Sunday, December 1, 2013

It's A Crazy Busy Week For The Economy — Here's Your Complete Preview, December 2, 2013

View this email online | Add newsletter@businessinsider.com to your address book

Monday, December 2, 2013

It's A Crazy Busy Week For The Economy — Here's Your Complete Preview

Stocks are at record highs.

And this week is totally stacked with manufacturing, housing, and labor market data.

Here's your Monday Scouting Report:

Top Story

Searching For Risk: Volatility is low and stocks are high. People are feeling good about things.

So what are people worried about? According to Societe Generale's Aneta Markowska, clients are asking about geopolitical risks. From Markowska: "China’s new airspace defence zone established last week proved the source of renewed tension in the region. US Vice-President Biden kicked off a week-long visit to Asia on Sunday and hope is that this will help alleviate some of the tension. Our concern as economists is that a new round of geopolitical tension in the region could have ramifications on trade at a time where momentum is already slowing in emerging economies."

Meanwhile, PIMCO's Bill Gross is warning about stock market bubbles and Nouriel Roubini is warning about housing bubbles.

Economic Calendar

Markit US PMI (Monday): Economists estimate the purchasing managers index was unchanged at 54.3 in November. Any number above 50 signals growth.
ISM Manufacturing (Monday): Economists estimate this index slipped to 55.0 in November from 56.4 in October. "A tug of war between the reported rebound in the Markit Economics’ national barometer and generally softer regional manufacturing canvasses suggests that the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) probably dipped modestly to 56.0 in November, essentially matching the average posted over the August-October span," said Societe Generale's Brian Jones.
Construction Spending (Monday): The Census will publish both September and October numbers due to government shutdown-related disruptions. Economists estimate spending climbed by 0.4% in October. Economists warn that their estimates may be way off because thanks to the government shutdown they don't have current new home starts data. "This makes the already revision prone construction data a particularly rough cut this time," said Citi's Peter D'Antonio.
Vehicle Sales (Tuesday): Analysts estimate vehicle sales climbed to an annualized pace of 15.75 million units. "Light vehicle sales likely reaccelerated in November after the concerns about the government shutdown interrupted sales in September and October," said UBS' Kevin Cummins.
ADP Employment Change (Wednesday): Economists estimate that 173,000 net private payrolls were added in November.
Trade Balance (Wednesday): Economists estimate that the trade deficit narrowed to $40.2 billion in October from $41.8 billion in September. "The trade deficit probably didn’t budge in October, despite a large jump in petroleum imports," said Citi's D'Antonio. "Oil imports increased mainly due to a rise in volume, as prices actually fell. We think that the non-oil deficit improved mainly on the export side. While growth in the rest of the world has slowed, there is no reason to believe that the declines in each of the past three months represent a new trend."
ISM Non-Manufacturing (Wednesday): Economists estimate the services index fell to 55.1 in November from 55.4 in October. "This gauge has generally been more positive than actual economic growth would suggest," noted Citi's D'Antonio.
New Home Sales (Wednesday): The September and October stats will be published simultaneously as a result of the government shutdown. Economists estimate sales climbed to an annualized pace of 430,000 units in October. "The Federal government shutdown may have had an effect, as 17% of realtors said delays in IRS income verification weighed on sales in October," said UBS' Cummins. "Other indicators of housing demand were also softened in September and October, including mortgage applications and builder sentiment."
Federal Reserve Beige Book (Wednesday): The Fed's collection of economic anecdotes will be published at 2 p.m. ET. "We wouldn’t be surprised to see a very slight upgrade in tone to the upcoming edition, consistent with the slightly better economic data, on balance," said UBS's Cummins.
Initial Jobless Claims (Thursday): Economists estimate unemployment claims climbed to 320,000 from 316,000 a week ago. "Jobless claims have bounced around a bit in November," said UBS's Cummins. "Some of the volatility likely reflects the timing of Veterans Day. The upcoming report is also subject to some heightened volatility as it will cover the Thanksgiving holiday."
Q3 GDP (Thursday): Economists estimate 3.1% from 2.8% prior. Personal consumption growth of 1.5%. "Roughly $23 billion in additional inventory building last quarter relative to what the Commerce Department had assumed will push GDP growth up to +3.2% compared to an initially reported +2.8% figure.," said Deutsche Bank's Joe LaVorgna. "Importantly, there is little evidence thus far in the quarter that suggests inventories are being unwound. In fact, the inventory subcomponent of the Chicago purchasing managers’ index soared 13.1 points to 61.1 in November, the highest reading since October 2006. Consequently, we expect further incremental inventory building this quarter, which is why we see growth above 3%."
Factory Orders (Thursday): Economists estimate factory orders fell 1.0% in October. "October factory orders likely fell, pulled down primarily by the already reported drop in durable goods," said Citi's D'Antonio. "Falling oil prices probably contributed to lower nondurable goods orders and shipments."
Nonfarm Payrolls (Friday): Economists estimate U.S. companies added 183,000 nonfarm payrolls in November, bringing the unemployment rate down to 7.2%. "Employment indicators have been mixed, leading us to expect a moderate slowdown in payrolls," said Credit Suisse's Neal Soss.
Personal Income And Spending (Friday): Economists estimate income increased by 0.3% and spending climbed by 0.2% in October. "Within the former we are looking for a 0.2% increase in wages and salaries as well as positive contributions from rental and dividend income," said Barclays' economists. "On the spending side, we expect a 0.2% increase in real consumption as well, with a flat reading on the PCE price index and a 0.1% print on the core."
University of Michigan Consumer Confidence (Friday): "This report will provide us with limited information about December, as it will be reported after just five survey days," warned Citi's D'Antonio. "However, it will give a relatively pure view on the period around the crucial Thanksgiving kickoff to holiday selling."
Consumer Credit (Friday): Economists estimate credit balances grew by $14.5 billion in October. "Nonmortgage consumer credit continues to rise quite rapidly," said UBS's Cummins. "About 70% of the rise over the past year has reflected Federal lending—primarily student loans. However, commercial banks and finance companies have also been increasing lending."

Market Commentary

The stock market is at an all-time high, yet only half of America says they're invested.

However, in their efforts to chase gains, investors may flood into the markets and boosts prices even higher.

"2014 may finally be the year individual investors, as a group, begin to buy stocks in contrast to the net selling they have done since the bull market began nearly five years ago," said LPL Financial's Jeff Kleintop. "The five-year trailing annualized return for stocks has been weak, especially compared to bonds, in recent years. However, as 2014 gets underway, the one-, three-, and five-year trailing annualized returns for the S&P 500 will all be in the double digits for the first time this business cycle"

"Our analysis of history shows that it is the five-year return that individual investors tend to chase, based on net inflows to U.S. stock funds," argued Kleintop. "As of March 6, 2014, five years from the bear market low in the S&P 500 — even assuming no additional growth in the stock market between now and then — the five-year annualized return may have exceeded bonds’ 5% return by 20%. This may prompt many investors to reconsider the role of stocks in their portfolios, especially as interest rates rise and bond performance lags."