NEW$ & VIEW$ (26 NOVEMBER 2013)

U.S. Pending Home Sales Continue to Erode

Pending home sales continue to show weakness. The number of homes on the market for sales has dropped for five straight months. The number of homes for sale has contracted by 1.2% over the past year. There are still year-over-year increases in homes for sale in the Northeast and the Midwest. But in the South and the West, the numbers have shrunk.

In all regions, sales are lower over six months. Sales are lower over three months in the Midwest, the South and the West with only the tiny Northeast showing a gain.

Pointing up Pending home sales are usually stronger than actual existing home sales. When the gap between the growth rates of the two series is squeezed, as it is now, that is usually a sign of more weakness to come. (Haver Analytics)

Auto Vehicle Sales Forecasts: Stronger Sales Expected in November
From CalculatedRisk:

The automakers will report November vehicle sales on December 3rd.
Here are a few forecasts:
From WardsAuto: Forecast Calls for Post-Shutdown Bounce

U.S. automakers should sell 1.21 million light vehicles in November, according to a new WardsAuto forecast.

The forecast sales volume (over 26 days) would represent … equate to a 15.9 million-unit SAAR.

From JD Power: Consumer Demand for New Vehicles Picks Up in November

In November, U.S. new-vehicle sales are likely to reach 1.2 million units … based on an auto sales forecast update from J.D. Power and strategic partner LMC Automotive.
The average sales pace in November is expected to translate to a 16.1 million-unit seasonally adjusted annual rate, or SAAR, which would … outpace the 15.2 million-unit SAAR in October, 2013.

From November Auto Sales Set the Tone for Final Stretch of 2013, Forecasts … forecasts that 1,196,663 new cars and trucks will be sold in the U.S. in November for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.7 million.

It appears sales in November will be significantly above the government slowdown pace of 15.154 million in October 2013.

High five  …but within the monthly range of 2013 and at previous cyclical peaks if we consider the early 2000s sales levels abnormally high (internet and housing bubbles, mortgage refis):


Thinking smile  While inventories are pretty high…


New PMI-based indicators for non-farm payroll

Markit Flash US PMI™ surveys are signalling non-farm payroll growth of 163k in November, down slightly on the 219k rise signalled in October (which compared with a 204k rise in the official data for October). The latest increase in employment is being led by the service sector, while
manufacturing payrolls remained broadly stagnant.

Markit has extended its US PMI survey coverage to encompass private services as well as manufacturing. The data for services, as well as combined indices covering both manufacturing and services, are published for the first time for November, including the back histories extending to late-2009.

imageThe Flash Composite PMI Employment Index fell from 54.6 in October to 53.3 in November, signalling a modest easing in the pace of job creation. However, comparisons of the survey indicator against actual non-farm payrolls shows that the survey remains consistent with buoyant payroll growth of 163k in November, fuelled by a 176k rise in private sector payrolls (implying a small fall in government payroll numbers).

Over the latest three months, the PMI has averaged 54.2, signalling an average 202k monthly increase, identical to the change signalled by the official data.

The PMI showed services driving the increase, with private sector services employment up by 163k in November (as signalled by a Flash Services PMI Employment Index reading of 53.6). However, the manufacturing PMI data were consistent of a mere 1k rise in November (as signalled by a Flash Manufacturing PMI Employment Index reading of 52.2).

The PMI survey comparisons against the official data reveal that, while small variations in the monthly numbers are to be expected (a standard error of 49k for total non-farm payrolls), the PMI acts as a valuable advance guide to the trend in the data, helping not only in the prediction of official data but also providing additional information on the degree of confidence with which official data should be considered.

Fears Rise as China’s Yields Soar

Yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing’s relentless drive to tighten the monetary spigots in the world’s second-largest economy.

The higher yields on government debt have pushed up borrowing costs broadly, creating obstacles for companies and government agencies looking to tap bond markets. Several Chinese development banks, which have mandates to encourage growth through targeted investments, have had to either scale back borrowing plans or postpone bond sales.


The slowing pace of bond sales from earlier in the year is reviving worries of reduced credit and soaring funding costs that were sparked in June, when China’s debt markets were rattled by a cash crunch. (…)

Last week, China Development Bank, one of the nation’s largest issuers and regarded as one of the most creditworthy, delayed a planned bond sale by two days and cut the size of the offering from 24 billion yuan ($3.9 billion) to 8 billion yuan. China Development Bank supports funding for China’s major infrastructure projects.

Also cutting the size of a debt offering last week was another regular issuer, Export-Import Bank of China, according to people familiar with the deal. The Agricultural Development Bank of China, which helps fund the development of China’s vast rural areas, has postponed its borrowing plans indefinitely, according to bankers familiar with that deal. Export-Import Bank and Agricultural Development Bank weren’t available to comment on their plans to issue bonds.

According to the latest data from Financial China Information & Technology Co., bond issuance in China totaled 687.36 billion yuan last month, down from 785.88 billion yuan in September and 822.14 billion yuan in August. It also represents a 24% drop from April’s 908.13 billion yuan, which was the most of any month this year. (…)

Even the Chinese government is having a tough time selling debt. In October, China’s Ministry of Finance sold 28.25 billion yuan of one-year debt offering an interest payment of 4.01%. (…)  Offers to buy the bonds roughly matched the number of bonds available, according to the Finance Ministry. Analysts said that typically demand for such bonds has been about double the supply.


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