Week in review
Canada – The Survey of Employment, Payrolls and Hours (SEPH), a survey of establishments (unlike the Labour Force Survey which surveys households), showed that Canada gained 31K jobs in September, largely making up for the prior month’s losses. However, the manufacturing sector lost jobs for the fourth month in a row and factory employment is now about the same as it was five years ago. So much so that the share of manufacturing in total employment fell to just 9.4% in September, the lowest on records going back to 2001.
For the first nine months of 2015, an average of 9K jobs/month were created according to the SEPH, a touch higher than the Labour Force Survey’s 8K for paid employment over the same period. The SEPH’s year-on-year earnings growth rose to 1.7%. Annual wage growth topped the national average in sectors like forestry, wholesale, management, finance/insurance, health care, education, accommodation and food services. Sectors including information and culture, manufacturing, transportation and warehousing, mining/oil/gas, utilities, real estate, construction, arts and entertainment, had annual wage growth below the national average.
United States – The Conference Board’s consumer confidence index fell to a 14-month low of 90.4 in November. The decline in confidence was due to both perceptions about the present situation (sub-index falling to 108.1), and to the index relating to economic prospects (sub-index falling to 78.6). Consumers were less optimistic than in the prior month about prospects for jobs and income. Interestingly, they were more enthusiastic than in the prior month about buying autos and appliances.
The weekly jobless claims report showed initial claims falling to 260K in the week of November 21st. The more reliable 4- week moving average was unchanged at 271K. Continuing claims for the prior week rose 34K to 2.21 million.
Markit’s flash/preliminary estimate of the manufacturing purchasing managers index ended up at 52.6 in November, the lowest in 25 months. However, a reading above 50 is still consistent with expansion in manufacturing activity. The production, new orders, and employment sub-indices expanded at a slower rate than in the prior month. New export orders were back in contraction mode. Markit’s services purchasing managers index rose to 56.5 in November (from 54.8 in the prior month), the highest in 7 months. Business confidence remained subdued largely due to global conditions. However, the pace of job creation remained strong. Services output price inflation remain mild. The composite PMI, which takes into account both services and manufacturing, rose to 56.1, the highest reading since April. That bodes well for Q4 GDP growth.
The durable goods report showed new orders rising a consensus-topping 3% in October. Adding to the good news was the upward revision to the prior month to -0.8% (from - 1.2%). In October, transportation orders jumped 8% due to civilian aircrafts which dwarfed declines for orders of autos/parts. Excluding transportation, orders were up 0.5%. Here too, there was an upward revision to the prior month to - 0.1% (initially reported as -0.4%). As for actual shipments of durable goods, they fell 1%, while those of non-defense capital goods ex-aircraft, a proxy for business investment spending, dropped 0.4%.
Personal income was up 0.4% in October, faster than the 0.1% increase in personal spending. As a result, the savings rate jumped to 5.6%, the highest in three years. In real terms, spending rose 0.1% while disposable income was up 0.4%. The PCE deflator rose just 0.1% in October, allowing the yearon- year rate to remain unchanged at 0.2%. The core PCE deflator was flat, leaving the annual core rate at 1.3%.
New home sales rose 10.7% to 495K in November, from a downwardly revised print of 447K in the prior month. The months supply of homes at current sales rate fell from 6.0 to 5.5 as a result. However, the median sale price fell to $281,500.
Existing home sales fell 3.4% to 5.36 million units in October. The decrease was largely due to single family units (-3.7%), although sales of multis also fell 1.6%. The months supply of homes at current sales rate rose slightly to 4.8. The median resale price fell to $219,600 but is still 5.8% higher than yearago levels (+6.3% for singles and +1.6% for multis). About 24% of October sales were made to cash buyers, while the share of distressed sales in total sales fell to just 6%, a multiyear low.
The Case-Shiller showed the 20-city home price index rising 0.6% on a seasonally-adjusted basis in September. That took the 20-city annual home price inflation rate up to 5.5%, the highest in a year. Overall, US home prices are still 6% below the 2006 peak, or 13% below peak for the 20-city index.
The Bureau of Economic Analysis’ second estimate of Q3 GDP growth came in at 2.1% annualized, up sharply from the advance estimate of 1.5%. The major source of the upgrade was inventories (i.e. less of a drag than previously thought), while the contribution of investment spending was raised a bit. Those upgrades dwarfed downgrades to consumption spending and trade, the latter turning into a drag on growth. Final sales, i.e. GDP excluding inventories ended up growing 2.7%, slightly lower than the advance estimate.
World – Flash manufacturing purchasing managers indices for the month of November were released by Markit for a range of countries. Japan’s PMI rose to 52.8, the highest since March 2014. All of the major sub-indices, i.e. output, orders and employment were above 50, consistent with expansion. The eurozone’s PMI rose to a 19-month high of 52.9 thanks to gains in Germany and France.
The eurozone’s services PMI surged to a 54-month high of 54.6 in November as gains in Germany offset declines in France, the latter country still in expansion nonetheless.
In Japan, October data put the unemployment rate at just 3.1%, the lowest in 20 years. The annual inflation rate for the same month rose to 0.3%, but the annual core inflation rate, i.e. excluding food and energy, fell to just 0.7%.
After seeing the worst two-quarter sequence since the financial crisis, global trade volumes bounced back in Q3 according to latest CPB data. Similarly, world industrial output also rose in Q3 benefiting from growth in both advanced and emerging economies. So much so that the ratio of output to trade, a proxy for global inventories, managed to fall back a bit, an encouraging development for growth going forward.
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.
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