NEW$ & VIEW$ (27 NOVEMBER 2013)


Strong new orders, positive employment stats.

The composite index of manufacturing strengthened, climbing to a reading of 13 in November following last month’s reading of 1. The index of shipments improved 18 points, ending at 16, and the index for new orders advanced 15 points compared to a month ago. In addition, the index for the number of employees gained two points, finishing at a reading of 6.


Vendor lead-time shortened, shaving three points from last month’s index, to settle at 8. The backlog of orders index gained 14 points moving New Orders Indexto a reading of -1. Capacity utilization flattened in November; the index
gained five points, leveling off at 0. Finished goods and raw materials built up at a slightly slower rate this month. Those indexes shed one and three points respectively, with both gauges ending at a reading of 13.

Manufacturing employment edged up this month, moving the index to 6 from 4. The average workweek grew solidly, pushing that index up 13 points to end at a reading of 12. Additionally, average wages grew more quickly, reaching an index of 15 compared to last month’s reading of 9.


Housing Sector Shows Sign of Strength

Housing permits surged in October to their highest level in more than five years, driven by strong demand for multi-family buildings such as apartments and condos, a sign U.S. home construction could gain traction as the year ends.

Housing permits surged in October to the highest level in more than five years, driven largely by solid demand for multifamily buildings such as apartments and condominiums, the Commerce Department said Tuesday. And prices in most major U.S. cities rose in September, though more slowly than in prior months, according to the Standard & Poor’s/Case-Shiller home-price index.



High five  Remember that multi-family is very volatile and lumpy. From the Conference Boardès November survey (via the WSJ):

When asked about what type of home, however, consumers who plan to buy in the next six months are more interested in existing houses rather than new ones. During the boom years, the preferences were more evenly split.


Fed Reveals New Concerns About Long-Term U.S. Slowdown

Worker productivity, a key component of an economy’s health, has risen at an annual clip of 1 percent during the last four years, as the U.S. has struggled to recover from the worst recession since the Great Depression. That’s less than half the 2.2 percent average gain since 1983, according to data from the Labor Department in Washington.

“Slower growth in productivity might have become the norm,” the central bankers noted at their Oct. 29-30 meeting, according to the minutes released last week. That’s a switch from past comments by Bernanke that the deceleration probably was temporary and would end as the expansion continued.

A combination of forces may be at work. Chastened by the deep economic slump, corporate executives have reduced spending plans for factories, equipment, research and development. Startup businesses have been held back as would-be entrepreneurs find it harder to get financing from still-cautious lenders. And out-of-work Americans have seen their skills atrophy the longer they’re without jobs. (…)

A lasting decline in the growth of productivity, or nonfarm business output per employee hour, would be bad news for the economy. Its potential — the ability of the U.S. to expand over an extended period without generating inflation — is determined by the sum of growth in the labor force and of productivity. A slowdown in the latter would limit how fast the U.S. can develop in the future.

That, in turn, would have far-reaching implications for policy makers, company executives, working Americans and investors. Fed officials would need to be more alert to inflation risks if growth picked up. Lawmakers would face even more difficulties reducing the budget deficit because tax receipts would be lower. Companies might have to settle for reduced revenue, employees for smaller paychecks and investors for diminished returns as a result of the slower expansion. (…)

Alan Blinder, who co-wrote a book with Yellen and is himself a former Fed vice chairman, says he’s concerned.

“Taking the Alfred E. Neuman view, what we’re experiencing is a give-back of the very surprising productivity gains” seen during the recession, he said, referring to the Mad Magazine character famous for saying “What, me worry?”

Blinder, now a professor at Princeton University in New Jersey, said he’s 65 percent convinced this is what’s going on. “The other 35 percent of me is puzzled by how low productivity has been and worried it might continue.” (…)

China set to unravel cotton stockpile
Auction to be closely watched by global markets


China is to start selling down its bloated state cotton reserves on Thursday, in an anticipated move that has already caused prices on global markets to unravel.

Chinese state cotton reserves stand at about 10m tons – or half the world total – after a three-year buying binge that lifted international prices. The China National Cotton Reserve Corp is caught in a dilemma, as any attempt to cut its position is likely to further pressure prices and result in steep losses.

Spot cotton prices on ICE have dropped steadily in recent months in anticipation of sales from the Chinese reserves.

Thailand Surprises With Rate Cut

Thailand’s central bank cut interest rates to the lowest in three years, citing a poor economic outlook and political tension that is hurting investor confidence.

The Bank of Thailand cut its benchmark rate by 0.25 percentage point to 2.25%. Nine of 10 economists surveyed by The Wall Street Journal had expected the bank to hold rates steady.

The bank also slashed its growth estimate for this year to 3% from 3.7%, and cut its 2014 growth target to 4% from 4.8%.

Policy makers were concerned over Thailand’s poor economy, which grew 2.7% in the third quarter from a year earlier, and especially a failure of exports to pick up more strongly, said Paiboon Kittisrikangwan, secretary of the bank’s monetary-policy committee. (…)

Other nations, including India and Indonesia, have been raising rates recently to combat inflation and attract foreign funds at a time when U.S. bond yields have trended higher.

Thailand entered a technical recession earlier this year but was unable to cut rates because of the need to attract capital as U.S. yields rose. These pressures have eased recently as the U.S. Federal Reserve has delayed ending its extraordinary monetary policies, pushing yields somewhat lower. (…)


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