Unleaded Inventories: 1.534mln draw vs. 1.842mln build prior
Distillates: 1.721mln draw vs. 186k draw prior
Refinery Usage: 1.82% decrease vs. 1.25% increase prior
• The November ISM Non-Manufacturing Index (NMI) is expected to fall to 43 from a prior reading of 44.4
The ISM NMI is expected to dip slightly in November after plummeting to its lowest level since the inception of the index in Jul-97. The unprecedented weakness in October provides and indication of recessionary pressures infecting all US sectors, while even spreading into the once proud US services sector.
There is some upside risk to the November data, which could reflect a rebound from the steep drop in October; nonetheless, lingering credit market issues are likely to further thwart non-manufacturing sectors already facing downward pressure before the near credit market collapse in October. On the bright side, the ISM-NMI index is once again expected to outperform the ISM Manufacturing Index which fell to 36.2 in November.
The November ISM NIM Prices Paid Index is likely to post a steep decline from the 53.4 reading reported in October. The November ISM Manufacturing Prices Paid Index plunged to 25.5 from 37 in October.
Related data:
• The October ISM-NMI Production Index fell to 44.2 from 52.1 prior
• The October ISM-NMI Employment Index fell to 24.6 from 41.8 prior
• The October ISM-NMI New Orders Index fell to 32.2 from 38.8 prior
• Final Q3 Non-Farm Productivity is expected to be revised down to 0.8% from the 1.1% reported in the preliminary data
• Final Q3 Unit Labor Costs are expected to be revised down to 3.5% from the 3.6% reported in the preliminary data
Final Q3 Non-Farm Productivity is expected to be revised lower as expected declines in output growth are likely to outpace expected downward revision to compensation growth. Output growth is expected to be revised lower to -1.9% from -1.7% reflecting downward revisions to the preliminary Q3 GDP report. Compensation growth is also expected to be revised down to 4% from the surprising 4.7% reported in the preliminary data.
The hours worked competent is expected to be left unchanged from the 2.7% decline reported in the preliminary data—which was the largest drop since Q1 ’02. Q3 Unit-Labor-Costs are expected to be revised marginally lower to 3.5% from the 3.6% reported prior.
The November ADP Employment report is expected to reveal a more than 200k drop in employment following a 157k drop in October. This would reflect the first monthly decline of 200k jobs or more since Dec-01. Potential upside remains severely limited.
• October ADP Employment fell by 157k following a 26k drop in September
The Bank of England (BOE) is set to lower the UK base rate by at least one full percentage point to 2%, a 69-year low, with a growing chorus also calling for a repeat of the BOE’s audacious 150-basis-point slash as leading indicators tell a story of a deepening recession and a disinflationary spiral.
BOE policy makers will announce their decision on Thursday, December 4 at 1200 GMT. Need To Know New’s (NTKN) Scream Audio will broadcast the announcement live.
Just last week, a slim majority of economists polled predicted a 50-basis-point cut at the very least after the bank’s ’shock’ 150-bps rate cut in early November, which took rates down to a 50-year low of 3%.
However, the latest round of November data has swung the consensus forecast to a more aggressive cut of 100 bps, which would take the official UK rate to 2% for the first time since the start of World War Two. UK rates have never been below 2%.
Wednesday’s UK services report cemented that bold forecast and led some to even call for a cut of 150 percentage points. The Markit/CIPS survey showed that the UK service sector shrank for the seventh month in a row, and at a record rate, to 40.1. New business, confidence and employment all fell at record rates as well.
“This is a desperately worrying survey given the importance of the dominant service sector to the UK economy,” said Howard Archer, chief UK and European economist with IHS Global Insight. “The heightened financial sector crisis has obviously taken a particularly heavy toll on the services sector, while the deep housing market downturn and markedly reduced consumer spending on services is also hitting the sector hard.”
The services survey also showed disappearing inflationary pressures, with output prices contracting for the first time in seven years and input prices rising at their slowest rate since March 2002.
Founding member of the Bank’s Monetary Policy Committee (MPC) Willem Buiter accurately forecast the BOE’s 150-bps cut last month and is one who is looking for a similar move tomorrow. Such a cut would take the UK rate to a record low of 1.5%. The ex-BOE policy maker is eventually looking for UK rates to hit zero, and was quoted in the UK press today as saying that the only thing stopping the BOE from cutting rates to that level tomorrow is the worry ”about what it would do to the pound.”
