From Peter Boockvar:
Succinct Summation of the Week's Events:
Positives,
1) The February Philly manufacturing index was +18.1, 4 pts above expectations and after the January spike to +44.3 and vs -10.9 in December.
2) The February NY manufacturing index rose to +5.7 from -12.6 and vs +2.1 in December and +20.2 in November and -11.5 in October.
3) Post holidays and the rush to get goods, along with the continued Israel/Hamas truce which has kept the Houthi's quiet resulted in container shipping costs to fall for a 9th straight week by $269 w/o/w to $2,618 for the Shanghai to Rotterdam route. That price is the lowest since early January 2024. The Shanghai to LA cost fell to the lowest since December 2024 at $3,888, down by $504.
4) From Walmart: "Customers are shopping with us more often and buying more items, including general merchandise categories, which were up low single digits in Walmart US and Sam's US for the quarter...Customers continue to respond to our value proposition as we provide lower prices, a broader assortment and greater levels of convenience."
5) From Live Nation: "We are seeing continued strong demand. We're seeing sell-through rates at the stadium level higher than any previous year...So no slowdown at all. Lots of inventory, but equally great demand selling most of these stadiums out or close to being sold out by the time we get to the show dates."
6) From Booking Holdings: "The improvement in room night growth was seen across all our major regions, each of which grew by double-digits in the quarter...At the start of 2025, we continue to see healthy demand for leisure travel globally...Given the importance of travel to consumers and the aspirations of people to experience the world, we remain confident in the long term outlook for the travel industry."
7) From JB Hunt: "I think we're at 31, 32 months of dealing with this freight recession. And so I do feel like we're at the bottom. I do feel like we're at an inflection point." Let's hope.
8) From Carvana: "The strong demand we experienced in the first three quarters of the year continued into the fourth quarter." Though the market focused on margins.
9) From Analog Devices: "while we continue to operate in a challenging macro and geopolitical environment, our first quarter results and outlook for double-digit y/o/y growth in our 2nd quarter builds my confidence that 2025 will be a year of growth."
10) From Huntsman: After talking about the potential tariffs and how they are planning on managing through them, "The second shift we are seeing is around recent price announcements in many of our products...I think Huntsman remained incredibly disciplined with respect to pricing. We previously announced lost volume due to this. We've stated on past calls that demand needs to return before pricing picks up. As we have reported in the past few quarters we've seen volumes improve as de-inventorying has ceased and demand has tepidly returned. I believe that we're seeing some early signs of recovery in pricing and margins return."
11) From Vulcan Materials: "Over the last year, trailing 12 months, highway starts have increased by another $7 billion to $122 billion...Additionally, $45 billion of funding initiatives were passed at the state and local level in recent election cycle to spur additional transportation in local states...Recent trends in both warehouse starts and data centers have been encouraging. Trailing 12 month warehouse starts, the largest category in private non-residential construction have continued to flatten out to pre-pandemic levels after a precipitous drop from historic highs throughout 2023...Current planned data center activity in our markets remains robust."
12) Japan's manufacturing and services composite index in February rose to 51.6 from 51.1 with slight gains in each category but with manufacturing still below 50. Australia's was flattish at 51.2 vs 51.1 and both components were above 50.
13) India remains strong with its PMI rising to 60.6 from 57.7 with all of the gain m/o/m driven by services, though manufacturing is still well above 50.
14) The UK CBI February industrial orders figure was -28, though up 6 pts m/o/m and 2 pts above expectations. CBI said "The survey paints a downbeat picture of the manufacturing sector over the last three months, which can be attributed in part to low domestic business confidence following the Autumn Budget combined with a subdued international environment. Manufacturers expect to raise output in the quarter ahead. But with firms having rapidly run down stocks of finished goods, it's possible that the need to re-build inventories partly explains this rebound. Order books remain weak from a long-term perspective."
15) UK payrolls unexpectedly rose in January by 21k instead of falling by 30k as estimated. Also, wage growth was stronger than anticipated in the three months thru December. Their unemployment rate held at 4.4% vs the estimate of 4.5%.
16) Investor confidence has picked up in Germany in their economy as the February ZEW rose to 26 from 10.3 and was above the estimate of 20. The Current Situation remains tough though as this component was still deeply negative at -88.5 vs -90.4 in January. The ZEW said "This rising optimism is probably due to hopes for a new German government capable of action. Also, after a period of absent demand, private consumption can be expected to gain momentum in the next six months."
17) The RBA cut rates by 25 bps as expected but remained hawkish. The RBNZ cut by 50 bps as expected and that likely is it for now.
