1)Initial jobless claims fell to 340k from 354k last week and that was 5k less than expected. Those filing for PUA dropped by 14k w/o/w to a 4 week low. Delayed by a week, continuing claims declined to 2.75mm which is the lowest since March 2020 from an upwardly revised 2.91mm last week. Delayed by two weeks, those still getting PUA jumped by 408k to 5.4mm, the most since late June. Continuing emergency claims though were little changed, up by 6k to 3.8mm.
2)The August ISM manufacturing index was up slightly at 59.9 from July’s print of 59.5. That was 1.4 pts above expectations. Of the 18 industries surveyed, 15 saw growth, two contraction and one no change. This compares with 17 seeing growth in July with one in contraction. ISM said this: “Manufacturing performed well for the 15th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of unprecedented obstacles. Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to difficulties in hiring and a clear cycle of labor turnover as workers opt for more attractive job conditions. Disruptions from COVID-19, primarily in Southeast Asia, are having dramatic impacts on many industry sectors. Ports congestion in China continues to be a headwind as transportation networks remain stressed. Demand remains at strong levels, despite increased prices for nearly everything.”
3)Mortgage apps were mixed w/o/w as the average 30 yr mortgage rate was unchanged at 3.03%. Purchases were little changed, up .6% w/o/w while down almost 16% y/o/y on tougher comps and the moderation in the pace of transactions because of little inventory and skyrocketing prices. Refi’s fell 3.8% w/o/w but are up 2.1% y/o/y.
4)Wednesday saw the 1st US Covid daily vaccine dose above 1mm since June.
5)Hong Kong saw an improvement in its PMI to 53.3 from 51.3. “Both demand and output growth accelerated to multi year highs, aided by the increase in economic and consumer confidence and supported by recent measures such as the distribution of the consumption vouchers. The overall outlook also improved noticeably amongst Hong Kong SAR private sector firms in August.”
6)Other Asian PMI’s remaining above 50: South Korea and Taiwan because of their large presence in semi’s and with the former also in auto’s, both remained above 50. South Korea 51.2 vs 53, Taiwan 58.5 vs 59.7. India’s fell 3 pts m/o/m but remains still above 50 at 52.3.
7)The UK August manufacturing index was revised to 60.3 from 60.1 at first and vs 60.4 in July. “UK manufacturers continued to face rising constraints caused by supply chain issues during August. Shortages of inputs and delivery delays disrupted production schedules, leading to slower output growth, and also resulted in marked increases in input prices” said Markit.
8)German unemployment in August fell by 53k which is more than the estimate of a decline of 40k. Their unemployment rate fell again to 5.5% and that is the lowest since the pre Covid print of 5% in March 2020.
9)Multiple ECB members this week seem to be laying the ground work for visibility on the beginning of tapering its PEPP (Pandemic Emergency Purchase Program).
1)Payrolls in August grew by just 235k, well below the estimate of 733k, partially offset by an upward revision to the two prior months of 134k. July specifically was revised to over 1mm. The private sector added 243k vs 798k in July (revised up by 95k). The household survey was solid, with an increase of 509k after a 1.04mm print in July. Combine this with the labor force increase of 190k and the unemployment rate fell to 5.2% from 5.4%. For perspective, the 30 year average is 5.9%. The all in U6 rate is down to 8.8%, lower by 4 tenths from July and that matches the March 2020 rate. The 30 yr average for this metric is 10.4%. It was specifically the leisure/hospitality sector that accounts for a large chunk of the miss as there was ZERO net jobs added after 415k in July and 397k in June. Average hourly earnings jumped .6% m/o/m, double the estimate and up 4.3% y/o/y. Specifically here, trying to lure more people to leisure/hospitality jobs saw wages rise by 1.3% m/o/m and by 10.3% y/o/y. Hours worked was unchanged at 34.7 vs the estimate of 34.8 though. Even so, average weekly earnings rose .6% m/o/m and 4.3% y/o/y. The participation rate held at 61.7%. It was 63.3% in February 2020. For 25-54 year olds, the rate held at 81.8% vs 82.9% in February 2020.
