China in Close Contact with U.S. on Trade, Urges Tariffs Cut
Chinese officials are in “close contact” with U.S. counterparts on trade negotiations, Ministry of Commerce spokesman Gao Feng said, while reiterating that tariffs should be reduced proportionately as part of a phase-one accord. (…)
Investors cling on whatever hope they can find or imagine while Trump keeps saying that “discussions with China are going very well” and that China “really wants to make a deal”. Meanwhile, China reiterates the need for tariffs rollbacks for a phase one deal to be reached. Can they find a complicated enough solution for everybody to pretend winning and save face? December 15 is only 2 Sundays ahead.
But then what? The band-aid would not restore confidence, trust, cooperation.
U.S. Light Vehicle Sales Bounce Back
The Autodata Corporation reported that sales of light vehicles during November rose 3.7% (-1.3% y/y) to 17.20 million units (SAAR) and reversed most of the prior month’s decline to 16.58 million. During the first eleven months of 2019, sales averaged 17.00 million units versus 17.27 million during all of 2018.
Sales of light truck increased 3.6% both m/m and y/y to 12.52 million units. Purchases of domestically-made light trucks rebounded 3.4% (2.8% y/y) to 9.95 million units after October’s 4.1% decline. Sales of imported light trucks increased 3.6% (6.6% y/y) to 2.57 million units, the fifth straight month of increase. Imported truck sales have roughly doubled in the past five years.
Trucks’ share of the U.S. light vehicle market eased from the record to 72.8%, but remained up from a low of 48.8% during all of 2012. (…)
Imports’ share of the U.S. vehicle market fell to 22.7%, but remained in an up trend. Imports’ share of the passenger car market fell to 28.6%. Imports share of the light truck market held steady at 20.5% and remained up from the 12.0% low in January 2015.
U.S. Services PMI: Business activity growth strengthens in November
U.S. service sector firms signalled a quicker expansion in
business activity in November. Although only marginal, the
increase in output was supported by a renewed upturn in new
orders. Foreign client demand remained lacklustre, however,
with new business from abroad continuing to fall. Greater new
order inflows and a subsequent rise in backlogs of work led to
a return to growth in employment, albeit only fractional overall.
That said, business confidence remained muted and close to
historical lows. Meanwhile, inflationary pressures were relatively subdued, with
selling prices increasing only fractionally.The seasonally adjusted final IHS Markit US Services Business
Activity Index registered 51.6 in November, up from 50.6 in
October and in line with the ‘flash’ figure, indicating a further
upturn in output across the U.S. service sector. The expansion
was only marginal and well below the long-run series trend.
Nonetheless, the rate of growth accelerated to a four-month
high which companies attributed to an uptick in client demand.
Accordingly, new business rebounded from the slight contraction
seen in October and expanded at the fastest pace since August.
Although relatively subdued, the marginal upturn was linked to
the acquisition of new clients and stronger domestic demand.In contrast, new business from abroad contracted for the fourth
month running midway through the final quarter of 2019. The
rate of decline was marginal and the slowest for three months,
but compared unfavourably with the series trend.At the same time, firms expressed a lower level of positive
sentiment towards the outlook for output over the coming 12months in November. Ongoing global economic uncertainty
weighed on expectations, with the majority of respondents
forecasting no change in activity over the next year.Meanwhile, service providers marked the first increase in
workforce numbers since August. Although only fractional,
employment growth was commonly linked to greater workloads,
with the rate of job creation reaching the fastest for four months.Renewed strain on capacity was also reflected in a rise in the
level of outstanding business at service sector firms. The
accumulation of backlogs of work in November signalled a
sharp turnaround from September’s solid fall in work-in-hand.
On the price front, cost burdens increased for the second month
running in November. The rate of inflation picked up from
that seen at the start of the fourth quarter, but remained only
marginal overall.Service providers also registered a quicker rate of prices charged
inflation. That said, the pace of increase was only fractional
following October’s broad stagnation in selling prices. Where
a rise was reported, however, companies attributed this to the
partial pass-through of higher costs to clients.The IHS Markit Composite PMI Output Index* registered 52.0 in
November, up from 50.9 in October, to signal a modest increase
in business activity across the U.S. private sector. The rate of
growth was the fastest for four months, despite remaining
below the long-run series trend.Similarly, new business received by both manufacturers
and service providers rose at a quicker rate midway through
the fourth quarter. Goods producers recorded the sharpest
expansion since January, with service sector firms registering
only a marginal upturn in client demand.Subsequently, private sector companies indicated a renewed
increase in employment amid greater new business inflows and
a rise in backlogs of work.Business confidence remained subdued in November, with
manufacturers and service providers noting less upbeat output
expectations for the year ahead.