The ECB is expected to lower its main interest rate, the refinancing rate, by 50bps to 2.75% from 3.25% in what would be the third such cut since 8 October. The result of the rate decision will be broadcast live on Need to Know News’ Scream Audio at 1245 GMT Thursday.
When it comes to interest rates, virtually all signs point down. Recession has most of Europe firmly in its grip, with the region’s largest economy sputtering like an old Mercedes running on fumes: German Q3 GDP growth fell 0.5%, placing the country firmly in recession. Thus, with the motor failing, EZ preliminary Q3 GDP dropped 0.2% to put the currency area in its first ever recession. Final EZ GDP data are due Thursday before the rate decision.
One needs a pretty strong telescope to find any silver lining the dark economic clouds over Europe, and this week provided more bleakness. For example, Spanish, Italian, French, German and EZ services and composite PMIs for November were all below forecasts, and some touched record lows. German retail sales plunged a whopping 1.6% m-o-m in October after a 1% decline the month prior.
Prices are following economic activity lower thanks to falling oil costs. With a barrel now going for $100 less than this summer’s all-time high, the follow-on drop in price pressures will provide ammunition to ECB doves wishing to fire more rate cut bullets. Virtually no observer expects a rate hike or even a hold; the argument centers on whether central bankers will drop the rate by 25, 50, or even 100bps.
The November ADP Employment report is expected to reveal a more than 200k drop in employment following a 157k drop in October. This would reflect the first monthly decline of 200k jobs or more since Dec-01. Potential upside remains severely limited.
Related data:
• October ADP Employment fell by 157k following a 26k drop in September
November Challenger Job cuts are likely to tick higher following the surge to 78.9% y-o-y in October. Monthly Challenger data is sometimes subject to variability, so a lower-than-anticipated increase may not clearly reflect heightened jobs pressure in November.
Related data:
• October Challenger Job Cuts Rose 78.9% following a 32.6% increase in September
• The November ISM Non-Manufacturing Index (NMI) is expected to fall to 43 from a prior reading of 44.4
The ISM NMI is expected to dip slightly in November after plummeting to its lowest level since the inception of the index in Jul-97. The unprecedented weakness in October provides and indication of recessionary pressures infecting all US sectors, while even spreading into the once proud US services sector.
There is some upside risk to the November data, which could reflect a rebound from the steep drop in October; nonetheless, lingering credit market issues are likely to further thwart non-manufacturing sectors already facing downward pressure before the near credit market collapse in October. On the bright side, the ISM-NMI index is once again expected to outperform the ISM Manufacturing Index which fell to 36.2 in November.
The November ISM NIM Prices Paid Index is likely to post a steep decline from the 53.4 reading reported in October. The November ISM Manufacturing Prices Paid Index plunged to 25.5 from 37 in October.
Related data:
• The October ISM-NMI Production Index fell to 44.2 from 52.1 prior
• The October ISM-NMI Employment Index fell to 24.6 from 41.8 prior
• The October ISM-NMI New Orders Index fell to 32.2 from 38.8 prior
• Final Q3 Non-Farm Productivity is expected to be revised down to 0.8% from the 1.1% reported in the preliminary data
• Final Q3 Unit Labor Costs are expected to be revised down to 3.5% from the 3.6% reported in the preliminary data
Final Q3 Non-Farm Productivity is expected to be revised lower as expected declines in output growth are likely to outpace expected downward revision to compensation growth. Output growth is expected to be revised lower to -1.9% from -1.7% reflecting downward revisions to the preliminary Q3 GDP report. Compensation growth is also expected to be revised down to 4% from the surprising 4.7% reported in the preliminary data.
The hours worked competent is expected to be left unchanged from the 2.7% decline reported in the preliminary data—which was the largest drop since Q1 ’02. Q3 Unit-Labor-Costs are expected to be revised marginally lower to 3.5% from the 3.6% reported prior.
Sales in the week ended November 22 were down 1.4% y-o-y week, down 1.1% y-o-y month and down 1.3% m-o-m.
Redbook sales for the week ended November 15 declined 0.9% y-o-y week, dropped 0.9% y-o-y month and fell 1.1% m-o-m.
Monthly figures are seasonally adjusted, while y-o-y figures are not. There are no estimates for the Redbook Index, as weekly retail data are highly volatile.