18) China home prices continued to fall in January but the pace of declines are still slowing giving hope that a bottom is near.
19) Japan said its January exports rose 7.2% y/o/y, about in line with the estimate of 7.7% while imports jumped by 16.7%, almost double the estimate of up 9.3%.
Negatives,
1) Initial jobless claims rose to 219k from 214k and that was 4k above the estimate. The 4 week average of 215k though is down 1k w/o/w as a print of 223k drops out of the calculation. They particularly jumped in DC. Continuing claims totaled 1.869mm as expected and still around the highest since November 2021.
2) The S&P Global US composite PMI fell to 50.4 from 52.7 and all driven by a drop in the services component (which does not include retail for some reason) to 49.7 from 52.9. Manufacturing improved a touch, remaining above 50 at 51.6. Helping manufacturing was an easing of falling inventories, though new orders fell. S&P Global said "The upbeat mood seen among US businesses at the start of the year has evaporated, replace with a darkening picture of heightened uncertainty, stalling business activity and rising prices." As for the outlook, "Optimism about the year ahead has slumped from the near-three year highs seen at the turn of the year to one of the gloomiest since the pandemic. Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments. Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff related price hikes from suppliers." On the labor market, "employment fell slightly amid heightened uncertainty and concerns over rising costs." One key thing on the pricing comments, while manufacturers passed on their cost increases, "intensifying competition helped limit the pass through of selling prices in the services sector, where inflation sank to a near five year low."
3) The final February UoM consumer confidence index fell to 64.7 from the initial print of 67.8, down from 71.1 in January and the lowest print since November 2023. One year inflation expectations held at 4.3% with the initial read but up 100 bps m/o/m. The 5-10 yr guess is at 3.5% from 3.2% in January and 3.3% when initially asked a few weeks ago. With the headline figure, the UoM said "The decrease was unanimous across groups by age, income and wealth." And there was "a 19% plunge in buying conditions for durables, in large part due to fears that tariff induced prices increases are imminent." The big problem now with this survey however has become the politics involved. The UoM said "While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies." To quantify, confidence among Democrats was 91.4 in October and now sit at 51.3. For Republicans, they were at 53.6 in October and now are at 86.7. Specifically with the inflation expectations jump, they rose for Independents and Democrats alike; "they fell slightly for Republicans."
4) Within the Philly manufacturing index, prices paid rose to 40.5 from 31.9 and that is the highest since October 2022. Prices received were up 3.2 pts m/o/m to the most since November 2022. Also, there was the drop in the 6 month outlook to 27.8 from 46.3. That's a 5 month low. Capital spending plans fell to a 6 month low.
5) The same was seen in the NY manufacturing index. Prices paid jumped by 11 pts to 40.2, the highest since March 2023 and those received rose to match the highest since May 2023 at 19.6, up 10.3 pts m/o/m. The 6 month outlook fell 14.5 pts m/o/m to 22.2, the lowest since May 2024. Capital spending plans fell to a 4 month low.
6) Housing starts in January totaled 1.366mm, below the estimate of 1.390mm and down from 1.515mm in December and vs 1.305mm in November and 1.344mm in October. Single family starts fell back under one million at 993k from 1.084mm in the month before. Multi family starts were 373k vs 431k in December and 284k in November. As for the forward looking permits, they were flat m/o/m with single family at 996k, no change from December. Multi family permits were 487k vs 486k in the prior month.
7) The January Architecture Billings Index remained well below 50, though rose 1 pt to 45.6 m/o/m. All four of their components are below 50 which consists of commercial/industrial, industrial, multi family residential and mixed practice. The chief economist there said "Stubborn inflation, persistently high interest rates, and labor concerns continue to weigh on the willingness of owners and developers to move ahead with construction projects. Architecture firms have been moving to right size their operations in response to softer market conditions. There was a net loss of 1,400 positions at architecture firms nationally in 2024, and firm employment has declined by a total of 4,100 positions since the post pandemic peak in June 2023."
8) The February NAHB home builder index fell 5 pts to 42 and vs the estimate of 46. "Uncertainty on the tariff front helped push builders' expectations for future sales volume down to the lowest level since December 2023. Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible buyers." Also, "With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs" said the NAHB. The Prospective Buyers Traffic fell 3 pts to just 29, well below 50.
9) Purchase applications fell by 5.9% w/o/w, down for a 4th straight month to the lowest since early January. Refi's were down by 7.3% w/o/w but after rising by 9.6% in the week before.
10) The February NY services index fell to -10.5 from -5.6.
11) From a 2nd month, foreigners sold US notes and bonds in December. Japanese holdings fell to the lowest since December 2018. Chinese official holdings are at the least since 2009.
