Succinct Summations for the week ending September 25th
2) Initial jobless claims totaled 267k, 5k less than expected and up a touch from 264k last week. The 4 week average was down slightly to 272k. Continuing claims were little changed.
3) New home sales in August totaled 552k annualized, 37k more than expected and July was revised up by 15k. This is the best since February ’08 and 3 of the 4 regions of the country saw m/o/m gains. Months’ supply fell to 4.7 from 4.9. This is the lowest rate since February. Pricing was essentially flat both y/o/y and sequentially which I consider needed at this point vs the 5.1% gain for single family existing homes in August.
4) Old news but US Q2 GDP was revised up to 3.9% from 3.7% in the last read. This brings the 1st half average to 2.25%, in line with the multi year trend.
5) The ECB said M3 money supply growth rose 4.8% y/o/y in August and while that was less than the 5.3% rise expected, there was an upside surprise to the July number and the 3 month average is still 5%, around a 6 ½ yr high. Bank loans to non financial entities rose .4% y/o/y and were up by 1.4% y/o/y to households, the best pace of gain since December ’11.
6) Taken before the VW news, the German IFO business confidence index was 108.5, holding steady vs 108.4 in August and a touch better than expectations of 107.9. The internals though were mixed as the Current Assessment fell to 114 from 114.8 offset by a 1.1 rise in the Expectations component. The IFO said “the German economy is proving robust.”
7) French business confidence held at 100, matching the best since August ’11.
1)US durable goods orders in August were unchanged m/o/m ex volatile transportation orders, one tenth less than expected. The core rate of capital spending was down by .2% m/o/m which was in line with the estimate. On a y/o/y basis, core spending is down by 4%. Shipments of core goods (plugged into GDP) were down .2% m/o/m and 1.8% y/o/y with the overall inventory to shipments ratio staying unchanged at 1.65.
2) The final September UoM confidence index was 87.2 vs 85.7 initially but down from 91.9 in August. While the estimate was 86.5, confidence is now at the lowest level since October 2014 on a final basis. The fall in stocks was cited earlier in the month and the UoM said this today, “the decline in optimism continued to narrow in late September as consumers increasingly concluded that the stock market declines had more to do with international conditions than the domestic economy.” They however also said, “Although most believe the domestic economy is still largely insulated (from overseas economic issues), they have lowered the pace of job and wage growth that they now anticipate.”
3) August existing home sales totaled 5.31mm annualized, about 200k less than expected. It’s the lowest since April but still above 5mm for the 6th straight month. Most of the m/o/m drop was in single family. Months’ supply ticked up to 5.2 from 4.9. Home prices including condos/co-ops rose 4.7% y/o/y, a needed slowdown vs the average year to date of 6.5%. Positively, first time buyers made up 32% of purchases, back to where it was in May and up from 28% in July and 30% in June.
4) Following poor manufacturing prints from NY and Philly last week, Richmond’s index falls to -5 from zero and the KC regional index is at -8 vs -9.
5) Markit’s national manufacturing PMI held at 53, the lowest since October 2013. Markit said “Manufacturing remained stuck in crawler gear in September, fighting an uphill battle against the stronger dollar, slumping demand in many export markets and reduced capital spending, especially by the energy sector.”
6) The Markit services PMI for September fell to 55.6 from 56.1. Markit said “Business optimism slumped to one of the lowest levels seen since the global financial crisis, inflows of new business rose at the weakest rate for 8 months and job creation slipped to a 6 month low…Average prices charged for goods and services are falling at the fastest rate seen since the survey began in late 2009.”
7) This is a negative for the Japanese consumer but positive for the BoJ: August CPI ex food and energy rose .8% y/o/y, one tenth more than expected and up from .6% in July. It’s the highest in 5 months and if you take out the upward influence from the VAT hike, it’s the most since 1998. Kuroda today said “the price trend is on a solid footing. As you can see by looking into details of CPI, prices are rising at a rate of about 1.1%” ex energy. Likely no more QE for now based on that.
8) Japan’s manufacturing PMI fell to 50.9 from 51.7 in August.
9) China’s Markit/Caixin manufacturing PMI in September fell to 47, the lowest since March ‘09 from 47.3.
10) Reflecting the Chinese mainland slowdown, Hong Kong exports in August fell 6.1% y/o/y, the weakest since February ’13 and well worse than expectations of a decline of 1.7%. Imports fell by 7.4% y/o/y, more than double the expected drop of 3.3%.
11) VW wrecks its global reputation. One of seven jobs in Germany are linked to the auto industry.
12) The September eurozone manufacturing and services composite index fell to 53.9 from 54.3. It’s a hair below the estimate of 54 with Germany slightly missing estimates while France exceeded them. Markit expects 1.6% GDP growth for the region in 2015.
13) The September CBI survey of UK manufacturers fell to -7 from -1. The estimate was zero and it’s now negative for the 5th straight month. The weakness was driven by the export orders component which fell to -24, the weakest since March from -8. For small and medium sized manufacturers, export orders fell to the lowest since October ’09.
14) Greece elects to give Alexis Tsipras more time in office.
Chief Market Analyst
The Lindsey Group LLC
peter -AT- thelindseygroup.com