Economic Summary:
There was only one monthly indicator reported today, the ISM non-manufacturing
index, but it had an outsized impact on the markets. A sharp decline in this
index, while somewhat suspicious, unsettled equities and drove Treasuries
higher. Concerned words from normally-hawkish Richmond Fed President Lacker
about the increased likelihood of recession exacerbated the market moves in
the early afternoon. And Fitch's decision to put MBIA on negative watch,
announced just before the market close, pushed equities to the lows of the
session. While off its intraday highs, the dollar rose despite the news,
partly because Europe posted surprisingly weak service industry data of its
own.
The Institute for Supply Management's Non-manufacturing Index (NMI) for
January fell to a below neutral 44.6 from 53.2 in December. Like its
manufacturing counterpart, a reading of below 50 on the NMI indicates a
contraction in activity. January's was the first sub-50 reading for the
non-manufacturing sector since March 2003. Moreover, 44.6 was the lowest
reading since the ISM began surveying non-manufacturing activity in July 1997.
While a deterioration in the ISM non-manufacturing index was not particularly
surprising, the severity of the decline reported for January was hard to
believe, especially as it came amid an annual revision to the seasonal factors
and a new methodology for compiling the data. Nevertheless, the data
reinforced the general impression given by other data that the economy is weak.
Economic Outlook:
The preliminary readings on Q4 Productivity and Unit Labor Costs will be
released at 8:30 on Wednesday (Forecast +1.0%/+2.5%, Consensus +0.5%/+3.5%).
Given the tepid annualized growth rate of 0.6% reported for Q4 GDP, it appears
that productivity grew at only about 1.0% last quarter. This rate would
represent a substantial deceleration from the 6.3% growth in productivity
reported for Q3. With productivity growth slowing, ULC probably accelerated,
rising about 2.5% after a 2.0% drop in Q3. That would translate into a year
over-year ULC growth rate of +1.1% for Q4, down from +3.0% YoY through Q3.
Market Summary
The broad equity indexes were weak from the opening bell after disappointing
service sector news in Europe drove down stocks abroad. A record drop in the
newly-calculated ISM non-manufacturing index added momentum to the decline,
and Richmond Fed President Lacker didn't help by mentioning the "R" word.
Fitch placed MBIA's AAA insurer financial strength reading on negative watch
17 minutes before the market close, and that was the final straw. The major
indexes closed down some 3% at or very close to their intraday lows. (DJ INDU
12265, -370; S&P500 1337, -44; NASDAQ 2310, -73)
Showing posts with label Economy Summary. Show all posts
Showing posts with label Economy Summary. Show all posts
Wednesday, February 6, 2008
Tuesday, January 15, 2008
Economic Outlook 15th Jan 2008
Better-than-anticipated earnings news from IBM got equities off to a strong
start today. Optimism that the Fed will not let inflation fears keep it from
easing added fuel to the stock rally. Treasuries were mixed and little changed,
while the dollar took another step lower versus the euro and the yen.
Retail Sales and sales ex-autos for December will be released at 8:30
(Forecast +0.2%/+0.2%, Consensus unch/-0.1%). Retail sales surprised to the
upside in November, jumping 1.2% overall and 1.8% excluding autos. We estimate
the gains in December were much more modest, with the pace of holiday spending
petering out as the season progressed. We put December retail sales up 0.2%
both with and without motor vehicles. Gasoline sales are not likely to be a
large factor; we see the same 0.2% gain when gasoline is excluded.
The December Producer Price Index and core PPI are also due out at 8:30
(Forecast +0.1%/+0.1%, Consensus +0.2%/+0.2%). The December PPI should look
nothing like November's, when the index posted an energy-related rise of 3.2%.
Wholesale energy prices, which surged by 14.1% in November, probably edged up
only 0.2% last month. We put the headline December PPI at +0.1%. Excluding
food and energy, the core PPI should also be contained, rising an estimated 0.
1% in December after November's 0.4% gain. This would leave the core PPI
unchanged at +2.0% YoY through December.
