ADP, Mtg purchase apps, Capital spending report, Oil prices

Winding down from post hurricane levels, however keep in mind this is a forecast of Friday’s number, not report of actual private payrolls:

Highlights

A pre-hurricane total of 190,000 is ADP’s call for November private payroll growth which would follow a hurricane-related upswing of 252,000 in October and 15,000 downswing in September. This fits with Econoday’s consensus for Friday’s November report where private payrolls are expected to rise 184,000. Demand for labor has been very strong this year though wage traction has still been limited. Note that ADP’s October call is unrevised at 235,000.


The quarterly chart for the growth of hours worked shows a lower growth rate:


Overall looks to be flat to down vs last year:

Planned Capital Spending – November 2017

Combined U.S. & Canadian Industrial Spending Falls 30 Percent

RALEIGH, NC –December 1, 2017

Research by Industrial Reports, Inc. shows combined U.S. and Canadian planned capital spending dropped dramatically in November compared to October. November spending for the two nations totaled $36.83 billion compared to October’s $53.37 billion. The research organization reported 239 planned U.S. and Canadian projects in November.

Planned U.S. project spending sunk in November with $30.33 billion in planned investment compared to the October total of $48.97 billion. However, Canadian planned investment improved with $6.50 billion in November compared to $4.40 billion in October. Projects in both nations ranged in value from $800,000 to $6 billion.

Process projects led U.S. spending with $22.83 billion in planned investment, followed by manufacturing projects with $3.24 billion. Power and energy projects reported $1.96 billion in planned U.S. spending.

In Canada, process projects led all markets with $6.19 billion in planned spending, while power and energy projects accounted for $84 million.

Texas led the U.S. in planned investment for the month with $11.90 billion, followed by Louisiana with $4.98 billion and California with $2.02 billion

In Canada, Alberta led the provinces and territories with $4.51 billion in planned spending. British Columbia reported $591 million and Ontario reported $267 million.

Texas was the leader in U.S. project activity with 19 planned projects. New York and Ohio each reported 13 planned projects while North Carolina reported 12.

Alberta led Canadian project activity with eight planned projects. British Columbia reported seven and Ontario five.

More evidence Saudis may be on the move towards higher prices:

Aramco Raises Light Crude Pricing to Asia to Three-Year High

Aramco raises Arab Light pricing for January sales by 40c/bbl to $1.65 vs Oman/Dubai benchmark, according to emailed statement.

  • Co. increases pricing for all grades to Asia and NW Europe
  • Co. cuts pricing for all grades to U.S.
  • Aramco raises Light, Extra Light pricing to Mediterranean region, keeps Medium, Heavy grades unchanged
  • Factory orders, Cash bonuses, Oil prices

    As the chart shows, year over year growth has gone to near 0 since the election, and the hurricane replacement effect has since dissipated:

    Highlights

    A big upward revision to core capital goods highlights today’s factory orders report which closes the book on what was a mixed October for manufacturing. The month’s 0.1 percent decline, which is better than expected and actually hits Econoday’s high estimate, reflects a 33 percent downswing for commercial aircraft orders that follows, however, a very strong recent run and looks to build again following Boeing’s success at November’s Dubai air show.

    The split between the report’s two main components shows a 0.7 percent gain for nondurable goods — the new data in today’s report where strength is tied to petroleum and coal — and a 0.8 percent dip for durable orders which is 4 tenths improved from the advance report for this component. And driving the upward revision for durables is a major upward revision to October core capital goods (nondefense ex-aircraft) which is now up 0.3 percent from the initial 0.5 percent decline. This extends what is a very strong run for a component that offers leading indications on business investment.

    Shipments of core capital goods are also revised higher, up an additional 2 tenths to 1.1 percent to extend what is also an impressive run, one that feeds directly into nonresidential fixed investment and marks a strong early plus for fourth-quarter GDP. Other readings include a 0.2 percent gain for inventories and a 0.6 percent gain for total shipments, a mismatch pointing to the need for restocking but not enough to change the inventory-to-sales ratio which holds at 1.37. Not a plus in the report is no change in unfilled orders which have yet to get going.

