Monday, January 5, 2015

A Happy New Year So Far (excerpt)

In the US, it is a happy new year already. It isn't for everyone, but it certainly is starting this way for US consumers. Payroll employment rose 2.73 million over the 12 months through November, the best such gain since March 2006. The average hourly wage rate rose 2.1% y/y that month, while PCED prices rose 1.2%. The recent plunge in gasoline prices is providing consumers with an annualized windfall of about $200 billion. This happy news is boosting various measures of consumer confidence:

(1) Consumer Comfort Index. Bloomberg’s weekly measure of consumer confidence jumped late last year, ending 2014 at the highest level since October 2007. Consumers turned more bullish on the state of the economy and the buying climate.

(2) Consumer Confidence Index. The present situation component of the Consumer Confidence Index rose to a new cyclical high during December, and the best reading since February 2008. The percentage of this survey’s respondents who said that jobs are hard to get dropped to 27.7% last month. That’s down from the cyclical high of 49.4% during September 2011, and the lowest since March 2008. It tends to be highly correlated with the unemployment rate, which should continue to fall this year.

Consumers are in the mood to spend some more. Revised data showed that they did so during Q3, contributing 2.2 percentage points to the quarter’s 5.0% increase in real GDP. No wonder that the ATA Trucking Index of freight tonnage jumped 3.5% m/m in November to a new record high. Intermodal railcar loadings also rose to a new record high at the end of last year.

Today's Morning Briefing: Another Happy Year? (1) Santa was early last year. (2) Dow Theory is bullish. (3) Still targeting 2300 for S&P 500. (4) Bond Kings remain bullish on bonds, and we are inclined to agree. (5) Hard to argue against stronger dollar. (6) Oil could retest 2008 low before bouncing back to around $60. (7) US GDP should gain from lower oil prices. (8) US MSCI should continue to outperform. (9) Eurozone is a mess again. (10) China’s zombies. (11) Consumer confidence is soaring, according to weekly measure. (12) “The Imitation Game” (+ + +). (More for subscribers.)

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