2)The August ISM services index fell to 61.7 from 64.1 as expected. The six month average is 62.7. Of 18 industries surveyed, 17 saw growth, the same number as seen in July. The moderation in services from July remains a supply side factor. ISM said “There was a pullback in the rate of expansion in the month of August; however, growth remains strong for the services sector. The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints.”
3)The labor market shortage was writ large in the August NFIB small business survey where Plans to Hire, Positions Not Able to Fill and Compensation all rose to levels never before seen in the 48 year history of this survey. The NFIB said “Small employers are struggling to fill open positions and find qualified workers resulting in record high levels of owners raising compensation. Owners are raising compensation in an attempt to attract workers and these costs are being passed on to consumers through price hikes for goods and services, creating inflation pressures.”
4)While ISM saw a moderation in delivery times and prices paid, Markit’s index, which includes small and medium sized businesses that ISM does not capture said this: “Manufacturers commonly reported that material shortages hampered output growth, as supplier delivery times increased markedly and to one of the greatest extents on record. Longer lead times were attributed to greater global demand for inputs and capacity issues at suppliers. Subsequently, cost burdens rose substantially in August. The rate of input price inflation was the fastest seen in more than 14 years of data collection amid supplier price hikes. In an effort to partially pass on greater costs to their clients, goods producers raised their selling prices at the steepest pace on record.”
5)S&P CoreLogic said its June home price index rose 19% y/o/y rounded up. That exceeds the biggest pace of gains in the mid 2000’s. The gains in some of the biggest cities was just eye popping. Home prices rose 29.3% in Phoenix, 27% in San Diego and 25% in Seattle. These increases are for houses where people need their income to pay for, not tech stocks but one wouldn’t be able to tell much of a difference between the two. Chicago was the laggard with ‘just’ a 13.3% increase, followed by Minneapolis with an gain of 13.8% and Cleveland by 15.4%.
6)Apartment List’s August national report said rents rose 2.1% in the month of August from July. While that is down from the 2.5% jump in July from June, rents are up “a staggering 13.8% year to date” they said. Further, Apartment List said “With rents rising virtually everywhere, only a few cities remain cheaper than they were pre pandemic. And even there, rents are rebounding quickly. In San Francisco, for example, rents are still 12% lower than they were in March 2020, but the city has seen prices increase by 20% since January of this year. At the other end of the spectrum, many of the mid sized markets that have seen rents grow rapidly through the pandemic are only continuing to boom. Rents in Boise, ID are now up 39% since March 2020. Rent growth in 2021 so far is outpacing pre pandemic averages in 98 of the nation’s 100 largest cities.” Bottom line according to Apartment List, “2021 has brought the fastest rent growth we have on record in our data.”
7)Pending home sales in July fell by 1.8% m/o/m, an unexpected drop after a 2% fall in June. The estimate was for a slight gain of .3%. Only the West saw an increase from June. The NAR chief economist said “Buyers are still interested and want to own a home, but record high home prices are causing some to retreat. The moderate slowdown in sales is largely due to the huge spike in home prices. The Midwest region offers the most affordable costs for a home and hence that region has seen better sales activity compared to other areas in recent months.”
8)The August Conference Board Consumer Confidence index fell sharply to 113.8 from 125.1 and that was well below the estimate of 123. Both main components fell m/o/m. One year inflation expectations rose further, up 2 tenths m/o/m to 6.8%, the highest since July 2008 when the price of gasoline spiked to almost $4 per gallon vs $3.15 on average today according to AAA. The answers to the labor market questions moderated a touch after big improvements over the prior few months. Employment and income expectations came in too. Spending intentions fell across the board but the desire to get out on vacation improved to the best since last October. Bottom line, Delta and inflation are the main reasons for the fall off in consumer confidence to the lowest since February 2021.
9)Thanks to a dearth of inventory, vehicle sales in August totaled 13.06mm, well below the estimate of 14.45mm and that is the lowest since last June.
