It's time once again, boys & girls, for Uncle Jay to finish off the year in review and in tune too!
The Global Bear Market In Freedom
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Today's durables report came in mixed but core orders may be back on an uptrend. Durables orders in November declined 1.3 percent, following a revised 3.1 percent drop the prior month. However, the latest was a little more negative than analysts' expectation for a 1.0 percent fall. Weakness was led by a drop in civilian aircraft orders. However, excluding transportation, new orders for durables rebounded 2.4 percent after a 1.9 percent contraction in October. Strength in core orders was broad based.
By major industries, transportation plunged a monthly 11.9 percent in November after falling 6.3percent the month before. The decline was mainly in nondefense aircraft which plummeted a monthly 53.1 percent-essentially Boeing orders. Also, within transportation, motor vehicles slipped 2.9 percent while defense aircraft & parts rebounded 7.9 percent.
Outside of transportation, strength was widespread, led by a 5.8 percent jump in computers & electronics, with electrical equipment up 5.6 percent and with primary metals up 3.0 percent. Also up were fabricated metals, machinery, and "other."
Business investment in equipment is showing signs of strength. Nondefense capital goods orders excluding aircraft in November rebounded 2.6 percent after falling 3.6 percent the prior month. Shipments for this series gained 1.0 percent, following a 1.2 percent contraction in October.
Outside of nondefense aircraft, today's report is notably positive. It looks like manufacturing is regaining some strength in the fourth quarter.
While income growth slowed in November after a sizeable October boost, consumer spending was relatively healthy heading into the holiday shopping season. As in recent months, core inflation is quite soft and still below the Fed's target range. Personal income in November rose 0.3 percent, following a 0.4 percent boost in October. The market consensus had called for a 0.2 percent improvement. However, the wages & salaries component was sluggish, edging up 0.1 percent after jumping 0.5 percent in October.
The consumer continued to open up his wallet as in recent months. Personal consumption expenditures advanced 0.4 percent, following a 0.0.7 percent gain in October. For the latest month, strength was led by a 0.7 percent monthly surge in nondurables. Only about 0.2 percentage points was price related. Durables slipped back 0.1 percent while services increased 0.4 percent.
Chain-dollar PCEs rose 0.3 percent in November, following a 0.5 percent boost the month before, suggesting healthy PCEs growth for the fourth quarter.
Year on year, personal income for November posted a 3.8 percent gain, compared to 3.9 percent in October. PCEs growth edged up to 3.8 percent in from 3.7 percent in October.
On the inflation front, the PCE price index increased 0.1 percent in November, following a 0.2 percent rise the month before. The core rate nudged up 0.1 percent after no change in October. On a year-ago basis, the headline number in November was up 1.0 percent while the core was 0.8 percent.
While personal income growth has oscillated somewhat, consumers appear to be relatively confident about the economy as spending has been on a more stable uptrend. This is good news for fourth quarter growth and for moving forward.
The job market is improving but only at a moderate pace. That's the indication from initial jobless claims which for a third time in a row held little changed, at 420,000 in the December 18 week. The four-week average ended six weeks of improvement, up 2,500 to a 426,000 level that's still about 10,000 lower than the month-ago comparison.
Continuing claims fell steeply, down 103,000 to 4.064 million in data for the December 11 week and knocking another tenth off the insured unemployment rate to 3.2 percent. The four-week average of 4.156 million is about 150,000 lower than the month-ago comparison.
Month-ago comparisons in this report point to a month-to-month increase, though only a moderate increase, for December payroll growth.
The number of buyers filing mortgage applications fell 2.5 percent in the December 17 week, the second straight decline to show no significant improvement from a month ago. The report warns that home sales are likely to remain "relatively weak" over the next few months.
Some of the softness is tied to rising mortgage rates which are really cutting into refinancing volume. Refinancing applications fell 24.6 percent in the week and are back to levels last seen in April. The average 30-year rate was 4.85 percent in the week, up one basis point from the prior week and up 35 basis points from one month ago. Next data on the housing sector are existing home sales for November, to be posted at 10:00 a.m. ET.