    A plus in the report is a sharp 1.3 percent rise in vehicle orders as the auto sector responds to the hurricane-replacement sales surge of September and October. Looking past the headline, this report is very solid and points squarely at a rising contribution from the factory sector.


    From this longer view I don’t see much to get excited about here, and the numbers are not adjusted for inflation:

    And previously released credit aggregates, vehicle sales, and building permits are saying growth has already ended:

    More Employers Skip The Cash Bonus

    From Challenger Gray and Christmas

    Higher corporate profits, low unemployment, and high economic confidence among employers is not translating to more cash-based year-end bonuses.

    Saudi Arabia may raise January oil prices to Asia to over 3-year high

    SINGAPORE, Dec 1 (Reuters) — Top oil exporter Saudi Arabia is expected to raise the January price for its flagship Arab Light crude in Asia to the highest in more than three years to track a stronger Dubai benchmark, trade sources said on Friday.

    Robust demand in Asia and continuing supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia are rebalancing global oil markets. The producers agreed on Thursday to extend those supply cuts to end-2018, a decision that pushed Brent above $64 a short time later.

    A price hike would track a wider price spread between prompt and third month cash Dubai that rose 31 cents last month from October, trade sources said. Front-month Dubai is higher than those in future months, indicating strong demand for prompt oil.

    The survey respondents also expect an increase of 50-60 cents in Arab Extra Light’s OSP in January after naphtha margins surged last month to the highest since early 2016.

    January price hikes for Arab Medium and Heavy grades were likely to be smaller than those for light grades as fuel oil cracks weakened last month, the respondents said.

    One of the four respondents expected a price cut for Arab Heavy crude.

    Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

    State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

    Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

    Below are expected Saudi prices for January (in $/bbl against the Oman/Dubai average):

    DEC Change est.JAN OSP

  • Arab Extra Light +2.45 +0.50/+0.60 +2.95/+3.05
  • Arab Light +1.25 +0.25/+0.40 +1.50/+1.65
  • Arab Medium +0.00 +0.10/+0.35 +0.10/+0.35
  • Arab Heavy -1.15 -0.15/+0.30 -1.30/-0.85
  • Construction spending, Rig count, Fed US leading index, Flynn news

    Up a bit this month but as per the chart it’s bumping along at recession type levels:

    Highlights

    It’s not housing that drove construction spending up a very sharp 1.4 percent in October but non-residential activity which had been lagging in this report. Spending on private non-residential construction jumped 0.9 percent in the month with strength centered in office construction and transportation construction. Despite the improvement, year-on-year spending on the non-residential side is still negative, at minus 1.3 percent. Public building also had a strong month with educational building up 10.9 percent for a standout year-on-year rate of 14.6 percent. Spending on highways & streets was also strong in October, up 1.1 percent though still down on the year, at minus 8.5 percent.

    Residential spending has been leading this report but October was moderate, up 0.4 percent overall and held back by a 1.6 percent decline for multi-units. But home improvements were strong in the month, up 1.4 percent for an 8.7 percent yearly rate. Total residential spending is up a year-on-year 7.4 percent with spending on new single-family homes up a very significant 8.9 percent.

    But new homes aside, overall construction spending is up only 2.9 percent which is a very moderate total that evokes this week’s Beige Book where modest-to-moderate still dominated the description of the economy.

    This is not adjusted for inflation:


    Seems to go up when the price of oil goes up…


    Looks like we’ve crossed the line?

    Keeps getting worse:

    Flynn says Trump transition official told him to make contact with Russians

    As part of a plea deal, former national security adviser Michael Flynn has admitted that a senior member of the Trump transition team directed him to make contact with Russian officials in December 2016.

    Flynn pleaded guilty Friday to making false statements to the FBI, becoming the first official who worked in the Trump White House to make a guilty plea so far in a wide-ranging investigation led by special counsel Robert Mueller into possible coordination between Russia and the Trump campaign to influence the outcome of the 2016 election.

    The government did not reveal the identity of the senior transition official.

