1)The August ISM services PMI rose a touch to 56.9 from 56.7 in July and that was above the estimate of 55.3. That puts it about in line with the average year to date of 57.1 and it is the exact same level where it stood in February 2020. Of the 18 industries surveyed, 14 saw growth vs 13 in July, 18 in June and 14 in May. The ISM said “Growth continues, at a slightly faster rate, for the services sector, which has expanded for all but two of the last 151 months…Based on comments…there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.”
2)Again, initial jobless claims came in below expectations at 222k vs the estimate of 235k and that compares with 228k last week, revised down by 4k. As these are holiday time frame numbers, I’d prefer to see the figures in coming weeks to get a more accurate read. The 4 week average did fall to 233k from 241k last week and that is the least since July 1st. Continuing claims, delayed by a week, rose by another 36k to 1.473mm, the most since April 1st.
3)Positive for employees, the Atlanta Fed’s Wage Growth Tracker was updated and it was up 6.7% y/o/y in August, the same pace seen in July. For those ‘job switchers’, wages rose 8.4% vs 8.5% in July. For those not changing jobs, wages were higher by 5.6% vs 5.9% in July.
4)Manheim yesterday said that its used vehicle price index dropped 4% m/o/m in August while still up 8.4% y/o/y. They said this was a “larger than normal decline that were consistent over the month.” The index itself is at the lowest in a year.
5)The average gallon of gasoline has now fallen every day for the past 12 ½ weeks according to AAA.
6)The ECB put its deposit rate above zero for the first time since 2012 at .75% and left it open for another similar hike in October.
7)The Bank of Canada hiked rates too by 75 bps as expected to 3.25% but didn’t clearly guide the pace from here.
8)The RBA increased its cash rate by 50 bps as expected to 2.35% and hinted at a slower pace of hikes from here.
9)Both PPI and CPI in China were below expectations but largely due to their own self-imposed economic slowdown.
10)Spitting in the wind but after a depressed level of lending in July, aggregate financing in August grew by 2.43T yuan, above the estimate of 2.075T. Bank loans made up about half of this.
11)Base pay in July in Japan rose 1.2% y/o/y. Doesn’t sound like much but it’s the most since late 2018.
12)The manufacturing PMI in Vietnam rebounded by 1.5 pts m/o/m and rose too for India’s service sector.
13)The price of European natural gas closed down on the week and to a one month low.
1)S&P Global said their US services PMI reflects a recession with its August print of just 43.7, well under 50. They said, “August survey data signaled a sharp and quicker decline in business activity across the US services sector…The decreases in output stemmed from weak domestic and foreign client demand, as new orders returned to contraction territory. At the same time, weak inflows of new business led firms to moderate their hiring activity. Employment rose at the softest rate since January as backlogs of work contracted at the fastest pace in over two years. Although the degree of optimism picked up to a 3 month high, it was below the series average as concerns regarding the impact of price rises on demand weighed on expectations.” Price pressures eased for both those paid and received but “average cost burdens continued to rise at an historically marked pace during August.”
2)With the average 30 yr mortgage rising to 5.94% for the week ended Friday, up 50 bps over the past 3 weeks, purchase applications fell .7% w/o/w and by 23% y/o/y. Refi’s dropped another 1.1% w/o/w and by 83% y/o/y.
3)The Logistics Managers Index for August fell to 59.7 from 60.7 and that is the first read below 60 since May 2020. The average since inception is 65.3 and its record high was 76.2. The strength was in inventory costs and warehousing because of the excessive inventories out there. The bottom line, “The logistics industry is currently facing an interesting mix of decreased consumer demand, but with an abundance of goods throughout supply chain systems…This mix has resulted in the tightest warehousing market we have seen in years, along with the loosest transportation market.”
4)The July wholesale inventory to sales ratio rose to 1.29 from 1.26, the highest since November 2020 due to an unexpected drop in sales.
5)Seemingly every day of the week there was another European smelter of some sort cutting capacity in response to the energy price spike.
6)German factory orders in July fell for the 6th straight month and down by almost 14% y/o/y. The Economy Ministry said “The development of demand in the manufacturing sector continued to be weak at the beginning of the third quarter in view of the war and high gas prices.”
7)The August Eurozone services PMI was revised to below 50 at 49.8 vs 50.2 initially and down from 51.2 in July. The UK services PMI was also revised lower.
8)Both China and Taiwan reported trade data that was weaker than expected.
9)The Caixin China services PMI for August fell a touch to 55. PMI’s also dropped m/o/m in Singapore and Hong Kong.
10)QE II, what an incredible life you lived.