Succinct Summation of Week’s Events (12/13/13)

Succinct Summation of Week’s Events:


1) Retail Sales in November were above expectations and October was revised higher helped by good auto, furniture and building material sales. Online retailing and electronics also gain solidly with clothing and department store sales more muted.

2) Business Inventories in October rise .7% m/o/m, more than twice expectations and at the fastest pace since January led by wholesale inventories (prescription drugs and agricultural products) and retail auto dealers. This gain combined with the better retail sales data for both October and November leads us to raise our Q4 GDP forecast to closer to 2% from 1.5%.

3) Wholesale inflation benign in November as headline PPI falls .1% m/o/m and grows just .1% at the core as commodity prices continue to weigh on prices. Watch for services inflation in next week’s CPI as that has been more sticky.

4) Both refi and purchase applications rose on the week by 2.1% and .9% respectively but comes after declines of 17.5% and 4.1% last week. The average 30 yr mortgage rate rose to 4.61%, the highest since September 20th according to the MBA.

5) As it’s becoming very clear that the Fed will be focusing more on the weapon of ‘forward guidance’ with short rates, the 3 yr note auction was good but 2 yr and 3 yr yields do close the week at two month highs. With influencing the yield curve, forward guidance is only as good as one’s crystal ball.

6) A budget deal, however modest (ZERO focus on long term budget busters), gets consummated. House votes yes, Senate likely will next week.

7) The November NFIB small business optimism index was 92.5, about in line with the forecast and up from 91.6 in October but still below 93.9 in September. Five years in to this recovery and the NFIB index still remains below the 20 year average of 97.6 as the weight of regulation, higher taxes, Obamacare, etc… on small business remains clear.

8) In China, exports in November rose 12.7% y/o/y, well above the estimate of 7% but import growth was a bit below expectations. Also of note, CPI in November rose 3% y/o/y, down from 3.2% and slightly below the estimate of 3.1%. The moderation was led by a slower rate of increase in food as non food prices rose 1.6% for a 3rd straight month.

9) Australia reported a greater than expected increase in job growth but the unemployment rate ticked up to 5.8% from 5.7%, matching the highest since August ’09.

10) French business sentiment rose 1 pt to the highest since May ’11 as likely the ECB rate cut last month boosted optimism.

11) Italy’s Q3 GDP was revised to unchanged q/o/q from the initial report of down .1%. It’s the 1st time since Q2 2011 that their economy has not contracted q/o/q. Also, Italy reported its smallest y/o/y drop in industrial production in October in 26 months, falling by .5% y/o/y which was better than the estimate of a decline of 2.2%.

12) Central banks in South Korea, Indonesia, Philippines, New Zealand and Switzerland end the year with no change in policy.


1) Treasury sells longer term 10 and 30 yr paper to a pretty lackluster reception with the 10 yr yield in particular rising to a 3 month high in response. Also of note, the Japanese 10 yr JGB yield closes the week at an 11 week high.

2) Initial Jobless Claims spiked by 68k to 368k, well above the estimate of 320k but we should average the last two weeks to normalize for the Thanksgiving holiday which gives us 334k to analyze which compares to 321k and 326k in the two weeks prior.

3) For the 3rd week in a row I include the Investors Intelligence weekly sentiment data as the extreme nature of the survey deserves attention from anyone that considers the usefulness of contrarian indicators. Bulls rose again to 58.2 from 57.1 and is just shy of the highest level since October 2007. Bears remained unchanged at 14.3, the lowest since 1987. The 4 week average ratio of bulls divided by bulls+bears equates to 79.5% which compares with 73% in October 2007.

4) In October, the EU (all 28 countries) industrial production figure fell 1.1% m/o/m which was below the estimate of up .3% with declines seen in Germany, France and Italy among others.

5) The euro stickiness above 1.37 vs the US$ pressures European stocks with the Euro Stoxx 50 index closing at a 2 month low. The FTSE does as well (interest rate worries) and the CAC closes at a 3 month low.

6) Excessive credit growth continues in China as aggregate financing in November jumped higher by 1.23T yuan vs 856b in October and was well above the estimate of 920b. There is also chatter that within days Chinese officials will officially lower their 2014 GDP growth target to 7% from 7.5%, though likely more sustainable and realistic if it were to occur.

7) Japan’s economy in Q3 was revised to a slower pace of gain than initially reported. It was changed to a rise of 1.1% annualized vs the 1st read of 1.9% and down from 3.6% in Q2. Also, led by a record increase in imports thanks to higher energy costs, Japan’s current account went into an unexpected deficit in October for the 1st time since January. The yen hovers at 5 year lows vs the US$ in response.



Peter Boockvar
Managing Director
Chief Market Analyst
The Lindsey Group LLC
E:  peter -at-


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