Succinct Summation of Week’s Events:
1 ) Initial jobless claims fell to 255k, 15k less than expected and down from 262k last week. This level is the same as a print in July which matched the lowest level since November 1973. The 4 week average fell to 265k from 267k and continuing claims fell by 50k to a fresh 15 year low.
2) UoM consumer confidence in October rebounded to 92.1 from 87.2 in September. This was 3 pts better than expected and gets back what it lost last month as the August print was 91.9. It also coincides with the stock market rebound over the past 3 weeks. Current conditions rose 5.5 pts and Expectations were higher by 4.5 pts. One year inflation expectations fell one tenth to 2.7% which is basically steady with the year to date average of 2.8%.
3) Industrial production while soft (but in line) in September as it fell .2% m/o/m, it was off a higher than expected base as August was revised up to a drop of .1% instead of .4% initially. Manufacturing production fell for a 2nd month but one tenth less than expected and August was revised up by one tenth. The production of auto’s/parts continue to the main standout as it rose .2% m/o/m and 9.4% y/o/y. Manufacturing ex this though is up just .8% y/o/y as mining (oil, gas, industrial metals) production is lower by almost 6% vs last year and fell 2% alone in September vs August.
4) Headline CPI in September fell .2% m/o/m and is flat y/o/y helping to raise real wages as energy prices are down 18.4% y/o/y. Apparel prices also fell, making it more affordable to buy clothes. The NFIB said in their release, “normally, low inflation is good news, but in our upside down world, the monetary authority wants more of it, not less.”
5) Headline PPI in September fell .5% m/o/m headline and .3% core vs the estimates of down .2% and up .1% respectively. The y/o/y headline drop is 1.1% with a core rate of gain of .8%. Energy prices fell 5.9%. Food prices were down by .8%. Prices for final demand goods less food and energy were flat. Final demand for services were down by .4%, the biggest drop since February where “almost half of the drop can be traced to prices for final demand services less trade, transportation and warehousing.”
6) NFIB small business optimism index for September rose a touch to 96.1 from 95.9 in August. It is up for a 3rd month and moved closer to its year to date average of 96.4 and is slightly above the average seen last year of 95.2. The NFIB curmudgeon and Chief Economist said “Small business optimism continues to be stagnant, which is consistent with the expected economic growth of about 2.5 percent.
7) September CPI for the eurozone rose .2% m/o/m but was down .1% y/o/y again due to lower energy prices (down 8.9% y/o/y). The core rate was higher by .9% y/o/y for the 2nd straight month and is just one tenth from matching the highest level since August ’13 as services inflation held steady at 1.2% for a 3rd month.
1) Core rate of CPI rose .2% m/o/m and 1.9% y/o/y. The cost of living for services ex energy rose 2.7% y/o/y, matching the highest level since December ’08 as Rent of Primary Residence accelerated to .4% m/o/m and 3.7% y/o/y. Medical care prices were higher by .2% m/o/m and 2.5%. Food prices were up by 1.6%.
2) Retail sales in September missed expectations and August was revised down. Sales ex auto’s and gasoline were unchanged m/o/m instead of rising by .3% as forecasted. August was revised down by one tenth. For the so called ‘control group’ which also excludes building materials, sales fell by .1%, 4 tenths weaker than estimated and August was revised down by 2 tenths. Sales in the ‘control group’ were higher by a mediocre 2.9% y/o/y vs an average of 3.6% over the past 5 years and 4.2% over the credit fueled 30 year average.
3) Number of job openings in August moderated to 5.37mm, about 200k less than expected and down from the record high seen in July of 5.67mm. While job openings fell by 298k, hiring only picked up by 13k. The hiring rate was unchanged as was the quit rate. The August drop in openings just gives back the July jump and puts it back to the trend seen in April thru June.
4) NY manufacturing index remained negative at -11.4 but a bit less so from -14.7 in September. The estimate was -8.0 and the index is below zero for a 3rd straight month. The internals softened further as new orders weakened to -18.9 (weakest since 2011) from -12.9 and backlogs fell 7 pts to -15.1. Shipments were -13.6 and employment fell to -8.5 pts. The overall outlook held at the weakest pace since January ’13.
5) Philly manufacturing index was -4.5, up 1.5 pts from September but 2.5 pts below the estimate. It’s negative for 2 months in a row for the 1st time since early 2013. New orders collapsed by 20 pts to -10.6, the weakest since June ’12. Backlogs fell further below zero at -11.7 vs -6.6. Employment fell by almost 12 pts to -1.7, the lowest since January. Inventories fell to a 2 ½ yr low. The 6 month outlook fell to a 5 month low and cap ex plans fell by 20 pts.
6) Business inventory growth in August was flat m/o/m for a 2nd straight month but with a .6% drop in sales, the inventory to sales ratio rose to 1.37 from 1.36. That matches the highest level since June 2009.
7) Applications to buy a home fell 34.1% after rising by 27.4% last week. It’s at the lowest level since February. Refi applications fell 22.5% w/o/w after spiking by 24.2% last week. This component is at a 4 week low.
8) Chinese imports fell 20.4% y/o/y vs the estimate of down 16% in dollar terms. This reflected soft domestic demand but also lower commodity prices. Crude volume imports rose off a 3 month low, iron ore volume imports rose to near a record high and copper volumes were up as well.
Chief Market Analyst
peter -at- thelindseygroup.com