January's Empire State Manufacturing Survey is also scheduled for 8:30
(Forecast +7.0, Consensus +10.0). This survey of manufacturers from the New
York region fell to 10.3 in December after posting strong readings above 25 in
five of the previous six months. Its average for all of 2007 was +17.1. For
January, we look for a further deterioration in the index to a nine-month low
of +7.0.
Business Inventories for November are due out at 10:00 (Forecast +0.4%,
Consensus +0.4%). Factory inventories jumped 0.8% in November, and we estimate
wholesale inventories rose 0.4%. We put retail inventories up 0.2% for the
month. These estimates leave us with an expected increase of 0.4% for total
business inventories in November. Looking forward, slowing inventory
accumulation is expected to subtract from GDP growth throughout the first half
of 2008.
start today. Optimism that the Fed will not let inflation fears keep it from
easing added fuel to the stock rally. Treasuries were mixed and little changed,
while the dollar took another step lower versus the euro and the yen.
Retail Sales and sales ex-autos for December will be released at 8:30
(Forecast +0.2%/+0.2%, Consensus unch/-0.1%). Retail sales surprised to the
upside in November, jumping 1.2% overall and 1.8% excluding autos. We estimate
the gains in December were much more modest, with the pace of holiday spending
petering out as the season progressed. We put December retail sales up 0.2%
both with and without motor vehicles. Gasoline sales are not likely to be a
large factor; we see the same 0.2% gain when gasoline is excluded.
The December Producer Price Index and core PPI are also due out at 8:30
(Forecast +0.1%/+0.1%, Consensus +0.2%/+0.2%). The December PPI should look
nothing like November's, when the index posted an energy-related rise of 3.2%.
Wholesale energy prices, which surged by 14.1% in November, probably edged up
only 0.2% last month. We put the headline December PPI at +0.1%. Excluding
food and energy, the core PPI should also be contained, rising an estimated 0.
1% in December after November's 0.4% gain. This would leave the core PPI
unchanged at +2.0% YoY through December.
January's Empire State Manufacturing Survey is also scheduled for 8:30
(Forecast +7.0, Consensus +10.0). This survey of manufacturers from the New
York region fell to 10.3 in December after posting strong readings above 25 in
five of the previous six months. Its average for all of 2007 was +17.1. For
January, we look for a further deterioration in the index to a nine-month low
of +7.0.
Business Inventories for November are due out at 10:00 (Forecast +0.4%,
Consensus +0.4%). Factory inventories jumped 0.8% in November, and we estimate
wholesale inventories rose 0.4%. We put retail inventories up 0.2% for the
month. These estimates leave us with an expected increase of 0.4% for total
business inventories in November. Looking forward, slowing inventory
accumulation is expected to subtract from GDP growth throughout the first half
of 2008.
Friday, January 11, 2008
Economic Summary 11th Jan 2008
Strong signals from Fed Chairman Bernanke that the FOMC will be cutting rates
further propelled equities into positive territory while simultaneously
boosting short-term Treasuries. Longer-term Treasuries and the dollar sold off
on the chairman's remarks.
Initial claims for unemployment insurance for the week ended January 5 fell by
a sharper-than-expected 15k to 322k. Continuing claims, while still a concern,
did turn lower. Continuing claims fell 52k in the week ended December 29 after
a combined 161k jump higher in the previous four weeks. The continuing claims
data still bear watching as their four-week average of 2.7mn is the highest
seen since mid November 2005.
Commercial paper outstanding for the week ended January 9 rose by $14.5bn, its
largest gain since late July. Asset-backed CP outstanding rose $4.8bn,
building upon a $26.3bn jump the previous week. These were the first gains in
ABCP since the subprime mortgage-related credit crisis hit full force in early
August.
Annual revisions to Philadelphia Fed index seasonal factors were released this
morning. With the new seasonals, the December index was revised up to -1.6
from -5.7. November was revised down to +7.5 from +8.2. January's Philadelphia
Fed index is scheduled for release next Thursday, January 17.
