No Recession In Sight:Conference Board Leading Economic Index Edged Up in December
The index rose to 0.1 percent to 99.4 percent from the previous month’s 99.3 (2004 = 100). This month’s gain was mostly driven by positive contributions from financial components. In the six-month period ending December 2013, the leading economic index increased 3.4 percent (about a 7.0 percent annual rate), much faster than the growth of 1.9 percent (about a 3.9 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have been more widespread than the weaknesses.
Led by declines in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to +0.16 in December from +0.69 in November. Three of the four broad categories of indicators that make up the index decreased from November, although three of the four categories also made positive contributions to the index in December.
The index’s three-month moving average, CFNAI-MA3, edged down to +0.33 in December from +0.36 in November, marking its fourth consecutive reading above zero. December’s CFNAI-MA3 suggests that growth in national economic activity was above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.
The CFNAI Diffusion Index ticked down to +0.38 in December from +0.40 in November. Forty-seven of the 85 individual indicators made positive contributions to the CFNAI in December, while 38 made negative contributions. Twenty-seven indicators improved from November to December, while 56 indicators deteriorated and two were unchanged. Of the indicators that improved, seven made negative contributions.
Sales increased 1.0% in December, to an annual rate of 4.87 million, below economists’ expectations, and the November sales pace was revised down to 4.82 million.
But the year-end weakness wasn’t enough to stop the year from being the best for resales in years. Sales totaled just over 5 million last year, “the strongest performance since 2006 when sales reached an unsustainably high 6.48 million at the close of the housing boom,” said the National Association of Realtors that compiles the existing home data.
A sales pace of five million homes looks more sustainable. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population,” said Lawrence Yun, NAR chief economist.
The key story in the NAR release this morning was that inventory was only up 1.6% year-over-year in December. The year-over-year inventory increase for November was revised down to 3.0% (from 5.0%).
All-cash sales jump as “normal” buyers go on strike. RealtyTrac reports:
All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from a revised 38.1 percent in November, and up from 18.0 percent in December 2012.
States where all-cash sales accounted for more than 50 percent of all residential sales in December included Florida (62.5 percent), Wisconsin (59.8 percent), Alabama (55.7 percent), South Carolina (51.3 percent), and Georgia (51.3 percent).
Institutional investor purchases (comprised of entities that purchased at least 10 properties in a year) accounted for 7.9 percent of all U.S. residential sales in December, up from 7.2 percent the previous month and up from 7.8 percent in December 2012.
Metro areas with the highest percentages of institutional investor purchases in December included Jacksonville, Fla., (38.7 percent), Knoxville, Tenn., (31.9 percent), Atlanta (25.2 percent), Cape Coral-Fort Myers, Fla. (24.9 percent), Cincinnati (19.3 percent), and Las Vegas (18.2 percent).
For all of 2013, institutional investor purchases accounted for 7.3 percent of all U.S. residential property purchases, up from 5.8 percent in 2012 and 5.1 percent in 2011.
Not a sign of a healthy market, is it? Meanwhile,
General Electric vice chairman John G. Rice said that the global economy “was getting better, not worse,” and that beneath lower growth expectations for emerging markets “there was tremendous underlying demand for infrastructure.”
Investors dumped currencies in emerging markets, underscoring growing anxiety about the ability of developing nations to prop up their economies as they face uneven growth.
The Argentinian peso tumbled more than 15% against the dollar in early trading as the South American nation’s central bank stepped back from its efforts to protect the currency, forcing the bank to reverse course to stem the slide. The Turkish lira sank to a record low against the dollar for a ninth straight day. The Russian ruble and South African rand hit multiyear lows. (…)
Countries with similar current-account deficits considered especially fragile by investors include Brazil, South Africa, India and Indonesia. But the emerging-markets tumult hasn’t hit the “contagion” stage of across-the-board, fear-driven selling of all emerging economies. Indonesia’s rupiah and India’s rupee, for example, advanced against the dollar Thursday, benefiting from those countries’ efforts to adjust their policies to support their currencies.
And this little nugget:
Art Cashin, who runs UBS’s operations on the floor of the New York Stock Exchange, picked up on this in a mid-afternoon note to clients. “China Beige Book has a sentence that translates into English as ‘credit transmission is broken,’ ” he wrote. “That suggests the current credit squeeze may be far more complicated than Lunar New Year drawdowns.” (WSJ)
BOE’s Carney Suggests Falling Unemployment Doesn’t Mean Rates Will Rise Bank of England Gov. Carney said the U.K. central bank will look at a broad range of economic factors when assessing the need for higher interest rates, a sign that officials may be preparing to play down the link between BOE policy and falling unemployment.
BoE signals scrapping of forward guidance Carney flags dropping of 7% jobless threshold
(…) Mr Carney made it clear in the interview that there was “no immediate need to increase interest rates” but said the economy was now “in a different place” to the time he introduced guidance. Then, he said, the concern was that the UK economy was stagnating and might contract again: now the concern is that rapid growth might need action by the BoE to make it more sustainable. (…)
If this is not clear guidance, what is? FYI, here’s the situation in the U.S.:
Range of jobs in danger of being wiped out, says Schmidt
(…) Mr Schmidt’s comments follow warnings from some economists that the spread of information technology is starting to have a deeper impact than previous periods of technological change and may have a permanent impact on employment levels.
Google itself, which has 46,000 employees, has placed big bets on automation over some existing forms of human labour, with a series of acquisitions of robot start-ups late last year. Its high-profile work on driverless cars has also led to a race in the automobile industry to create vehicles that can operate without humans, adding to concerns that some classes of manual labour once thought to be beyond the reach of machines might eventually be automated.
Recent advances in artificial intelligence and mobile communications have also fuelled fears that whole classes of clerical and research jobs may also be replaced by machines. While such upheaval has been made up for in the past by new types of work created by advancing technology, some economists have warned that the current pace of change is too fast for employment levels to adapt. (…)
“There is quite a bit of research that middle class jobs that are relatively highly skilled are being automated out,” he said. The auto industry was an example of robots being able to produce higher quality products, he added.
New technologies were creating “lots of part-time work and growth in caring and creative industries . . . [but] the problem is that the middle class jobs are being replaced by service jobs,” the Google chairman said. (…)
For decades, Mexico’s state oil company, Petróleos Mexicanos, had the best customer an oil company could want: the U.S. But now the U.S. energy boom is curtailing the country’s demand for imported oil, and Pemex is being forced to look farther afield.
For the first time, the company is negotiating to sell its extra-light Olmeca crude oil in Europe, according to Pemex officials. The first shipment will go out in the second half of February to the Cressier refinery in Switzerland, the company said.
The change is one of many in the North American energy landscape affecting Pemex, which also faces competition in exploration and production as Mexico prepares to allow foreign oil companies back into the country for the first time in 75 years. (…)