The first week of 2018 started with a substantial rally in U.S. and foreign stocks. Both short and long treasury yields rose and the dollar fell. Oil prices continued to rise due to decreases in inventories. Light vehicle sales were down slightly in 2017 from 2016’s record. We believe auto demand will likely be less in 2018. At this time, any pent-up auto demand from the financial crisis has been supplied. We expect overall consumer spending to remain strong in 2018 with homebuilding continuing to strengthen.
In this busy week for economic data:
- The Caixin China purchasing managers index
- For manufacturing rose from 50.8 to 51.5 in December.
- For services rose from 51.9 to 53.9 in December.
- The HIS Markit Eurozone Manufacturing PMI came in at 60.6 in December, up from 60.1 in November. The increase in PMI indicates acceleration on Europe. The numbers were good across Europe with Austria, Germany and Ireland with the highest readings ever recorded. Growth in France was the highest in over 17 years and Greece, the fastest in 9 years.
- The Institute for Supply Management reported for the U.S.:
- Its purchasing managers index (PMI) for manufacturing rose to 59.7 in December from 58.2 in November signaling acceleration of U.S. manufacturing.
- Its PMI for non-manufacturing fell from 57.4 to 55.9. Keep in mind that anything over 50 represents expansion, just at a slower acceleration.
- The IMF chart shows the industrialized countries with the highest debt and the U.S. is the fourth highest. The biggest qualitative difference is Japanese citizens own the biggest share of Japan’s debt as compared to the other three.
- The Labor Department reported:
- Frist time claims for unemployment rose 3,000 to 250,000 in the prior week. The four-week moving average of claims rose 3,500 to 241,750.
- Non-farm payrolls rose 148,000 in December, below expectations. For the year, payrolls rose by 2.1 million, the seventh straight year over 2 million. The unemployment rate remained at 4.1%, a 17 year low.
- Wages grew a substantial 0.3% in December and 2.5% in 2017.
- The labor force participation rate, which is the percentage of Americans from age 15 to 64, who are working remained unchanged in 2017 at 62.7%. The lack of progress in the participation rate was due to an increase in early retirements offsetting gains in younger people working.
- According to Motor Intelligence, U.S. light vehicle sales (autos and light trucks) were down 5.2% in December from December of 2016. For the calendar year of 2017 light vehicle sales were down 1.8% from the record set in 2016. Light-duty trucks continued to gain while autos were down sharply in 2017.
- The Commerce Department reported
- Construction spending rose 0.8% in November, a sharp increase.
- The trade deficit rose 3.2% in November. Both imports and exports rose, but imports increased more based on consumer spending. For the first 11 months of 2017 exports grew 5.6% and imports rose 6.7%. Since imports are larger than exports, the trade deficit for the first 11 months rose 11.6% from the prior year.
- Factory orders rose 1.3% in November while Octobers order were revised from a 0.1% decline to a 0.4% increase. The increase was attributed to transportation and electrical equipment.
- The Energy Information Administration weekly report is here. Also the EIA reported:
- Weekly field production of crude oil rose 28 thousand barrels per day.
- Storage of Natural Gas fell 206 BN Cubic Feet as cold weather gripped the nation and demand surged. Supplies are in the lower half of the five year range at this time.
- Baker Hughes reported that the number of active oil rigs was unchanged at 747 and the number of active gas rigs was down 2 to 182.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.