Chris Williamson,
Chief Business Economist at IHS Markit:
With both services and manufacturing reporting stronger
rates of expansion, the November PMI surveys indicate
the fastest pace of economic growth for four months. The
improvement is coming from a low base, however, and
even at these higher levels the survey is merely indicative
of annualised GDP growth in the region of 1.5%Similarly, while reviving order book growth has
encouraged more companies to take on extra staff after
two months of net job losses being reported, the survey’s
employment index continued to run at a level consistent
with monthly jobs growth of only around 100,000. (…)Business expectations for the year
ahead continue to run at one of the lowest levels recorded
by the survey since 2012 with firms worried about trade
wars, slowing economic growth at home and abroad, as
well as the possibility of next year’s election cycle causing
customers to postpone spending decisions.
The ISM:
The Institute for Supply Management on Wednesday said its nonmanufacturing index—tracking industries including health care, finance, agriculture and construction—grew in November, albeit at a slower pace than in October. The index logged in at 53.9 in November, compared with 54.7 in October. (…)
Demand for goods supplied by service-sector businesses was solid in November, ISM’s report showed. Companies also ramped up hiring. (…)
CHEMICALS NOT BULLISH
While ISM and Markit manufacturing PMIs paint a different picture, the CAB index remains weak. Whatever is manufactured, chemicals are needed. No signs of rising demand just yet…although the GM strike may have impacted the recent data…
Heavy-Duty Truck Orders Wane as Industrial Demand Declines Orders fell by 39% last month as fleets extended a reversal in growth plans, slicing the backlog at production lines
Trucking companies in November ordered 17,300 Class 8 trucks, the big rigs used in highway transport, according to a preliminary estimate from industry data provider FTR. That was down 39% from November 2018 and a 21% decrease from October, providing a weak start for what is typically the busiest season for new-equipment orders.
The orders last month were the lowest for a November in four years, and analysts said they expect a backlog at factory production lines that has been dwindling this year to pull back even more. The October backlog was 129,000 units that were ordered but not yet built, according to FTR, less than half of last October’s record backlog of 304,500 units. (…)
Engine-maker Cummins Inc. cut its annual revenue forecast in October and the company last month said it plans to lay off about 2,000 workers early next year. “Demand has deteriorated even faster than expected, and we need to adjust to reduce costs,” the Columbus, Ind.-based manufacturer said in a statement. (…)
Shinzo Abe launches $121bn stimulus package for Japan Bigger-than-expected spending plan marks a return to the free-spending days of ‘Abenomics’
French workers take to streets to protest over pension reform Emmanuel Macron confronts biggest public sector strike since 1995
Tired of OPEC Laggards, Saudis Threaten Oil-Output Surge Saudi Arabia is threatening to boost oil production unilaterally if some OPEC nations continue to defy the cartel’s output curbs, cartel officials say.
Trump’s Tax Cuts Push U.S. Burden Lower in World Report says U.S. total tax rate lowest among grouping of major economies except Ireland, Chile and Mexico
(…) U.S. taxes at all levels of government fell to 24.3% of gross domestic product in 2018, down from 26.8% a year earlier and 25.9% in 2016.
That 2.5 percentage-point drop was only the fourth time since 1995 that any country’s tax burden has declined by at least that much in one year outside of the financial crisis, according to OECD, an intergovernmental economic organization with 36 member countries including the U.S.
The steepness of the decline stemmed partly from an increase in 2017, when a one-time tax from the 2017 law was counted as revenue that year.
Measured as a share of the U.S. economy, taxes are now 10 percentage points below the 2018 OECD average of 34.3%. Among 34 countries with preliminary 2018 data, the U.S. tax burden is lower than everywhere except Chile, Ireland and Mexico. The tax cut drove U.S. taxes below Turkey’s, and taxes in France and Denmark are now nearly twice what they are in the U.S.
The 2018 data mark the culmination of nearly two decades of tax-cutting in the U.S., starting with President George W. Bush’s tax cuts in 2001 and 2003. Congress let some of those tax cuts expire at the end of 2012, during President Barack Obama’s administration, and raised some taxes on high-income households.
The net effect of fiscal policy this century has been lower taxes and larger budget deficits. (…)
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Biden Proposes $1 Trillion in New Corporate Taxes Democratic presidential candidate Joe Biden proposed nearly $1 trillion in new corporate taxes as he sought to generate more revenue to pay for his policy plans on health care, climate, infrastructure and education.
TECHNICALS WATCH
- 13/34–Week EMA Trend Chart (CMG Wealth)
- NDR Crowd Sentiment Poll: Extreme Optimism (S/T Bearish for Equities) (Source: Ned Davis Research)
The current weekly sentiment reading is 66.3. It was 67.6 last week. The current regime is highlighted in yellow.
SentimenTrader:
December drip. Stocks rebounded Wednesday, but still lost more than 1.5% in the first couple sessions of the normally positive December. The last 3 times this happened were 2018, 2008, and 2002, not exactly auspicious. Historically, bucking the S&P’s seasonal trend like this has preceded weaker-than-average returns, especially shorter-term.