Data of the day

The final Oct UoM confidence # was 70.6 down from 73.5 in Sept but above the preliminary reading out a few weeks ago of 69.4 and also above estimates of 70. The drop from Sept was led by a fall in the Outlook component which fell almost 5 pts. Current Conditions rose a touch. The discrepancy between the UoM confidence # and the Conference Board report which saw the Present Situation component fall to the lowest level since 1983 is because of the weighting of the labor market questions in the Conference Board data whereas the UoM doesn’t specifically ask about the labor situation. One year inflation expectations rose to 2.9%, up .7% from Sept and vs 2.8% in the preliminary report. This is the highest since July and is likely due to the rising price of gasoline as its the most high profile everyday cost.

Chicago PMI was much better than expected at 54.2 vs forecasts of 49 and is up from 46.1 in Sept. It’s the highest level since Sept ’08. New Orders spiked to 61.4 from 46.3 to the highest since June ’07. Order Backlogs rose almost 5 pts to 41.9. Inventories fell almost 7 pts but with the spread wide between New Orders and Inventories, it should follow that inventories will start to increase in coming months. With the Chicago proximity to Michigan, the improvement in New Orders could likely be the inevitable increase in auto inventories which even relative to subdued sales levels, remains very low. Employment was punk as it fell .5 pt to 38.3, still well below 50. Prices Paid fell a touch. Interestingly, the S&P’s and Treasuries are back to the level just prior to the release which may reflect the markets desire to focus more on the national ISM as the regional surveys have been mixed and/or the weak employment #.

Sept Income and Spending data was exactly in line with expectations with Income flat and a .5% fall in Spending, the CARS hangover after Aug rose 1.4%. With the headline PCE deflator up .1% m/o/m, REAL spending fell .6% and REAL Incomes fell .1%. Core PCE rose .1%. As a result of the spending drop relative to flat income, the Savings Rate rose to 3.3% from 2.8%. After bottoming at +.8% in April ’05, the increase in the Savings Rate is still not even back to its 30 year average of 5.7% and remains well off its high of 12.2% in 1981. The transition of depending more on savings and less on credit and the wealth effect of asset prices is a healthy but long term process. The ideal way for the economy though of raising the Savings Rate is to rely more on income growth and less on spending cuts. Today’s Sept data was captured in yesterday’s Q3 GDP report but we can at least see how the quarter ended in terms of spending.

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