ISM indices (Dec): Robust expansion levels
Written on January 1, 2011 by Wiley Hayden
The Conference Board’s consumer confidence jumped 4.2 points in November, led by higher expectations. However, the index is still low compared to the University of Michigan’s consumer sentiment and, as the graph shows, even relative to the current pace of job creation. We thus forecast that consumer confidence will have improved again to 57.5 in December. However, the last labour market report revealed an increase in the unemployment rate from 9.6% to 9.8%, which could have had a negative impact on consumer confidence, as this indicator reacts quite sensitively to developments in the labour market.
The Chicago Purchasing Manager index improved unexpectedly in November, by 1.9 points to 62.5. This indicator performed very well all through 2010, probably mainly reflecting the global upswing. In December, we expect it to have fallen moderately to 60.7, which is the average of the first eleven months of this year.
Pending home sales had improved sharply by 10.4% mom in October, but due to their still low level we forecast another albeit less pronounced improvement of 2.0% in November. Pending home sales would then still be about 6% below previous year’s level.
We expect construction spending to have remained unchanged in November, after it had improved by 0.7% mom both in September and October. However, the oversupply on the market and high foreclosure rates are likely to limit the upward tendency.
The ISM manufacturing index remained almost stable on a high expansion level of 56.6 in November. The first indications for December from the regional manufacturing indices were quite positive, as the Philadelphia Fed index improved again and the New York Empire jumped back by 22 points into positive territory. But due to the already elevated level of the ISM manufacturing index, we expect it to have remained stable at best in December. The ISM non-manufacturing index, which had lagged behind its manufacturing counterpart since July 2009, could continue to narrow the gap by going up to 55.5 in December.
Factory orders had risen by 0.9% mom in October, as the decline in durable goods orders more than compensated for a rise in non-durable goods orders. Non-durable goods orders are likely to have risen again, not least because of higher gasoline prices, but due to the further decline in durable goods orders of 1.3%, we predict that total factory orders will have remained unchanged only in November.
November’s ADP report showed that private jobs increased by 93k, thus, for the first time since May, surpassing the increase in private payrolls reported by the Labour department. Given the downward trend in jobless claims, which are used in calculating the ADP increase, we expect the ADP report to show another acceleration in the growth of private jobs to about 110k in December.
The growth in nonfarm payrolls unexpectedly slowed to 39k in November, and private payrolls went up by a mere 50k. However, the 3-month and the 6-month average of 107k additional private jobs per month indicate that the November deterioration might have been a one-off departure from the underlying moderately favourable trend. We thus predict that non-farm payrolls will have increased by about 160k in December. The unemployment rate, which had risen from 9.6% to 9.8% in November, could have fallen slightly to 9.7%. If average hourly earnings have gone up by 0.1% mom, the annual rate would have risen slightly to 1.8%, but that would mark the 11th consecutive month below 2%.
Consumer credit had risen by $5.6m in September and October after a total decline of $165m between October 2008 and August 2010. The tentative improvement could have continued with a modest increase of $1.0m in November.
Similar Posts:
- ISM non-manufacturing index (Jun): Set to remain stable
- Home sales (Jan): Weather-related decline
- ISM indices (Oct): Still showing relatively robust expansion levels
- GDP (Q3, 2nd estimate): Slight upward revision
- ISM manufacturing index (May): Downward correction