    GDP, Profits, Pending home sales, Mtg purchase apps

    First revision has the consumer a bit weaker than expected, which means the savings rate isn’t quite as weak as initially reported. The savings rate, however, is still unsustainable weak, meaning either consumer spending falls further or personal income growth reverses its deceleration. The other revisions include an increase in already too high inventories that have already turned negative in Q4, and a smaller trade deficit that is now showing increases in q4. And the hurricane assisted boost in auto sales has more recently reversed as well:

    Highlights

    Third-quarter GDP proved even more solid than the first estimate, revised 3 tenths higher in the second estimate to an as-expected 3.3 percent annualized rate. Nonresidential investment and inventory growth added a little more in the second estimate while residential investment and net exports subtracted a little less. These offset a slightly smaller contribution from consumer spending, at a 2.3 percent rate vs 2.4 percent in the first estimate and expectations for 2.5 percent. The drop off on the consumer side was centered in durables which, despite a slight downgrade, still grew at an 8.1 percent rate getting a boost from hurricane-replacement demand for autos.

    Turning back to inventories, whether builds are actually positive or negative for the outlook are always difficult to assess, but given this year’s general strength in consumer and business demand, the third-quarter build is probably a positive for the outlook, suggesting that businesses were stocking up for strength ahead including for the holiday shopping season.

    Consumer spending, despite auto sales, wasn’t on fire in the third quarter though the outlook for the fourth quarter, given what are very high expectations for holiday spending, are positive. Early expectations for fourth-quarter GDP are once again in the 3 percent range.


    This is being held up by consumers dipping into savings to sustain their spending:


    This is from two weeks ago:


    Hurricane story, sales still very weak historically:

    Highlights

    Led by a hurricane bounce in the South, the pending home sales index jumped a much sharper-than-expected 3.5 percent in October which points to continued gains for final sales of existing homes. Pending sales in the South jumped 7.4 percent in October after falling 3.0 percent during the hurricane swept month of September. The index level in the South, at 123.6, far outdistances all other regions and compares against 109.3 for the total index. October’s overall gain follows two months of sharp increases in new home sales and will boost confidence that housing, after a mostly flat year, is pivoting higher at year end.

    The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but is still 0.6 percent below a year ago.
    Read more at http://www.calculatedriskblog.com/#vRbrDXSwqADlwL5M.99

    And no sign of a sudden spike in mtg purchase apps here:

    New home sales, Bank lending, Philly Fed state coincident index

    A better than expected, but somewhat peculiar details, and note the approximate average over the last 4 months. And maybe some tax related buying?

    Last month, new single-family homes sales soared 30.2 percent in the Northeast to their highest level since October 2007. Sales in the South increased 1.3 percent also to a 10-year high. There were also strong gains in sales in the West and Midwest last month.

    More than two-thirds of the new homes sold last month were either under construction or yet to be started.

    Despite the rise in sales in October, the inventory of new homes on the market increased 1.4 percent to 282,000 units, the highest level since May 2009.

    Total year-on-year sales are up 18.7 percent for a nearly 2 percentage point gain from September. But not the entire housing sector is showing this kind of strength as sales of existing homes are actually down 0.9 percent on the year. But new homes, boosted by the strong labor and stock markets, are definitely moving and look to be a significant contributor to fourth-quarter growth.


    Still working its way lower just like it’s done with every recession but GDP estimates telling me there’s some major credit expansion somewhere I’m missing?

    Nice bounce up to 42. Note the prior, similar bounces:

    Mtg purchase apps, Durable goods orders

    I don’t see any convincing evidence of a housing market revival, particularly with the growth of real estate lending remaining well below that of last year:

    Highlights

    Purchase applications for home mortgages rose a seasonally adjusted 5 percent in the November 17 week, though overall mortgage activity was only barely higher (by 0.1 percent) than in the prior week as the increase in buyers was offset by a 5 percent decline in refinancing activity. On an unadjusted basis, the purchase index rose only 1 percent from the prior week, putting the year-on-year gain at 4 percent, down a sharp 14 percentage points from last week’s reading due to an outsized weekly jump higher in the index in the comparable week last year. The slowdown in refinancing took its share of mortgage activity down 1.4 percentage points from the prior week to 49.9 percent. Mortgage rates rose slightly though remaining at historically low levels, with the average interest rate on 30-year fixed-rate mortgages ($424,100 or less) up 2 basis points to 4.20 percent. Today’s report shows home-buyers quite active and adds to recent evidence of a housing market reviving in the fourth quarter, though the year-on-year gain, now at just 4 percent after much stronger readings for most of the year, suddenly looks much less impressive.