10)Thanks to zero tolerance for Covid spread, China’s private sector focused Caixin August services PMI fell to 46.7 from 54.9 and that was well worse than the forecast of 52. Caixin said “While many businesses forecast that output will expand as the pandemic is brought under control globally, there remained concerns over how long this will take, and how long it will take for market conditions to normalize.”
11)China’s private sector weighted Caixin manufacturing PMI fell to 49.2 from 50.3. The estimate was 50.1. Caixin said what we already know. “Panelists often stated that the resurgence of Covid at home and abroad had weighed on the sector’s performance. Restrictions to contain the virus also impacted supplier performance, which deteriorated solidly, while shortages led to steeper rises in cost burdens and prices charged. At the same time, subdued market demand led firms to trim their purchasing activity and payroll numbers slightly.”
12)China’s state sector weighted PMI’s missed the mark for August with weakness especially noted in services. The non manufacturing PMI fell to 47.5 from 53.3, thus implying contraction and well below the estimate of 52. I’m assuming the no tolerance Covid policy was the main factor here. Manufacturing was lower by just .3 pts but at about 50 at 50.1. The estimate was 50.2.
13)Singapore’s PMI fell 4.6 pts m/o/m to 52.1 but only after rising by 6.6 pts in July. Because of the high vaccination rate in this city/state, “Further easing of Covid restrictions in August enabled private sector output to remain in strong expansion.” That said, “Optimism in the private sector also fell to a level below the survey average with concerns of a lingering Covid impact.”
14)Asian PMI’s below 50 in August: Vietnam 40.2 vs 45.1. Malaysia 43.4 vs 40.1. Indonesia 43.7 vs 40.1. Thailand 48.3 vs 48.7. Philippines 46.4 vs 50.4.
15)A week after the Bank of Korea surprisingly raised interest rates, South Korea said its August CPI rose .6% m/o/m, above the estimate of up .4% and vs .2% in July. Prices are up 2.6% y/o/y with a core rate of 1.8%.
16)The August Eurozone services PMI was revised slightly lower to 59 from the 1st print of 59.7 and down .8 pts from the 15 yr high seen in July, the 1st month since January that has seen a m/o/m decline. Employment in particular held at the highest since 2018. Input prices rose at the quickest pace in 13 years but there was a “softer rise in selling charges.” Lastly, “business confidence slid to a 4 month low, but remained historically elevated as hopes of a continued recovery supported optimism.”
17)The Eurozone August manufacturing PMI was tweaked to 61.4 from 61.5 initially and vs 62.8 in July. Markit said “The overriding issue was again a lack of components, however, with suppliers either unable to produce enough parts or are facing a lack of shipping capacity to meet logistics demand. These supply issues were the primary cause of a shortfall of manufacturing production relative to orders of a magnitude not previously recorded by the survey, surpassing the 24 yr record deficit seen in July. Factory selling prices consequently rose steeply once again, albeit with some of the upward pressure alleviated by a slight cooling of input cost inflation, albeit with still high materials prices adding to manufacturers’ problems.”
18)In the UK, its services PMI was revised down by .5 pt to 55 from its initial read. That is down from 59.6 in July. Markit said “The slowdown partly reflected a normalization of customer demand after the initial loosening of pandemic restrictions during the 2nd quarter of 2021. However, there were also widespread reports that shortages of staff and disrupted supply chains had constrained growth in August.”
19)The August Eurozone CPI figures rose more than expected. Headline CPI was up by .4% m/o/m, double the estimate and by 3% y/o/y and vs 2.2% in July. The core rate was higher by 1.6% y/o/y vs .7% in July and one tenth more than expectations.
20)The Eurozone July PPI showed a whopping 2.3% m/o/m increase, more than the estimate of up 1.8% and higher by 12.1% y/o/y. Year to date annualized PPI is up by 16%.
21)The August Eurozone Economic Confidence index slipped by 1.5 pts m/o/m to 117.5 and that was just below the estimate of 118 but off a record high. Manufacturing came off the boil, likely in response to mounting supply problems on top of already intense challenges. Services moderated too, in part to Delta but retail did rise. Consumer confidence was down m/o/m while construction rose.