In October, durable goods orders came out surprisingly weak, dropping 6.2% M/M, while the consensus expected a drop of 3.0% M/M. The previous figure was sharply downwardly revised from 0.8% M/M to -0.2% M/M. The less volatile durables ex transportation fell 4.4% M/M and the September figure was downwardly revised from -1.1% M/M to -2.3% M/M. Orders for transportation (-11.1% M/M) and primary metals (-12.6% M/M) plunged sharply, but also machinery (-6.8% M/M) and electrical equipment (-5.3% M/M) showed significant declines. Shipments of non-defence capital goods less aircraft, which is a good predictor of business investment in equipment & software, fell 2.4% M/M after rising 1.6% M/M in August. These data confirm the very bleak outlook for the US economy as companies are cutting their sales.
In October, new home sales fell 5.3% M/M to 433 000, while an outcome of 441 000 was expected. The previous rebound was downwardly revised from 2.7% M/M to 0.7% M/M. Regional data show that sales were rising in the Northeast (38 000 from 31 000) and Midwest (71 000 from 67 000), while sales were lower in the South (233 000 from 248 000) and West (91 000 from 111 000). The number of homes for sale dropped from 414 000 in September to 381 000 in October, while months’ supply rose from 10.9 to 11.1. The October housing data indicate clearly that a recovery in the housing market is not yet around the corner.
In the week ended November 22, initial claims dropped 14 000 from an upwardly revised 543 000 to 529 000. The consensus was looking for a slightly higher figure. Continuing claims, which are reported with a one-week lag, showed an unexpected plunge (-54 000) from an upwardly revised 4 016 000 to 3 962 000. Although the unemployment claims were lower than expected, it would be ridiculous to conclude that the labour market is improving as the decline might be due to the pattern of seasonal adjustment factors.
Chicago PMI dropped to 33.8 in November, while only a marginal decline was expected. Looking at the details, new orders (27.2 from 32.5), order backlog (28.2 from 39.0), inventories (41.2 from 56.5) and employment (33.4 from 41.5) showed significant declines, while production and supplier deliveries improved slightly. Prices dropped from 53.7 to 50.7, after a sharp drop in October. This outcome raises fears that national manufacturing ISM will show another drop in November.
Personal spending dropped 1.0% M/M in October, which is in line with the expectations. The weakening was due to a 4.04% M/M plunge in durables and a 2.54% drop in non durables. Personal income came out slightly higher than expected rising 0.3% M/M and the savings rate rose 2.4% M/M (from 1.0% M/M).
The final figure of Michigan consumer confidence surprised on the downside coming out at 55.3, compared to 57.9 in the first estimate. Both economic conditions (57.5 from 61.4) and economic outlook (53.9 from 55.7) deteriorated, which is in sharp contrast with the conference board consumer confidence indicator, released on Tuesday.
