Median household income still struggling:

First, factory orders
Always boring
;)

Factory Orders

Solid domestic demand together with solid foreign markets appear to be giving a lift to the factory sector with factory orders up a very strong 1.8 percent in November. Another plus is a 4 tenths upward revision to October, to minus 0.5 percent. September orders are unrevised and very strong at plus 1.8 percent like November.

Excluding transportation, orders rose 0.6 percent in November vs an upward revised 0.1 percent gain in October. Orders for capital goods show a big surge, possibly boosted by year-end tax issues but also perhaps by rising business confidence.

Shipments were very strong in November, up 1.0 percent following incremental 0.1 percent gains in the two prior months. And there seems to be no risk of inventory overhang as inventories were unchanged to bring down the inventory/shipments ratio to 1.28 from 1.29.

Unfilled orders are a special plus, jumping 1.0 percent for an 8th straight gain. Last week’s ISM report, boosted by strength in construction-related and auto-related industries, points to another strong month in December for manufacturing which is once again a leading strength for the nation’s economy.


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ISM non manufacturing
Always more interesting
Downward slope since the peak a few months back has continued
Enough said…

New orders moved suddenly into reverse for ISM’s non-manufacturing sample, pulling down the index which fell 9 tenths to 53.0. New orders, the leading indicator in this report, fell to 49.4 from 56.4 in November. This is the first sub-50 reading for new orders, which had been especially strong through much of the second half of last year, since July 2009.

But coincidental and lagging indications are positive including a steady reading for business activity and a big bounce back for employment, up 3.3 points to 55.8.

Other readings include a second straight contraction for backlog orders, a slight rise for input price pressures, and a slowing in export orders.

Today’s employment reading may lift expectations for Friday’s employment report but otherwise the report hints at an early 2014 slowdown for the economy.


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Highlights
Growth slowed this month in the Chicago economy but from unsustainably high rates of growth in November and October. The Chicago PMI slowed to 59.1 vs 63.0 and 65.9 in the two prior months. Aside from November and October, the December reading is the best since March last year.

Order growth is strong but did slow with new orders at 60.7, down from 68.8 and 74.3 in the two prior months but still above September’s 58.9. This are all very strong rates of monthly growth for new orders which have been on the plus 50 side to show growth every month since November last year. And backlog orders are piling up, at 58.3 for a 3rd straight monthly build.

Employment is a special weakness in the December report, at 51.6 and not much above 50 to signal only modest monthly growth. This is the softest reading for this index since April.

Other readings include a strong though slowing rate of production, steady and moderate price pressures for raw materials, and a sharp slowing in deliveries that may point to the emergence of capacity constraints in the supply chain. In a plus, inventories, where high levels are a concern for the 4th quarter, fell sharply in the month.

This report, which covers all areas of the Chicago economy, points to another month of solid mid-50s growth for the coming ISM reports on manufacturing and non-manufacturing. The Dow is moving off opening highs following today’s report.

This release along with the Chicago Fed report that November housing starts were down, and anecdotal evidence from home builder reports and various mortgage originators seems to indicate the reported 22% jump in November housing starts reported last week is at best subject to downward revision.

MBA Purchase Applications

Highlights
The rise in mortgage rates, this time following the Fed’s decision to begin tapering stimulus, is increasingly reducing mortgage activity. The purchase index fell 4.0 percent in the December 20 week for a year-on-year decrease of 11.0 percent, tangible contraction that underscores the importance of all-cash buyers in the home market.

The rise in mortgage rates is also sharply reducing refinancing activity with the refinance index down 8.0 percent in the week to its lowest level of the recovery. The average rate for conforming mortgages ($417,500 or less) rose 2 basis points in the week to 4.64 percent.

MBA Purchase Applications, Y/Y and level:

Durables were up nicely as per yesterday’s release as well, with a boost from November’s elevated vehicle sales rate of 16.4 million units. But December car sales are currently forecast to be down to about a 15.5-16 million pace, vs month’s 16.4 million and October’s govt shutdown limited 15.2 million. This also brings the year over year growth rate down to maybe 4% as things flattened out in 2013 from higher prior growth rates. Also, as you can see from the chart, durables don’t tell you much about what might happen next. For example, we had about the same increase in Q1 2008:

And the Capital goods non defense ex aircraft year over year chart speaks for itself as well:

New home sales also just out, with a whopping upward 120,000 revision to last month causing today’s initial November print to be down tic. Seems it’s going to take a few more months of releases and revisions to see what’s actually been happening.

just saying…