Several years ago I began using the analogy of the 10th plague of the Old Testament, the idea being that the EU wouldn’t move away from austerity until it brought down Germany itself. It’s looking like that day is getting a whole lot closer, as austerity has not only damaged Germany’s export markets in the rest of the EU, but has also caused the rest of the EU to become more competitive vs Germany in the external markets, which have themselves been weakened by their own austerity policies.
Oct 7 (Reuters) — German industrial output fell far more than expected in August and posted its biggest drop since the financial crisis in early 2009, Economy Ministry data showed on Tuesday, the latest figures to raise question marks about Europe’s largest economy.
The 4.0 percent month-on-month drop missed the consensus forecast in a Reuters poll for a 1.5 percent decrease and came short even of the lowest forecast for a 3.0 percent fall. It was the biggest drop since a 6.9 percent fall in January 2009.
Jobs: Just keeping up with population growth- 59% three months in a row, not at all ‘recovering’ as in prior cycles. So seems the extra jobs are from underestimating population growth?
Spending- working its way lower after the tax hikes and sequesters. Q3 201313 was supported by unsold inventories, Q4 13 by expiring tax credits, then down for Q1 2014 as inventories were reduced and cold weather hurt some, and a Q2 bounce that resulted in only 1.2% growth for the first half of this year:
You can see how in the previous cycle the large drop in the growth rate was followed by a rebound to much higher rates of growth. The current cycle saw a much larger decline in GDP that was followed by lower rates of growth that now seem to be further declining:
You can see the persistent shift down after the last recession that didn’t happen in prior cycles:
Inflation? 6 years of 0 rates, over 4 trillion of QE, and the Fed still can’t hit it’s 2% target? Maybe it’s not so easy to inflate as most think? And just maybe the Fed has it all backward, and 0 rates and QE are deflationary?
Like the hairdresser said, “no matter how much I cut off its still too short”:
Turned down this week as ‘leveling off’ continues:
No great shakes and leveling off:
Nothing happening here either:
The Fed believes this stuff causes inflation if it goes up, disinflation when it goes down:
A lot better than expected, and markets reacting accordingly, and the narrative about the 1.2 million people losing benefits at year end ‘inflating’ the jobs number seems not material based on the numbers so far released:
The labor market improved in September for the most part. Job growth topped expectations, The unemployment rate declined. However, wage inflation is oscillating but remaining on a low trajectory.
Nonfarm payroll jobs gained 248,000, after a 180,000 rise in August and 243,000 increase in July. Net revisions for July and August were up a sharp 69,000. The median market forecast for September was for a 215,000 gain.
The unemployment rate declined to 5.9 percent from 6.1 percent in August. Expectations were for 6.1 percent.
Going back to the payroll report, private payrolls advanced 236,000 in September after a 175,000 boost in August. Expectations were for 236,000.
Average hourly earnings were unchanged in September after a 0.3 percent rise the month before. Average weekly hours ticked up to 34.6 hours versus 34.5 hours in August and expectations for 34.5 hours.
Overall, job growth improved while wage inflation remained soft. The Fed still has many options for policy.
While there were more net new hires, seems the working age population went up quite a bit as well, as the % of the population working remained at relatively low 59% for the third month:
> (email exchange)
> On Thu, Oct 2, 2014 at 3:36 PM, wrote:
> I feel like you can officially say “Told ya so”
And that’s household income- generally 2 people working!
MBA Purchase Applications
Mortgage activity was steady in the September 26 week, unchanged for the purchase index and down 0.3 percent for the refinance index. The purchase index remains depressed compared to last year, down 11 percent. A move lower in rates during the week didn’t help activity. The average 30-year conforming mortgage ($417,000 or less) fell 6 basis points to 4.33 percent.
Still strong demand for Saudi crude as they set price and let quantity adjust.
The question is what price they set.
Full size image
Came in less than expected and the chart looks bad as well, having topped out prior to year end as tax credits expired:
Recent History Of This Indicator
Construction spending saw a broad-based gain in July. Construction spending rebounded 1.8 percent after a 0.9 percent dip in June. While all broad categories advanced, July’s increase was led by the public sector-up 3.0 percent, following a 1.8 percent decrease in June. Private nonresidential spending rebounded 2.1 percent in July after slipping 0.8 percent the month before. Private residential outlays gained 0.7 percent, following a 0.4 percent dip in June.
ISM manufacturing less then expected but still at reasonable levels:
ADP Employment Report
ADP’s estimate for private payroll growth for September is 213,000 vs the Econoday consensus for 200,000 and vs a revised 202,000 for August. The corresponding consensus for Friday’s jobs report from the government is 215,000 vs August’s 134,000.
ADP contracted with Moody’s Analytics to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic’s employment situation.
ADP used to report it’s payroll number, but a while ago ‘switched’ to using its internal numbers to try to forecast Friday’s non farm payroll report, so now we don’t see their actual payroll numbers, just their forecast for Friday
It’s all looking more and more like the ‘unspent income’ is winning, as happened in Q1, and it’s all on the verge of going into reverse.