Busy day for Fed followers:
Here’s a round-up of who’s speaking and when (all times ET):
- 9:05 – 9:45 a.m. St. Louis Fed President James Bullard.
- 9:30 a.m. Fed Chair Janet Yellen.
- 9:45 – 11:00 a.m. Richmond Fed’s Jeffrey Lacker on panel at CATO Institute.
- 10:15 a.m. Chicago Fed President Charles Evans.
- 12:15 p.m. NY Fed President William Dudley.
- 6:00 p.m. Fed Vice Chair Stanley Fischer.
Right after Draghi set the stage for the ECB’s December meeting:
Mario Draghi signaled that the European Central Bank is ready to boost stimulus at its December meeting at a hearing in the European Parliament this morning. He said that signs of a turnaround in core inflation have somewhat weakened and downside risks are visible.
Macy’s cuts full-year forecast, sends shivers through retail
Warm weather, low spending by tourists and a pileup of unsold inventory prompted Macy’s Inc (M.N) to cut its full-year forecast on Wednesday, raising wide concerns about the retail sector’s financial health. (…)
Sales at stores open at least a year fell 3.6 percent in their third straight quarterly decline.
Good lengthy piece by the WSJ helping understand what’s going on at Macy’s and other dept. stores. That chart sums it up:
A Record Share of Young Women Are Living at Home
A larger share of young American women are living with family now than at any time since the 1940s, as more of them forgo early marriage for higher education, Pew found.
(…) Recent data shows college students are significantly more likely to live with family than young adults who aren’t in school.
Marriage prompted many young women to fly the coop in 1940, when the typical woman first married at age 21.5. By 2014, the median age at first marriage had risen to 27 for women. And the share of married young women had dropped by half, from 62% in 1940 to 30% in 2013, according to Pew.
The data tell a similar story for young men. Last year 42.8% of men lived at home—higher than women, but not at its 1940 peak, when 47.5% of them lived at home. Back then, the lingering effects of the Great Depression–including an unemployment rate of nearly 15%–likely kept more of them at home.
A July Pew report from Pew showed that a higher percentage of millennials—adults born in 1981 or later—were living with parents than in 2010, despite earning close to their prerecession wages. Declining marriage rates, higher rental costs and rising student debt may all be partly to blame.
China Learns What Pushing on a String Feels Like
Data out Thursday showed lending in October to be decidedly lackluster. Banks extended 513.6 billion yuan ($80.7 billion) of new loans, down 3.3% from a year earlier. Total social financing, a broader measure of credit that includes various kinds of shadow loans, was also weak. Total credit outstanding was up just 12% from a year earlier, close to its slowest pace in over a decade. (…)
Capital outflows are also making the PBOC’s job harder. Figures out on Wednesday indicated that there was a massive $224 billion of investment outflows in the third quarter.
Facing this, the PBOC has been intervening to keep the currency from depreciating, selling off dollars and buying up yuan. Unfortunately this shrinks the domestic money supply, thus counteracting much of the PBOC’s easing measures. (…)
The outflow situation appeared to improve in October. The PBOC’s forex reserves unexpectedly ticked up for the month, suggesting it didn’t have to intervene as much in the currency markets. (…)
China Speeds Up Fiscal Spending in October to Support Growth
Fiscal spending jumped 36.1 percent from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7 percent to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1 percent and revenue increased 7.7 percent. (…)
“With downward economic pressure and structural tax and fee cuts, fiscal revenue will face considerable difficulties in the next two months,” the Ministry of Finance said in the statement. “As revenue growth slows, fiscal expenditure has clearly been expedited to ensure that all key spending is completed.” (…)
Eurozone Industrial Output Falls
(…) The European Union’s statistics agency said industrial output was down 0.3% from August, but up 1.7% from a year earlier. (…)
The decline in output was concentrated in Germany, the eurozone’s largest member and its export powerhouse. Eurostat recorded a 1.2% drop in German output, but increases in other large members of the currency area, including 0.2% rises in both France and Italy, and a 1.4% rise in Spain.
Markit’s PMI for October provides some hope:
Output growth ticked higher during the latest survey month, underpinned by a slightly sharper increase in new orders. Intakes of new export business* also rose at a moderately faster pace, the quickest since June. The strongest rates of output growth were signalled in the Netherlands, Italy and Austria, which were also the only nations to report faster rates of expansion than September. Germany and Ireland also reported relatively solid expansions of output, whereas as growth was comparatively modest in France and Spain.
Also, things improved in Germany as the month of October progressed:
The improvement in the headline index between its flash and final estimates was largely centred on Germany, where the PMI rose by 0.5 points since its first publication through stronger trends in the output (+0.5) and new orders (+1.1) components.
GREEN SHOOTS
The JPMorgan Global PMI, compiled by Markit, regained some poise in October after slipping to a nine-month low in September, rising to 53.4. However, the survey merely signals a rate of worldwide GDP growth of just over 2% per annum.
Services continued to drive the upturn, as has been the case throughout much of the past two years, though an upturn in the goods-producing sector meant the divergence narrowed. The latter is especially welcome as it hints at a potential upturn in global trade flows, weakness in which has been a key factor behind this year’s slowdown in many countries. Global exports grew at the fastest rate for ten months, rising for the first time since June.
Growth slowed in the US in Q3 (down to 0.4%, or 1.5% annualised), as flagged ahead by Markit’s US PMI surveys, but domestic demand showed encouraging signs of resilience. The PMI surveys also signalled a continuation of the moderate growth trend at the start of the fourth quarter. An upturn in exports helped allay global growth worries and the pace of expansion in services remained robust. Non-farm payrolls also impressed and wage growth accelerated, fuelling expectations of the Fed hiking interest rates in December.
Emerging markets continued to act as a brake on global growth in October, albeit with the drag easing. At 49.7, the Emerging Market PMI remained below the neutral 50.0 level for the fourth time in the past five months. Although the data point to a pick-up from what has been the worst performance since 2009, the emerging market index is still signalling GDP growth of less than 4%.
China remained mired in weakness, contributing to ongoing malaise across much of Asia. At 49.9, the ‘all-sector’ Caixin (Markit-compiled) PMI for Chinac learly indicates a risk that GDP growth will slow further from the 6.9% pace seen in Q3. However, the manufacturing downturn eased amid better export demand, the rate of decline having been the most severe for six-and-a-half years in September. Growth meanwhile picked up slightly in the service sector, which once again provided the main thrust to the economy.
Japan’s goods producers reported renewed signs of life as exports picked up. Together with an upturn in services growth, the Nikkei PMI survey indicates that Japan has enjoyed a growth upturn in Q3 which has gathered pace at the start of Q4. The stronger survey data support the Bank of Japan’s recent decision to keep policy on hold rather than inject more stimulus.
The Eurozone PMI edged higher in October to signal a 0.4% rate of GDP growth at the start of Q4, matching the pace indicated for Q3. Spain continued to lead the upturn, followed by Germany and Italy, with France once again trailing but nevertheless showing renewed signs of life. However, with inflation remaining absent, the ECB talked up the possibility of further QE by the end of the year.
China’s successful rebalancing is very important for world economies. Chinese retail sales rose 11.0% YoY in October. Given current retail sales of 2.7T yuan, this is a 0.3T yuan ($47B) increase in sales. Back in 2007 when retail sales were growing 14% YoY, it meant +0.1T yuan in additional demand. For perspective, U.S. retail sales rose by $10B YoY in October.