Succinct Summation of Week’s Events 11.27.15

Succinct Summation of Week’s Events:


1) US Durable goods orders in October rose .5% m/o/m ex transports which was two tenths better than expected and September was revised up by a few tenths. Importantly, the core measure rose 1.3%, well better than the forecast of up .2% and September was revised from -.1% (revised in factory orders)  to up .4%.

2) Initial jobless claims fell 12k to 260k, 10k less than expected and the 4 week average remained unchanged at 271k because a 260k print five weeks ago falls out of the average. Continuing claims though rose by 34k off near the lowest level in 15 years.

3) Personal income in October rose .4% m/o/m where private sector wages and salaries were higher by .6% m/o/m which matches the best level since May and is up 5.3% y/o/y. The savings rate rose to 5.6% y/o/y, the highest since December ’12 as spending lagged, see below.

4) Core PCE was flat m/o/m and up just 1.3% y/o/y, a large 6 tenths below core CPI mostly because of less contribution from housing and the reliance on government price fixing of health care costs via medicare and Medicaid. The CPI measures actual consumer expenditures on healthcare and about 40% is housing related.

5) The Markit services PMI improved to 56.5 in November from 54.8 last month. It’s at the best level since April and Markit said it was “helped by recovery in new business growth from October’s nine month low.” They also saw a “solid pace of job creation in November, but business confidence remains relatively subdued.” The rise in employment was up slightly, “but remained weaker than seen on average so far in 2015.” In light of the global economic uncertainty, “some panel members noted that signs of weaker global economic conditions were a factor leading to caution about the outlook for business activity at their units.”

6) US GDP in the 3rd quarter was revised to a gain of 2.1% from the first print of 1.5%. That was exactly in line with expectations as inventories and gross private investment were less of a drag than initially reported. The personal consumption component was actually revised down by two tenths instead of remaining unchanged as forecasted and real final sales was revised lower to an annualized gain of 2.7% from 3% as first reported. Trade was revised slightly lower.

7) Existing home sales in October totaled 5.36mm annualized, slightly below the estimate of 5.4mm and the 6 month average of 5.43mm. Of the total, single family sales dropped to 4.75mm from 4.93mm mostly driven by a fall in the South and West. Months’ supply rose a tenth to 4.8 and was kept from rising further because of a decline in the amount of homes for sale. The median home price rose 5.8% y/o/y with the single family component higher by 6.3%. After falling by 300 bps in September to 29%, the amount of first time buyers rebounded to 31% which is about in line with the 6 month average of 30% but well below the historical range of 40%.


1) Personal spending in October rose just .1% m/o/m, two tenths less than expected and with the headline PCE inflation deflator also up .1%, REAL spending was unchanged which has lead to a downward revision to Q4 GDP estimates.

2) Even though the average US 30 yr mortgage rate backed off a multi month high, there was no follow thru on last week’s bounce in mortgage applications. Purchases were basically flat, falling .5% w/o/w while refi’s were down by 4.8% to a 10 week low.

3) New home sales in October totaled 495k, just off the estimate of 500k but September was revised down by 21k to just 447k which is the lowest print since July 2014. The 495k level is right about in line with the year to date average of 500k but remains well below the 30 yr average 705k. After jumping from 5.1 to 6.0 in September, months’ supply fell back to 5.5. Prices fell 6% y/o/y and 8.5% sequentially but only after spiking by 18% y/o/y and 4.5% m/o/m in the month prior. At a median price of $281,500, it is the lowest since September ’14 after hitting a record high of $307,800 last month.

4) After rising by 3.1 pts in the first read of November UoM consumer confidence, sentiment fell back to 91.3 in the final survey of the month vs 90 in October. One year inflation expectations were 2.7%, in line with October but above the first November look of 2.5% which did match a multi yr low. “Nearly all of the recent advance was focused on current conditions rather than future economic prospects, and the entire November gain was due to lower income households. Households with incomes in the top third of the distribution, who account for more than half of all spending, expressed a more cautious optimism. This more guarded outlook reflected somewhat weaker personal financial prospects and a greater insistence that their purchases will be contingent on the availability of discounted prices and reduced interest rates.”

5) The Conference Board Consumer Confidence index for November fell to 90.4 from a revised 99.1 last month (initially 97.6)  and that was well below the estimate of 99.5. It is also at the weakest level since September 2014. A key factor in the headline weakness were the answers to the labor market questions. Those that said jobs were Plentiful fell 2.8 pts to 19.9, matching the lowest level since April and those that said jobs were Hard To Get rose 1.6 pts to the most since July. Also, those expecting more ‘employment’ fell to 11.6 from 14.4 in October and vs 15.5 last year and that is the weakest level since October 2011.

6) Markit’s US manufacturing index for November weakened to 52.6 from 54.1 in October. That is the lowest level since October ’13. Markit said all five components contributed to the softness. “Reports from survey respondents generally cited a cyclical slowdown in demand patterns and ongoing weakness in export sales.

7) Geopolitical tensions take another leg higher with Turkish shoot down of Russian jet.


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