This is what is really happening right now.
Lowest Since Feb 2019
January 14 (King World News) – Peter Boockvar: “The NFIB small business optimism index for December slipped 2 pts m/o/m to 102.7 after rising by 2.3 pts last month. It’s just below the monthly average in 2019 of 103, down from 106.7 in 2018 and vs 104.9 in 2017.
Digging underneath saw Plans to hire falling by 2 pts to 19 but that is in line with the 6 month average. Job openings fell 5 pts after gaining 4 pts last month and at 33 is below the 6 month average of 36. Compensation plans fell slightly but remain elevated. Capital spending plans fell 2 pts but is within the 6 month range while plans to increase inventory was unchanged. There was deterioration in ‘Earnings Trends’ as they fell a sharp 10 pts but only after rising a sharp 10 pts in November. At -8, it matches the lowest level since February 2019 and I’ll continue to point to the falling profit margin story that we’ve seen in corporate earnings in 2019. One of the ways of offsetting cost pressures is to raise prices. Those seeing Higher Selling Prices rose 2 pts to 14, a 5 month high…
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As for some of the forward looking questions, those that Expect a Better Economy did rise 3 pts to a 5 month high, likely in response to the trade deal. Those that Expect Higher Sales also rose 3 pts but only after falling by 4 pts in November. Notwithstanding the rise in both, those that said it’s a Good Time to Expand fell by 4 pts.
Bottom line, small business optimism peaked this cycle in August 2018 right around the time when the tariff fight with China started to ramp up and today sits only 4 pts above where it was in November 2016 in the initial reaction to the election. Finding qualified labor remains the number one problem for small businesses but as seen above, the number of job openings and hiring’s fell m/o/m.
JPM said this in their press release on the macro situation:
“While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year. The US consumer continues to be in a strong position and we see the benefits of this across our consumer businesses.”
There wasn’t much said on business lending and the demand for it.
The December trade data from China was better than expected. Exports jumped 7.6% y/o/y, above the forecast of up 2.9%. For the full year, exports were above flat from 2018. Exports to Europe and Asia offset a decline to the US. Imports grew by 16.3% y/o/y, higher than the estimate of 9.6% and helped by a 67% spike in soybean imports. Imports of iron ore also jumped.
Bottom line, the comparison’s with December 2018 are easy and thus flattered these figures but hopefully with trade tensions easing, things are beginning to stabilize. We are still stuck though with almost all of the tariffs so we’ll see to what extent. China’s markets didn’t respond positively to the trade data beat as they fell overnight with the Shanghai comp down .3% and the H share index lower by .4%. The yuan is taking a breather after the big run its had vs the dollar. Copper is slightly lower.
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