Upbeat employment data and strong GDP growth painted an encouraging profile for the US economy. Though investors reacted enthusiastically by bidding up market indexes, the news did fuel further expectations that the Federal Reserve may begin the tapering process soon.
The Federal Reserve has reiterated that it wants to see the impact of higher long-term rates and higher inflation before pulling the taper trigger. And while improving macro-economic conditions increase the odds of tapering, most market participants do not expect the Fed to taper its bond buying before March 2014.
Following is an economic review for the week ended December 2 - December 6, 2013.
Monday, December 2
ISM Manufacturing PMI:
US ISM Manufacturing PMI rose to 57.3 in November (a reading above 50 indicates expansion), its best reading since April 2011. November was the sixth consecutive month of growth since a contraction in May, with growth accelerating after the partial US government shutdown that limited activity in October.
Wednesday, December 4
UK Services PMI:
UK Services PMI recorded a level of 60 for November, marking buoyant growth in the sector.
ADP Non-Farm Employment Change:
Non-farm private employment rose at the strongest pace in nine months in November, fueling optimism over the US labor market — Employment rose to a seasonally adjusted 215K new jobs in November, blowing past expectations of 173K.
Canada Trade Balance:
Canada unexpectedly posted a trade surplus of $75 million in October vs. expectations of a deficit of $730 million, the first in two years.
US Trade Balance:
US Trade deficit fell 5.4% to $40.6 billion vs. expectations of $40 billion. Exports hit a record high — Exports increased 1.8% to $192.7 snapping three straight months of declines and pointing to increase in global demand that should help to support Q4 GDP growth for US.
Bank of Canada Rate Statement:
Bank of Canada kept its benchmark interest rate unchanged at 1%.
ISM Non-Manufacturing PMI:
Non-manufacturing sector expanded in November but at a slower pace than in October — The index declined to 53.9 (a number above 50 indicates expansion) in November from 55.4 in October, missing expectations for a reading of 55.
US New Home Sales:
New home sales in October jumped 25.4% to a 444K annualized pace vs. expectations of 429K, following a $354K rate in September. The increase in sales bodes well for the economy signaling that buyers are starting to take higher mortgage rates in stride.
US Crude Oil Inventories:
US crude oil inventories fell by 5.6 million barrels, well beyond expectations for a decline of 500K barrels for the week ended November 29,2013.
Thursday, December 5
Bank of England Official Rate:
Bank of England left interest rates and quantitative easing unchanged. The decision was widely expected, as the Bank had reiterated in the past meetings that it would not even consider raising interest rates until unemployment falls below 7%.
ECB held its key interest rate at a record low of 0.25%, while raising its forecast for the Eurozone's gradual recovery despite prolonged low inflation. ECB maintained its forecast for 2013 expecting the Eurozone economy shrink 0.4%, but predicted 1.1% growth in 2014, up from a prior forecast of 1%.
US preliminary GDP (q/q):
US GDP growth was revised to a 3.6% annualized rate in Q3 2013, up from an initial estimate of 2.8%. The results were boosted by an increase in inventories, and raised the prospects that the Federal Reserve might taper sooner than expected.
US Unemployment Claims:
Unemployment claims fell 23K to a seasonally adjusted 298K, declining for a third straight week for the week ended November 29, 2013.
US Factory Orders (m/m):
US factory goods fell 0.9% n October as demand for aircraft and capital goods weakened, suggesting some cooling in the manufacturing sector.
Canada Ivey PMI:
Canada Ivey PMI fell more-than-expected (53.7 vs. expectations of 59) in November.
Friday, December 6
Canadian economy added another 21.6K jobs in November, although all additional jobs were part-time and the unemployment rate remained steady at 6.9% for the third consecutive month.
US Non-Farm Employment Change and Employment Rate:
US economy added 203K new jobs in November vs. expectations of 180K, while the unemployment rate fell to 7% vs. expectations of 7.2%. The improvement in the job market is likely to influence the Fed's decision in the upcoming FOMC meeting.
US Personal Spending (m/m):
Consumer spending increased 0.3% in October compared to 0.2% in September, despite a dip in income.
University of Michigan Consumer Sentiment:
Consumer sentiment index soared to 82.5 vs. 75.1 in November, its highest level since July 2013.