Little attention was paid to the stronger-than-expected 0.6% gain in November
wholesale inventories. The consensus forecast was +0.4%. In general, inventory
accumulation probably provided less of a boost to GDP growth in Q4 than it did
in Q3, and we forecast it will subtract from growth throughout the first half
of 2008.
In a speech today, Fed Chairman Bernanke all but announced that more easing is
on the way. The chairman, well aware that markets had already priced in
several fed funds rate cuts over the next few months, used strong language in
his prepared text that validated the markets' expectations. Moreover, he
suggested that the additional policy moves could be aggressive: "...we stand
ready to take substantive additional action as needed to support growth and to
provide adequate insurance against downside risks." Before the speech, we were
forecasting another 100bp in rate cuts by mid-year, bringing the funds target
to 3.25%. The chairman's speech raised the likelihood that the bulk of the
easing moves will be front-loaded into Q1.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 9 fell to $1.5bn from $5.8bn the previous
week. Borrowing on January 9 alone was $1.0bn, split between the New York and
San Francisco districts.
Economic Outlook
The December Import Price Index will be released at 8:30 on Friday (Forecast
-0.4%, Consensus +0.1%). A drop in petroleum prices in December probably
tipped the entire import price index into negative territory that month. We
estimate prices of imported goods fell 0.4% in December after their 2.7%
petroleum-related surge in November. The imported petroleum index increased by
9.8% in November, and we estimate it fell back by 2.0% in December. Excluding
all imported fuel prices, including those for natural gas, we estimate import
prices rose by 0.1% after a 0.5% jump in November.
further propelled equities into positive territory while simultaneously
boosting short-term Treasuries. Longer-term Treasuries and the dollar sold off
on the chairman's remarks.
Initial claims for unemployment insurance for the week ended January 5 fell by
a sharper-than-expected 15k to 322k. Continuing claims, while still a concern,
did turn lower. Continuing claims fell 52k in the week ended December 29 after
a combined 161k jump higher in the previous four weeks. The continuing claims
data still bear watching as their four-week average of 2.7mn is the highest
seen since mid November 2005.
Commercial paper outstanding for the week ended January 9 rose by $14.5bn, its
largest gain since late July. Asset-backed CP outstanding rose $4.8bn,
building upon a $26.3bn jump the previous week. These were the first gains in
ABCP since the subprime mortgage-related credit crisis hit full force in early
August.
Annual revisions to Philadelphia Fed index seasonal factors were released this
morning. With the new seasonals, the December index was revised up to -1.6
from -5.7. November was revised down to +7.5 from +8.2. January's Philadelphia
Fed index is scheduled for release next Thursday, January 17.
Little attention was paid to the stronger-than-expected 0.6% gain in November
wholesale inventories. The consensus forecast was +0.4%. In general, inventory
accumulation probably provided less of a boost to GDP growth in Q4 than it did
in Q3, and we forecast it will subtract from growth throughout the first half
of 2008.
In a speech today, Fed Chairman Bernanke all but announced that more easing is
on the way. The chairman, well aware that markets had already priced in
several fed funds rate cuts over the next few months, used strong language in
his prepared text that validated the markets' expectations. Moreover, he
suggested that the additional policy moves could be aggressive: "...we stand
ready to take substantive additional action as needed to support growth and to
provide adequate insurance against downside risks." Before the speech, we were
forecasting another 100bp in rate cuts by mid-year, bringing the funds target
to 3.25%. The chairman's speech raised the likelihood that the bulk of the
easing moves will be front-loaded into Q1.
Weekly reserve data showed that daily average borrowing from the discount
window in the week ended January 9 fell to $1.5bn from $5.8bn the previous
week. Borrowing on January 9 alone was $1.0bn, split between the New York and
San Francisco districts.
Economic Outlook
The December Import Price Index will be released at 8:30 on Friday (Forecast
-0.4%, Consensus +0.1%). A drop in petroleum prices in December probably
tipped the entire import price index into negative territory that month. We
estimate prices of imported goods fell 0.4% in December after their 2.7%
petroleum-related surge in November. The imported petroleum index increased by
9.8% in November, and we estimate it fell back by 2.0% in December. Excluding
all imported fuel prices, including those for natural gas, we estimate import
prices rose by 0.1% after a 0.5% jump in November.
