As we kickoff trading this week, look at what is soaring and what just hit the highest level since 1999!
Since The Great Financial Crisis Started
December 16 (King World News) – Peter Boockvar: “The December Markit US manufacturing and services PMI was little changed from November at 52.2 vs 52 last month. The manufacturing component fell a hair to 52.5 from 52.6 while services was up by .6 pts to 52.2.
With services again leading the way, Markit said:
“Although the increase in new business remained historically muted, the rate of expansion quickened, with companies indicating the fastest rate of new order growth for 5 months.”
Export orders also increased after 4 months of declines.
“Employment rose marginally for the 2nd month running”
and there was
“an uptick in output expectations”
to the best level since June…
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On manufacturing, output and new orders did ease but is off the recent lows. There was a rise in hiring and
“output expectations improved to their strongest since June.”
Of note,
“cost burdens rose at the fastest pace since March as firms noted ongoing pressure from suppliers due to tariffs. However manufacturers increased their factory gate charges at a sharper pace in December as they sought to partially pass on higher costs to clients.”
These tariffs will now remain with us for a while to come. Someone has to eat these tariffs and that will be shared by all.
The bottom line according to Markit is that they like what they see in that
“December’s expansion was led by an improved performance of the vast services sector, accompanied by another month of steady manufacturing growth.”
But,
“The brighter news needs to be caveated, as the overall rate of economic expansion signaled by the surveys remains well below that seen this time last year, commensurate with GDP rising at an annualized rate of just over 1.5%.”
CRB Soaring
As for the price pressures cited, here is a chart of the CRB index which is rising to the highest level since May on the heels of the trade deal news. The 10 yr is at 1.86%, basically smack in the middle of the range seen over the past week. Inflation as seen with the stats last week remains very sticky on the services and just add some goods inflation to that if this rise in commodity prices, along with the tariffs, becomes sustained.
CRB (Commodity) Index Just Hit Highest Level Since May
Real Estate: Home Builders Confidence Surges
The December NAHB home builder survey jumped by 5 pts m/o/m to 76, well above the estimate of 70. That is the highest level since June 1999 and thus exceeds the June 2005 peak when we saw the greatest housing bubble we’ve ever seen. Remember though that these confidence indexes only measure the direction of optimism, not the degree.
Home Builders Survey Jumps To Highest Level Since 1999, Eclipsing 2005 Peak
About all of the increase within the 2 main components was in the Present Conditions where it jumped 7 pts m/o/m. Expectations rose 1 pt. Pointing to good demand, Prospective Buyers Traffic rose 4 pts to 58.
The NAHB said:
“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market.”
At least in the price range below $300k, demand is solid but
“Higher development costs are hurting affordability and dampening more robust construction growth”
and thus crimps the supply for this needed price point.
Bottom line, the low mortgage rate situation along with a good labor market, rising wages, ever increasing rents and the limited supply of new homes all combined have builders optimistic for sure.
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