Impressive Week For U.S. Economic Data

Transcription

1 Economics Weekly Economic Report Monday, Ed Hyman Dick Rippe Sean Zhang Stan Shipley Jaewoo Nakajima Impressive Week For U.S. Economic Data 1

2 Impressive Week For U.S. Economic Data EVRISI company surveys increased +0.5 last week to an elevated AHE s accelerated to +2.9% y/y. The composite PMI increased +2.9% to an elevated 59.3%. Unemployment claims declined last week to their lowest since 1969! The employment report s nominal income proxy increased a solid +5.1% y/y. Bond yields increased +8bp and the dollar increased +0.8%. The S&P decreased -1.0% on interest rate and EM concerns. Very best regards, Ed.Hyman@evercoreisi.com 2

3 SUMMARY Impressive Week for U.S. Economic Data The letter above hits the high points. But there s quite a bit more positive data. It s now clear that EVRISI company surveys are moving in a sideways pattern at an elevated level. The last time they did this was in 2004 through During those years, real GDP growth moved up and down with the surveys, in a range of +3.2% y/y to +4.3%. 3

4 Impressive Week for U.S. Economic Data Contd The recent strength in EVRISI company surveys overall has been led by retailers. 4

5 Impressive Week for U.S. Economic Data Contd NFIB s small business job openings survey showing record strength certainly confirms strength in employment, as does the decline in unemployment claims last week to their lowest level since 1969! Unemployment claims suggest the unemployment rate declines to 3.5%, or lower. All this suggests that AHEs continue to accelerate. 5

6 Impressive Week for U.S. Economic Data Contd NFIB s compensation survey was elevated, confirming the Aug acceleration in AHEs. And with employment moving up and wages accelerating, consumer incomes are accelerating. The income proxy from Aug s employment report was up a solid +5.1% y/y. 6

7 MOVING ON Disconcerting A primal reason many find the current environment disconcerting is that the expansion is approaching record-long and it s near-record strong. For example, the mfg PMI in Aug was 61.3%! However, this long-term chart of the PMI shows that there were many episodes of comparable PMI readings without a recession being imminent. 7

8 MOVING ON Contd Under Appreciated Over the past four-plus years, almost 4,000 deals over $1b have been announced totaling $20t! For comparison, over the same four-plus years, the Fed s balance sheet has increased less than +$0.2t, ie, a hundredth of the deals. Last week alone there were 51 deals totaling $225b or at an $11t annual rate. Here are the top 5: 1. China explores merger of China Unicom and China Telecom with a combined market cap of $77b. 2. Meituan Dianping sets IPO valuation of $55b. 3. Abu Dhabi Commercial Bank in three-way merger talks with a combined market cap of $16b. 4. Scot rejects $8.8b offer by Covea. 5. KKR raises $7.4b for new fund. 8

9 MOVING ON Contd The continued tsunami of deals reflects: 1. Confidence 2. Credit availability 3. Low rates. There is speculation of a Coca-Cola/Dunkin deal around $6.3b. Unilever closes only one-tenth of the M&A deals it looks at, illustrating how many upstart brands have flooded the market vying for attention. 9

10 MOVING ON Contd Donald Straszheim China individual income tax cuts hit Oct 1 and are equal to a significant 0.6% of GDP. They will help. 10 Years After By some metrics, the great financial crisis started Sep 6, 2008, ie, 10 years ago. Reinhart/Rogoff s seminal work indicates that after a financial crisis, it takes 10 years to get back to normal. McKinsey Study Artificial Intelligence could contribute 1.2% to annual global growth for the next decade, or as much as the steam engine did. 10

11 MOVING ON Contd Global Trend? Japan eyes moving retirement age to 70. As life expectancy grows, many choose to work. Blue Sky Australia GDP for 2Q was reported last week with a +3.4% y/y increase, completing its 27 th year of expansion. 11

12 MOVING ON Contd Tariffs Impacting Many companies (see 79 below) are feeling the weight of tariffs, including these two: 12

13 f 2019 f Real GDP 2.5% 3.5% 2.5% GDP Price Deflator 1.9% 2.5% 2.5% Nominal GDP 4.4% 6.0% 5.0% Fed Funds Rate* 1.50% 2.50% 3.25% 10-Year Bond Yield* 2.40% 3.25% 3.75% S&P EPS $130 $165 $175 Avg. Employment Change +170k +200k +160k Unemployment Rate* 4.1% 3.5% 3.0% * Year-end Evercore ISI U.S. Outlook 13

14 The Economic Calendar is Heating Up. Next week, three key inflation metrics will be released -- PPI, CPI and import prices. We estimate the headline CPI advanced +0.4% m/m in Aug as gasoline prices rose sequentially. Furthermore, tariffs are increasingly becoming an influence in final consumer goods prices. Retail sales probably increased just +0.3% m/m as vehicle sales slipped in Aug. Industrial production likely advanced around +0.3% m/m as vehicle production schedules jumped +11% sequentially. Finally, the U.S. budget gap probably widened to -$150b in Aug. Overseas, business sentiment in Germany and employment growth in the U.K. will be keys. Stan Shipley 09/10/18 14

15 2 Economic Estimates Stan Shipley of 1 Mon Sep 10 Monday Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 CONS INSTALL 3:00 NFIB 6:00 MORTGAGE APPS UNEMP CLAIMS 8:30 RETAIL SALES 8:30 June +$10.2 July Sep July +0.5% July +$15.5 E +$14.1 C Aug E C PPI 8:30 Sep E 210 C Aug +0.3% E +0.5% C July 0.0% ex AUTO BROAD LEI a.m. JOLTS - OPENINGS10:00 Aug +0.2% E +0.2% C CONSUMER COMFORT July +0.6% June -0.1% June PPI CORE Aug +0.4% E +0.5% C July 0.0% E July E July +0.1% CPI 8:30 Aug +0.3% E +0.2% C July +0.2% INDUSTRIAL PROD 9:15 WHOLESALE INV EX FOOD, ENERGY, TRADE Aug +0.4% E +0.3% C July +0.1% July +0.3% CPI CORE Aug +0.3% E +0.3% C Aug +0.2% E +0.2% C July +0.2% OPERATING RATES Aug +0.3% E +0.2% C July 78.1% Aug 78.3% E 78.3% C BEIGE BOOK BUDGET GAP 2:00 July -$76.9 MFG & TRADE INV 8:30 Aug -$150.0 E July +0.1% Aug +0.5% E +0.4% C Monday Sep 17 Sep 18 Sep 19 Sep 20 Sep 21 EMPIRE MFG 8:30 NAHB 10:00 MORTGAGE APPS UNEMP CLAIMS 8:30 MARKIT MFG PMI 9:45 July 25.6 Aug 67 Sep E 210 C Aug 54.7 Aug 24.0 E 22.6 C Sep 66 E HOUSING STARTS 8:30 Sep E Sep 55.2 E July MARKIT SVC PMI TICS Aug E C CONSUMER COMFORT Aug 54.8 BUILDING PERMITS Sep 55.0 E July LEI 10:00 MARKIT COMP PMI Aug E July +0.6% Aug 54.7 Aug +0.5% E Sep 55.1 E CURRENT ACCOUNT EXIST HOUSE SALE 10:00 July 5.34 Aug 5.45 E 5.42 C PHIL FED July 11.9 Aug 16.0 E 10:00 15

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