, it’s a tax.
3) With the average 30 yr mortgage rate above 4% for the 2nd week, the MBA said purchase applications to buy a home fell 3.1% w/o/w after 3 weeks of gains. Versus last year they are up 8.8% but it took a 100 bps drop in rates to drive that. Refi’s were down by 15% w/o/w as the recent rate rise cools things down but that 100 bps y/o/y decline in rates still has refi’s up by 104% y/o/y.
4) The September Conference Board’s Consumer Confidence index fell to 125.1 from 134.2 and that was well below the estimate of 133. It’s also a 3 month low and below the average seen this year of 128.6. Of particular note was the weakness in the Expectations component which fell to 95.8 from 106.4 and that’s the lowest since January (right after stock market tanked) and the 2nd lowest print since November 2016. The Present Situation was down by 7 pts m/o/m. One year inflation expectations fell one tenth to 4.8% which is smack in line with the 5 year average. The answers to the labor market questions were mixed. Employment expectations did fall to match a 5 month low and those expecting an Increase in Income fell 5.7 pts to the least since January and to the 2nd lowest level since 2017. Spending intentions softened. The Conference Board bottom lined the lower confidence index by saying “The escalation in trade and tariff tensions in late August appears to have rattled consumers. However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing.”
5) The Richmond manufacturing survey saw an index decline to -9 from +1. The estimate was for no change. It’s now the 2nd month in the past 3 below zero, the first time since 2016.
6) Initial jobless claims totaled 213k, 1k more than expected and last week was revised up by 2k to 210k. The level though is still low and continuing claims, delayed by a week, fell to the lowest in almost one year.
7) Economic confidence in the Eurozone continued to falter in September. The index fell to 101.7 from 103.1 and which was below the estimate of 103. This is the weakest level since February 2015 and was driven by a further slowdown in manufacturing, not surprisingly. Confidence with services and retail got back what they lost in August while retail and construction fell a touch.
8) The German manufacturing sector continued to worsen in September as its PMI fell to just 41.4, well below the breakeven of 50 while services moderated as well to 52.5. With activity down too in France, the overall manufacturing and services composite index for the Eurozone is now basically flat lining at 50.4, a more than 6 year low with manufacturing down to 45.6 and services now at 52. Markit said “The survey saw ongoing concerns about trade wars and geopolitical stress, notably Brexit, exacerbating worries about gloomier economic growth and demand prospects, both locally and globally.” This led to a slowdown in hiring as “Employment rose at the slowest rate since January 2015, the rate of job creation easing for a 3rd month running.”
9) The UK CBI industrial orders index for September weakened to -28 from -13 and that was 12 points below expectations. The CBI said “Following a stabilization in last month’s data, UK manufacturers have become noticeably gloomier in September. This likely reflects a combination of heightened Brexit uncertainty and the ongoing global slowdown in manufacturing.”
10) The viewpoint still of some central bankers is that when something doesn’t work, just keeping on doing more of it. Kuroda of the BoJ, Saunders of the BoE, and Lane of the ECB all think more cuts/QE might help at some point.
11) In September, Japan’s manufacturing and services composite PMI fell to 51.5 from 51.9. Manufacturing fell further below 50 at 48.9 from 49.3 while services were down by .5 pt to 52.8.
12) In the first 20 days of September, exports out of South Korea fell 22% y/o/y. This marks the 9th straight month of declines and shipments to China in particular, South Korea’s largest trading partner, fell 30% y/o/y. Exports to the US fell by 21%. Semi sales tanked by 40%.
13) ”Fare Thee Well” Robert Hunter, “Let there be songs to fill the air.” “Such a long long time to be gone and a short time to be there.” //www.youtube.com/watch?v=JT8zLTaKxeE