Summary: A second week of “clean” initial claims data confirms a return to the Trend rate of improvement, ISM New Orders and Employment both continued their respective advances to multi-year highs and, while Bloomberg’s weekly confidence data deteriorated marginally WoW, the positive reversal for consumer sentiment in December was unanimous across all the primary survey’s.
INITIAL CLAIMS: The YoY rate of change in non-seasonally adjusted claims improved 170bps WoW to -9.5% while headline claims fell 1K vs the prior weeks revised 338K.
Josh Steiner, head of Hedgeye Financials, offered some summary context for this morning’s data with respect to the broader trend:
- The last two weeks have finally provided a glimpse of normalcy in the labor market. The most recent week of data showed a 9.5% year-over-year improvement in initial claims while the week prior showed an 8.2% y/y improvement. The three months preceding that have been riddled with distortions, adjustments and comp issues making them all but unusable. Fortunately, the clean data at year-end reveals a continuation of trend for the labor market: strength. While we would no longer argue that the rate of change y/y is still accelerating, a high single digit rate of y/y improvement at this stage of the recovery is still quite strong.
(source: Hedgeye Financials)
ISM MANUFACTURING: The headline ISM index declined -0.3 to 57 in December but the New Orders and Employment sub-indices, the better lead indicators in the index, both advanced sequentially, posting their best readings since April 2010 and June 2011, respectively.
The TREND in the manufacturing data remains one of strength with the trailing 3M/6M/TTM figures still improving across the headline, New Orders, and Employment indices to close the year.
Notably, the Supplier Deliveries sub-index (i.e. how long purchase managers are waiting to receive orders/supplies) is getting interesting here as it moves into the high 50’s as higher waiting times are generally indicative of rising demand.
Elsewhere, despite the inventory build juicing third quarter GDP, inventory angst appears relatively muted across the manufacturing base according to ISM with the Business inventory and Customer Inventory readings both running sub-50.
Separately this morning, the final Markit PMI reading for December showed commensurate strength, improving +0.3 MoM to a new 11-month high.
CONFIDENCE: Bloomberg’s weekly read on consumer comfort deteriorated -1.3 to -28.7 week-over-week, but the index remains north of the -30 Mendoza line and the positive reversal in confidence in December has been discrete.
Indeed, with the +6.1 point jump in the conference board’s consumer confidence survey reported on Tuesday, the positive, post-gov’t shutdown, reversal across the major survey’s in December has been unanimous.
Confidence, of course, is coincident-to-leading for a bevy of economic activity indicators and with seasonality building as a positive support in the reported domestic macro data through 1Q14 and without a discrete negative catalyst imminent on the calendar, the path of least resistance is probably higher.
Christian B. Drake
Joshua Steiner, CFA