12) From Walmart: With regards to their 3% to 4% sales guidance vs the consensus of 4%, "We're one month into the year, so I think it's prudent to have an outlook that is somewhat measured. We don't want to get ahead of ourselves. There is certainly some unpredictability in any environment that we have, but we feel really good about our ability to navigate that."
13) From Etsy: "Recent eCommerce growth has been skewed towards those that offer low prices and fast delivery and that's a game we're unlikely to win. We also recognize that consumers are shopping and spending their time differently with more competition than ever for mindshare."
14) From Builders FirstSource: "Single family starts pulled back as builders manage the pace of building in the face of affordability challenges and uncertainty around potential policy changes...As expected and communicated, multi family remains a headwind amid muted activity."
15) From Huntsman: "As of today, we are seeing publicly reported polymeric MDI prices in China at a three year high. Huntsman has also announced a series of price increases in North America as well. Again, as publicly reported, we have seen others pushing for similar actions. It is challenging to say if these actions will be successful and how soon and to what segments they will stick. However, as we sit here today, it is fair to say that there are more positive than negative movements in the MDI industry. My personal feeling is that MDI was one of the first major chemical chains to drop and may well be among those that show signs of recovery earlier than other chains."
16) From Celanese: "Persistently weak global demand in critical end-markets like automotive, paints, coatings, construction and industrials caused headwinds throughout the year." And they also said they expect "the sequential demand and pricing challenges experienced in the fourth quarter to be largely unchanged in the first quarter."
17) From Toll Brothers: "Although demand has remained healthy in many of our markets and particularly at the higher end, affordability constraints and growing inventories in certain markets are pressuring sales - especially at the lower end. We continue to strategically manage our pricing, incentives and spec starts on a community-by-community basis to best match local selling conditions and to appropriately balance pace and price."
18) From Expeditors International: "We continue to have limited visibility going forward. It is extremely difficult to predict the impact to global air supply and demand that may result from actions such as the anticipated US elimination of certain de minimis exemptions. So, too, whether recessed Red Sea hostilities will lead to resumed ocean transit via that route remains to be seen. Geopolitical words and actions are driving disruption at a faster pace than we can ever recall, and national policies regarding tariffs and other similar measures are highly unclear in many countries around the globe."
19) From Treehouse Foods: "Private brand unit sales experienced a rather sharp deceleration during the quarter. We believe this slowdown was a result of continued macro pressure that has impacted the broader food and beverage market. We are experiencing similar trends thus far in Q1, and we have planned our 2025 business accordingly."
20) Japan has an inflation issue still and the BoJ has rates at only .50%. January headline inflation rose 4% y/o/y, up from 3.6% in the month before but as expected. The core/core rate was higher by 2.5% as estimated too vs 2.4% in the month before. Higher food prices were definitely a factor in the headline gain.
21) The February Eurozone PMI held at 50.2 vs the estimate of 50.5. Manufacturing rose a touch but still below 50 at 47.3 from 46.6 in January. Services dipped by .6 pts to 50.7. France was particularly weak with a PMI of just 44.5 vs Germany at 51 because of strength in services. With respect to inflation in the Eurozone as the ECB continues to cut rates, "As has been the case in each month since last October, the pace of input cost inflation quickened in February. The latest increase in input prices was the fastest since April 2023 and above the series average. The overall increase in input costs continued to be driven by services, where the rapid pace of inflation was unchanged from January. Manufacturing input prices rose for the 2nd month running and at the fastest pace in six months, albeit one that remained modest overall. In turn, output price inflation also accelerated and was at a ten month high in February. A solid rise in charges in the service sector contrasted with a marginal reduction in manufacturing selling prices, the fifth in the past six months."
22) The UK PMI was little changed at 50.5 vs 50.6 with services too offsetting weakness in manufacturing. The stagflationary situation is apparent too in the UK and it's not just me saying it. S&P Global said "Early PMI survey data for February indicate that business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs...The lack of growth alongside rising price pressures points to a stagflationary environment which will present a growing dilemma for the Bank of England."
23) In the UK, January CPI rose 3%, above the estimate of 2.8% and up from 2.5% in December. The core rate was higher by 3.7% y/o/y but as expected vs 3.2% in the month before with services inflation growing by 5%. The wholesale data, both input and output prices, were above expectations.
24) Taiwan exports in January fell 3% y/o/y vs the estimate of a gain of 2.7%. The Economic Ministry of Affairs though is still optimistic for this year saying "Demand will remain solid for our supply chain of advanced technologies in semiconductors and servers, supporting export orders growth momentum."