    Less than expected but still showing modest year over year growth:

    Highlights

    Durable goods orders, down 1.2 percent in October, couldn’t post three straight gains but there are positives in the report. But first the negatives which include a 33 percent reversal for commercial aircraft orders and a 0.5 percent decline for core capital goods orders (nondefense ex-aircraft). These two components have been very strong in recent months so a step back isn’t a surprise, and aircraft orders appear certain to jump sharply in next month’s report given Boeing’s major success at this month’s Dubai Air Show.

    Ex-transportation offers an underlying reading and this is solid with a 0.4 percent gain. The revision to this reading for September is also positive, up 4 tenths to 1.1 percent. And core capital goods get an even bigger revision, an 8 tenths upgrade to 2.1 percent in September which helps offset October’s decline. Shipments of core capital goods, which are direct inputs into GDP, are also revised higher, up 5 tenths in September to 1.2 percent with October coming in at a constructive plus 0.4 percent. Other positives in the report are a 1.7 percent rise in vehicle orders and a 1.5 percent increase in vehicle production, both of which follow the ex-hurricane spike in vehicle sales.

    Other readings are mixed including very modest 0.1 percent gains for both total shipments and total inventories and a disappointing no change for unfilled orders.

    This report isn’t a step forward but the factory sector, nevertheless, still looks to be a positive contributor to fourth-quarter growth.

    Modest growth recently but still not back on track since the collapse in oil capex at the end of 2014. And these charts are not adjusted for inflation:

    Industrial production, Household debt, Business sales and inventories, Container counts, Animal trophies

    A dip and a recovery due to the hurricane (as per vehicle sales data), chugging along at modest rates of growth, and still down from high a couple of years back, not adjusted for inflation:


    The NY Fed reports household debt growth decelerated in q1, in line with the deceleration in bank lending:


    Note the deceleration since January for both of these charts, inline with decelerating bank loan growth:

    Analyst Opinion of Business Sales and Inventories

    This was a worse month for business sales compared to last month – and inventories remain elevated. Our primary monitoring tool – the 3 month rolling averages for sales – declined and remains in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series.

    Now he’s gone too far…
    ;)

    The Trump administration reversed an Obama-era policy today banning the import of elephant trophies from Zimbabwe and Zambia. Americans hunting in the African countries will now be permitted to bring back their trophies of the killed animals, a U.S. Fish and Wildlife Service official told ABC News.

    Retail hiring, Container count, Truck sales

    October Retail Hiring Lowest In Six Years

    from Challenger Gray and Christmas

    Fewer major retailers have announced large-scale hiring announcements so far this year, which reflects the drop in the number of October employment gains in the sector. Gains fell 8 percent from last year to 136,700, the lowest October gain since 2011, when the sector added 134,200 jobs.

    Imports up and exports down doesn’t help US GDP:

    Port of Long Beach: Another Record Month in October

    By Bill McBride

    Read more at http://www.calculatedriskblog.com/#TgvZqc4qb4gZ5jQb.99

    Inbound containers destined for retailers jumped 14.3 percent to 339,013 TEUs. Export boxes decreased slightly, 0.5 percent, to 126,150 containers. Empty containers sent overseas to be refilled with goods increased 28.9 percent, to 204,055 TEUs.

    Read more at
    http://www.calculatedriskblog.com/#IHELvURAYYMpHj9O.99

    Credit check, Commercial real estate index, Unemployment, Margin debt

    Still no sign of a rebound:

    Home prices rising about 6% annually and loans now growing at under 4% annually looks in line with at best flat housing sales:


    Looks like the blip up as hurricane destroyed vehicles were replaced has run its course:


    This had looked like it peaked a couple of years ago, but since went back up to new highs: