It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
Business Spending Boosts Factory Orders
In November, factory goods orders rose 1.8% to a seasonally adjusted $497.8 billion. This topped economists’ consensus estimate of a 1.6% rise. Even better, the durable goods component rose a very healthy 3.4%. Breaking it down, aircraft orders skyrocketed 218%, but demand also picked up for construction equipment, computers and motor vehicle parts. This was a strong report. Over the past 12 months, the number of orders received by manufacturers has improved 2.5%. And the healthy durable goods number is a clear sign that business spending remains robust.
Energy Boom Helps U.S. Trade
In November the trade gap narrowed to $34.4 billion, down from a revised $39.3 billion in October (down from the initial estimate of $40.6 billion). Economists had forecast a $40.4 billion trade deficit. In November, exports rose 0.9% to $194.9 billion, while imports declined 1.4% to $229.1 billion. There were two main factors behind the smaller deficit: Declining petroleum imports (thanks to our booming domestic energy sector) and increasing energy exports (thanks to the weaker U.S. dollar). In any event, the trade deficit was much better than economists’ consensus forecast, so I expect them to revise their fourth-quarter Gross Domestic Product forecasts higher to as high as 3% growth (the consensus is currently 2.3%).
Consumer Credit Conditions Improve
In November, consumer credit increased by $12.3 billion. This was a smaller gain than expected; the consensus was that consumer borrowing would jump $14.3 billion. This was also a less dramatic increase from the prior month. In October, consumer credit rose a revised $17.9 billion (the initial estimate was $18.2 billion). The general consensus is that credit conditions are improving. Economists like seeing consumers take on more debt right now because that indicates that they’re more willing to spend on big-ticket items.
Jobless Claims Dive
Last week, first-time jobless claims fell 15,000 to a 330,000 annual rate. Economists had predicted a slight drop to 340,000 so this was a steeper drop than expected. Meanwhile, the prior week’s jobless claims number was revised up by 6,000 to a 345,000 annual rate. The four-week moving average fell by 9,750 to 349,000.This was a solid report. Unfortunately, the stronger-than-expected jobless claims data were soon overshadowed by the lackluster Unemployment Rate report for December.
December Payroll Report Shocks Economists
In December, 74,000 payroll jobs were created. This was well below economists’ consensus estimate of 193,000. At the same time, the unemployment rate fell to 6.7% in December. Economists had expected the rate to remain unchanged at 7% from November. The labor force participation rate and average weekly hours both declined to 62.8% and 34.4 hours, respectively. The only silver lining in the payroll report was that November payrolls were revised up by 38,000 to 241,000.
December payrolls represented the smallest monthly rise in three years. And the shrinking labor force is a disturbing trend. However, this is not cause to panic about the jobs market. There is no doubt that there were some wild seasonal adjustments and harsh winter weather impacted the December payroll report, so we could see a solid rebound in January.
Wholesaler Stockpiles Contribute to Q4 Growth
In November, wholesalers increased their stockpiles by 0.5% to $516.4 billion. This was stronger than expected; economists had predicted a 0.2% gain in inventories. Both durable and nondurable inventories climbed 0.5%. Meanwhile, wholesale sales advanced 1%, also above the 0.8% consensus estimate. At the current sales pace, wholesalers have enough inventories to last 1.17 months.
At least the economic news of the week ended on a high note. With November inventories topping expectations and October inventories revised to reflect a 1.3% gain, it looks like restocking will contribute more to fourth-quarter growth than expected.
Have a wonderful weekend. I’ll be back bright and early on Monday morning to post the new Stock of the Day.