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Peter: 1/6 – Succinct Summation of the Week’s Events

By - - Macro & The Boock Report & Weekly Data Summaries on January 6, 2017 6:03 PM Follow-Ups urhired

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  1. Average hourly wages accelerated to a .4% m/o/m gain, one tenth more than expected and the y/o/y gain was 2.9%, the best in this recovery and the most since 2009. The labor market is tightening (yes, I know that there are many out there not in the labor force but we don’t assume they’ll be rushing back) as the number of discouraged workers fell to the lowest level since August 2008.
  2. Initial jobless claims totaled 235k, 25k below the estimate and down from 263k. We’ll chalk up the drop to the holidays rather than drawing on any other conclusion. Smoothing this out has the 4 week average falling to 257k from 263k. Continuing claims, delayed by a week, did rise however for a 3rd straight week to a 4 week high.
  3. Wards said vehicle sales totaled 18.29mm at a SAAR in December. That is well above the estimate of 17.7mm and up from 17.75mm. It’s also the most in this recovery and at the best level since 2005 (not adjusted for population growth however). Was this the first sign that the hopes for Trumponomics excited buyers or was it just another jump in incentives offered and a jump off the fence response to the rise in short term rates?
  4. The December ISM manufacturing index improved further in the post election optimism. It rose to 54.7 from 53.2 in November and vs 51.9 in October. This is the best level in two years led by a 7.2 pt jump in new orders to above 60. There was still just 11 of the 18 industries surveyed that saw growth, the same level as in November. Also, six reported a contraction and unchanged with November.
  5. The ISM services index for December was unchanged with November at 57.2. That is a touch above the estimate of 56.8 and holds at the best level since October 2015. The negative within however was that 12 industries saw growth of the 18 surveyed vs 14 in November. Three saw contraction vs 2 in November.
  6. Construction spending in November grew by .9% m/o/m, almost double the estimate of up .5%. It was driven by both private and public investment.
  7. The eurozone manufacturing and services composite index rose to 54.4 from 53.9. That’s above the estimate of no change and is the best since 2011.
  8. The European Economic Confidence index in December rose to 107.8 from 106.6 in November. That was 1 pt above the estimate and brings it to the best level since March 2011. All 5 components were higher (manufacturing, services, consumer, retail and construction) and Germany, France and the UK led the way. Confidence fell in Spain and was flat in Italy post referendum.
  9. The number of unemployed in Germany in December fell by 17k, more than the expected fall of 5k. The unemployment rate held at its lowest since reunification.
  10. German factory orders in November fell 2.5% but that was expected as it came off a 5% jump in October. The Economic Ministry said that “despite the decline in November, the results point to a very favorable development of orders in the final quarter of the year. The significant increase in overall demand signals a revival of manufacturing in the winter half.”
  11. Both UK’s manufacturing and services PMI’s rose m/o/m.
  12. Spanish unemployment fell by 87k in December, well more than the forecast of a drop of 50k.
  13. China’s private sector Caixin manufacturing and services indices improved m/o/m. Japan’s composite PMI rose as well. Hong Kong’s PMI got back above 50 at 50.3.
  14. Base pay in Japan in November crawled higher by .4% y/o/y but that is the quickest pace of gain since March. Offsetting some of this however were declines in overtime pay and bonus’.


  1. The pace of job growth continues to moderate. Payrolls grew by 156k in December, about 20k less than expected but the two prior months were revised up by a total of 19k. The private sector added 144k of the 156k, well below the estimate of 170k but November was revised up by 42k. Private sector job growth has now averaged just 163k over the past 3 months vs 174k for 6 months and brings the full year average to 165k vs 221k in 2015 and 240k in 2014. The unemployment rate rose by one tenth to 4.7% because the household survey added just 63k jobs while the labor force grew by 184k. The all in rate fell by one tenth however to 9.2%, the lowest since April ’08. Hours worked fell to 34.3 from 34.4. The amount of Americans not in the labor force rose to 95.1mm, the most on record.
  2. The US trade deficit expanded by $45.2b in November, wider by almost $3b m/o/m and to a 9 month high. Exports fell for the 2nd month to the lowest level since June. Imports were up by 1.1%.
  3. Taken with a grain of salt because of the holidays, purchase applications to buy a home fell 1.4% w/o/w and are down .9% y/o/y. While refi’s were up 1.7% w/o/w it comes after falling by 23% in the week prior and are now down 13% y/o/y.
  4. German CPI in December accelerated by 1.7% y/o/y, 3 tenths more than expected and the fastest increase since July 2013 and there is a big problem brewing between the Germans and the ECB. A story in the German newspaper Handelsblatt this week was titled “Perfect Storm for German Savers” and the general secretary of the economic council of the CDU party, Merkel’s party, said this in the FT yesterday: “For the saver, the combination of rising inflation and zero rates is a dramatic destruction of the value of their money. It is all the more urgent that the race towards ever more unconventional central bank action is finally stopped.” This spat could be a big 2017 story. The German 10 yr yield was up 10 bps on the week.
  5. More in the context of an epic bond bubble in Europe, eurozone CPI rose 1.1% y/o/y, almost double the pace of November and above the estimate of up 1%. It’s the most since 2013. The core rate was higher by .9% y/o/y, matching the most since March. The euro zone PPI went positive for the 1st time since June 2013 by .1% y/o/y. Certainly energy was a main factor for both but Draghi better be careful with what he wishes for.
  6. China’s state sector weighted manufacturing and services PMI surveys moderated m/o/m in December.
  7. India’s feeling the effect of its messy cash exchange plan as its manufacturing index fell to 49.6 from 52.3. Services remained below 50 at 46.8.
  8. Manufacturing PMI in Indonesia fell to 49 from 49.7. Malaysia’s remained below 50 at 47.1. South Korea’s improved by 1.4 pts but is still below 50 at 49.4. Singapore’s PMI fell to 52 from 52.8.
  9. I don’t have something specific on this but the heightened FX volatility in so many important currencies is unnerving.

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This is Part of a 3 part Debate on Macro