Conference Board Leading Economic Index Increased Again in November
No recession on the horizon.
The index rose 0.6 percent to 105.5. October was revised to downward 104.9 percent (2004 = 100).
Positive contributions from the financial components and the ISM® new orders index offset the large negative contributions from initial claims for unemployment insurance (inverted) and building permits. In the six-month period ending November 2014, the leading economic index increased 3.6 percent (about a 7.4 percent annual rate), faster than the growth of 2.4 percent (about a 4.9 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators remained very widespread.
China’s Macro fundamentals continue to weaken
Looking forward into December, the forward-looking CEBM Composite Expectations Index (SA) plunged from -5% in November to -17.4%. The composite index was mainly dragged down by the sub-index for industrial activity which declined for a third consecutive month. Export shipment volume is likely to drop further before the start of 2015, while consumer sector sales are projected to increase in December due to end of the year sales promotions. Property transactions are expected to maintain their current momentum. However, recovering sales have yet to translate into increased investment and new starts. It is expected that the central bank’s recent lowering of the 1-year benchmark interest rate will result in large scale re-pricing on outstanding loans, however the positive impact of loan re-pricing will not be seen immediately as re-pricing will not begin until next year.
Review of November Export Sector Activity: Shipments and new orders both down M/M. Container shipments volume was down by a range of 20%-30% M/M and stayed flat Y/Y in November; we expect container exports to remain weak before the New Year’s Day and to rebound around the Chinese New Year in February. Electronics export volume was down M/M in November, ending an upward trend that has persisted over the past 6 months. Home appliance shipments and new order volume were both down M/M in November, largely demonstrating a seasonal decline.
BTW: Total electricity consumption was up 3.3% YoY in November vs up 3.1% in October and down 2.7% in September. Consumption in all of 2013 was up 7.3%, after +5.5% in 2012 and 12.0% in 2011. (Chart from RBC Capital)
Texas Could Be Headed for an Oil-Fueled Recession, J.P. Morgan Economist Says
(…) in 1986, Mr. Feroli noted, a similar decline of just over 50% in crude oil prices caused a regional recession in Texas.
There are some reasons to believe this time may be different, such as “rapid technological gains” in the energy sector that have reduced extraction costs, he said. But he concluded that those arguments “are not so strong as to signal smooth sailing for the Texas economy.”
The oil and gas industry is roughly the same share of the state economy today as it was in 1985 in terms of output, though its employment share is somewhat lower, he said.
On the upside, he said the U.S. economy as a whole probably won’t be derailed by a Lone Star downturn.
“The national economy performed quite well in 1986, in spite of the Texas recession,” Mr. Feroli said. “We expect the U.S. economy will perform well next year too, though some regions–most notably Texas–could significantly underperform the national average.”
Opec States Scramble to Avoid Debt Default
Source: The London Times via The Big Picture
Putin Strikes Harsh Tone With West
(…) Mr. Putin’s comments on Thursday, the first since the ruble plunged earlier this week, signal he may hunker down for a long chill in relations with the West, although he appeared to soften his stance on Ukraine.
He appeared to rebuff the pro-Russia separatists’ calls to join Russia, saying, “we are assuming that the common political space in Ukraine should be restored, but what form it will take it’s hard to say now.” Previously, the Kremlin had dodged appeals of separatists to join Russia. (…)
Mr. Putin remained defiant on Ukraine, but avoided provocative language such as “junta,” a term he once used for the current government in Kiev, and “Novorossiya,” a putative geographic entity encompassing large parts of eastern and southern Ukraine that Russian nationalists have used to suggest Moscow should annex larger parts of Ukraine.
He credited Ukrainian President Petro Poroshenko with seeking a solution to the crisis but suggested other more hawkish politicians in Kiev could spoil matters. Asked about the pro-Russia separatist regions in eastern Ukraine that have been fighting against Kiev’s forces for months, Mr. Putin accused Ukraine’s government of imposing an economic blockade on the regions and called for a political dialogue. (…)
Is this Putin’s first softening on Ukraine? If so, this could be the beginning of the end for the oil rout, assuming that part of the Saudis’ stance was politically motivated.