US: Chicago PMI beats expectations - Nomura

The Economics Team at Nomura provides a summary of the most recent US data published on Thursday. 

Key Quotes

Advance goods trade balance and inventories: The goods trade gap widened to $69.7bn in November from October’s $68.1bn. The deficit in November was wider than expectations (Nomura: $66.0bn, Consensus: $67.9bn). Goods exports rose strongly by 3.0% m-o-m. Strong demand from abroad likely supported exports from the US. On details, exports of autos jumped strongly by 7.5%, while exports of foods, feeds and beverages rose only modestly by 0.2% after falling sharply by 11.2% in October. Imports rose strongly by 2.7% m-o-m, consistent with healthy domestic demand. Wholesale inventories increased 0.7% m-o-m in November with an upward revision to October. Retail inventories were up modestly by 0.1% m-o-m, following a 0.1% decline in the prior month. We expect inventory accumulation to add only modestly to Q4 real GDP growth after a strong contribution to in Q3.

GDP tracking update: The wider-than-expected real trade deficit for November suggests more drag from real net exports in Q4 than we expected. November wholesale and retail inventories and backward revisions were broadly in line with our expectations, but a strong increase in autos and auto parts exports in November portend more drawdown of auto inventories than we estimated in Q4. Altogether, we lowered our Q4 real GDP tracking estimate by 0.2pp to 2.5% q-o-q saar.

Initial jobless claims: Initial unemployment claims for the week ending 23 December were unchanged from the previous week at 245k. The four-week moving average inched up slightly to 238k from 236k. Continuing claims for the week ending 16 December rose 7k to 1943k. Incoming claims data may show increased volatility during the holiday season due to difficulty with seasonal adjustment. Reading through the volatility, the unemployment claims data remain at a historically low level and continue to suggest a strong labor market. We expect this trend to continue as strong pace of job creation carries on next year.

Chicago PMI: Chicago PMI rose 3.7pp to 67.6 in December, above expectations (Nomura: 64.5, Consensus: 62.0), up from 63.9 in November. Chicago PMI indicated strong momentum at the end of the year, reaching the highest level since March 2011. The production index rose strongly by 7.6pp to 77.7, suggesting robust expansion in output. New orders index jumped 9.5pp to 72.7, pointing to increasing demand. Inventories index, which rose 4.8pp to 64.5, suggests firms are increasing the amount of stocks. The survey reported that firms are shoring up the level of stock “to support stretched lead times and in preparation for product launches scheduled for the new year.” The employment index fell 1.8pp, but remained at an elevated 55.3, consistent with our expectation that nonfarm payroll employment likely increased at a healthy pace in December.