The economy got an upgrade this morning from the Commerce Department but it was notably below expectations. For the second month in a row, third quarter GDP growth was revised up, this time to 2.6 percent annualized from the prior estimate of 2.5 percent. Analysts had projected a 3.0 percent final estimate.
The upward revision was primarily due to a higher estimated for inventory investment with small improvements to net exports and residential investment also contributing. Softening the upgrade were downward estimates for personal consumption, nonresidential fixed investment, and government purchases.
The biggest disappointment of the report is that demand numbers were revised down. Final sales of domestic product were lowered to 0.9 percent from last month's estimate of 1.2 percent. Final sales to domestic purchasers were downgraded to 2.6 percent from the second estimate of 2.9 percent for the third quarter.
Absolute strength within final sales is still found in PCEs, revised down to an annualized 2.4 percent boost in the third quarter from the prior estimate of 2.8 percent. Investment in equipment & software gained 15.4 percent versus the previous third quarter estimate of 16.8 percent. Government purchases advanced 3.9 percent, compared to 4.0 percent for the prior third quarter figure. Absolute weakness was found in residential and nonresidential investment. Also, net exports worsened.
Year-on-year, real GDP in the second quarter is up 3.2 percent, compared 3.0 percent in the second quarter.
On the inflation front, the GDP price index's growth rate for the third quarter was nudged down to 2.1 percent annualized from the prior estimate of 2.3 percent. The consensus forecast was for 2.3 percent.
Probably the best thing you can say about today's report is that it reflects old data. The mix between final sales and inventories is not as good as expected. But more recent economic data have been far more upbeat. Most likely, the final figures for third quarter GDP will not have a significant impact on estimates for fourth quarter GDP.
On the news, equities eased but remained positive.
1 in 7 Americans rely on food stamps
PICNEW YORK (CNNMoney.com) -- The use of food stamps has increased dramatically in the U.S., as the federal government ramps up basic assistance to meet the demands of an increasingly desperate population.
The number of food stamp recipients increased 16% over last year. This means that 14% of the population is now living on food stamps. That's about 43 million people, or about one out of every seven Americans.
In some states, like Tennessee, Mississippi, New Mexico and Oregon, one in five people are receiving food stamps. Washington, D.C. leads the nation, with 21.5% of the population on food stamps.
"The high unemployment rate caused the high participation rate," said Dottie Rosenbaum from the Center for Budget and Policy Priorities, a think tank.
But it's not just the nation's stubbornly high unemployment rate of 9.8% that's driving the increase in food stamp use. Some states are expanding their definitions of poverty to include more people.
At the same time, the 2009 American Recovery and Reinvestment Act boosted annual funding to the nationwide food stamp program, known as the Supplemental Nutrition Assistance Program, by $10 billion.
The average recipient receives $133 in food stamps per month, according to the U.S. Department of Agriculture. That amount varies from state to state; in Hawaii the average is $216, while it's $116 in Wisconsin.
But the Recovery Act funding increased the maximum food stamp benefit by 13.6%, which translates to about $20-24 dollars per person per month.
The U.S. government considers food stamps to be effective stimulus for the economy, because the recipients usually spend them right away.
Dec. 21 (Bloomberg) -- The Federal Open Market Committee authorized the extension through Aug. 1 of its temporary dollar liquidity swap arrangements with the European Central Bank and the central banks of Japan, Canada, Switzerland and the United Kingdom.
The arrangements, established in May, had been authorized through January, the Federal Reserve said today in a statement.
The Chicago Fed's national activity index slipped to minus 0.46 from October's minus 0.25 (minus 0.28 first reported). Three of four components fell in November including employment. The three-month moving average improved slightly to minus 0.41 yet still suggests that U.S. growth is below historical trend. Inflation indications point to subdued pressure over the coming year.