Thursday, January 10, 2008
Economic Summary 10th Jan 2008
In another day with no major economic releases, the markets spent a good part
of the trading session worrying about just how bad next week's Q4 earnings
reports will look. But equities turned higher in the middle of the afternoon,
encouraged in part by Berkshire Hathaway's announcement that it may invest in
municipal bond insurers. Treasuries peaked about the same time equities
bottomed out and closed the day with losses across the board. The foreign
exchange value of the dollar rose.
The Mortgage Bankers Association's weekly mortgage applications index for the
week ended January 4 surged by some 32%, breaking a three-week string of
declines. The purchase index rose 15%, and the refinancing index shot up by
54%. Mortgage applications probably overstate the underlying demand for
housing since mortgage brokers are submitting multiple applications in the
face of tight lending standards. Also, these data, while seasonally adjusted,
are particularly volatile around the holidays.
Economic Outlook
Initial claims for unemployment insurance for the week ended January 5 are due
out at 8:30 (Consensus 340k). While initial claims are slowly trending higher,
continuing claims for unemployment insurance are particularly concerning. The
latest four-week average reading of 2.7mn was the highest for continuing
claims in over two years. The data suggest that those who are already laid off
are having trouble finding new jobs.
Little attention will likely be paid to the November wholesale inventories
release at 10:00 (Consensus +0.4%). Wholesale inventories are a componenet of
business inventories, which will be released on January 15. In general,
inventory accumulation probably provided less of a boost to GDP growth in Q4
than it did in Q3, and we forecast it will subtract from growth throughout the
first half of 2008.
Market Summary
St. Louis Fed President Poole, a nonvoting member of the FOMC this year, said
that "the uncertainties are probably greater" for growth than for inflation,
and he added the risks of a recession are "high enough to worry about."
Tomorrow, Fed Chairman Bernanke will speak at 1:00 about the economic outlook.
We expect that his comments will also signal the Fed's concern about a more
pronounced slowdown in growth than expected.
of the trading session worrying about just how bad next week's Q4 earnings
reports will look. But equities turned higher in the middle of the afternoon,
encouraged in part by Berkshire Hathaway's announcement that it may invest in
municipal bond insurers. Treasuries peaked about the same time equities
bottomed out and closed the day with losses across the board. The foreign
exchange value of the dollar rose.
The Mortgage Bankers Association's weekly mortgage applications index for the
week ended January 4 surged by some 32%, breaking a three-week string of
declines. The purchase index rose 15%, and the refinancing index shot up by
54%. Mortgage applications probably overstate the underlying demand for
housing since mortgage brokers are submitting multiple applications in the
face of tight lending standards. Also, these data, while seasonally adjusted,
are particularly volatile around the holidays.
Economic Outlook
Initial claims for unemployment insurance for the week ended January 5 are due
out at 8:30 (Consensus 340k). While initial claims are slowly trending higher,
continuing claims for unemployment insurance are particularly concerning. The
latest four-week average reading of 2.7mn was the highest for continuing
claims in over two years. The data suggest that those who are already laid off
are having trouble finding new jobs.
Little attention will likely be paid to the November wholesale inventories
release at 10:00 (Consensus +0.4%). Wholesale inventories are a componenet of
business inventories, which will be released on January 15. In general,
inventory accumulation probably provided less of a boost to GDP growth in Q4
than it did in Q3, and we forecast it will subtract from growth throughout the
first half of 2008.
Market Summary
St. Louis Fed President Poole, a nonvoting member of the FOMC this year, said
that "the uncertainties are probably greater" for growth than for inflation,
and he added the risks of a recession are "high enough to worry about."
Tomorrow, Fed Chairman Bernanke will speak at 1:00 about the economic outlook.
We expect that his comments will also signal the Fed's concern about a more
pronounced slowdown in growth than expected.
Subscribe to:
Posts (Atom)
