More Signs of a Slowing in Growth of World Economy.

 

MBA Mortgage Applications  (week ended 1/1/2015)

– Purchase Index Week/Week -15.0%. Previous weeks were +4.0%, -3.0%, +0.04%, +8.0%, -1.0%, +12.0%, +0.1%, -1.0%, -3.0%, +16.0%, -34.0%, +27.0%, and -6.0%,.

– Refinance Index Week/Week -37.0%. Previous weeks were +11.0%, +1.0%, +4.0%, -6.0%, -5.0%, +2.0%, -2.0%, -1.0%, -4.0%, +9.0%, -23.0%, +24.0%, and -8.0%.

– Composite Index Week/Week -27.0%. Previous weeks were +7.3%, -1.1%, +1.2%, -0.2%, -3.2%, +6.2%, -1.3%, -0.8%, -3.5%, +11.8%, -27.6%, and +25.5%.

The most recent data is for a 2-week period.  The usual explanation that this was all about the holidays might be suspect.  If we go back to the previous year and look at the data for the weeks containing Christmas and New Year’s the composite indices for those two weeks were +0.9% and -9.0%.

 
ADP Private Jobs (December 2015)

– ADP employment  257,000. Previous was 211,000.

This is stronger than expectation.  If will be important to look at Friday’s BLS Employment Situation Report and see where these jobs were.  It is jobs and the income associated therewith which drive Consumer Spending which drives GDP.  There is a conundrum here:  we keep getting more jobs but a lower Labor Participation Rate.  Unless health in the jobs market drives wages higher those workers will not have more to spend and GDP growth will remain at the weak +2.0% we have had for the past 17 quarters.

The risks to the jobs market and the economy in general come from signs of slowing is the growth of world GDP and also from corporate debt. Increasing interest rates will cause some companies to pay more to service debt and spend less on jobs.

An unfortunate fact will be obvious soon.  This extended period of low interest rates was not used wisely.  Corporations spent too much on stock buybacks and too little on capital expenses.

The extent to which this will start hurting the jobs market by mid-year remains to be seen.

 
Trade Deficit (November 2015)

– Trade Deficit  $42.4 billion.  Previous was $44.6 billion.

The deficit was lower because imports fell more than exports.  This is about a stronger US $ and a weakening in world economic growth.

 
PMI Services Index (December 2015)

– Level  54.3.  Previous was 56.1.

This is a survey Index.  It had increased in November so it is a bit difficult to see a trend here.

 
ISM Non-Manufacturing Index  (December 2015)

– Composite Index   55.3.  Previous was 55.9

This is another supply side survey index.

 
Factory Orders (November 2015)

– Factory Orders month/month   -0.2%.  Previous was +1.3%.

I apologize for repeating that this is about a stronger US $ and a weakening in world economic growth.

With the truth about the economy of China starting to become evident this is not going to improve.