The MorningSnapshot- 11/30

The MorningSnapshot
November 30, 2012
Fiscal Cliff Countdown: 31 days

Yesterday’s Wrap-Up
Stocks in the U.S. advanced for a second day in a whipsaw session amid perceived improvement in economic data and budget negotiations in Washington. Treasuries remained higher after a $29B auction, while most commodities gained on the day led higher by energies. Fiscal cliff talks have been highly correlated with many of the larger moves we have experienced recently. Stocks reversed early gains after House Speaker John Boehner said no progress was being made in budget talks, but recovered  after Democratic Senator Chuck Schumer said there was indeed progress and White House spokesman Jay Carney said the administration is optimistic about the negotiations. The U.S. economy grew faster than estimates from the prior quarter, pending homes sales climbed more than forecast, and jobless claims fell.

Upward GDP Revision (Mostly from yesterday’s edition, added comments from BB senior economist)
Details of the GDP revision were worse than the weaker-than-expected overall result, with particular warnings signs coming from weak personal consumption that is unlikely to absorb the near doubling of the inventory growth estimate. Personal consumption growth was revised down to 1.4% QoQ from 1.9%, the lowest since 2Q 2011 and near the levels observed at the start of three prior recessions. Inventories rose $61.3B versus the initial estimate of $34.1B. The typical contribution that inventories make to nominal GDP is roughly 15%, but current figures show inventories make-up around 30% of GDP, according to Bloomberg Senior Economist Joe Brusuelas. Government spending growth remains at the highest level in three years, even after the revision to 3.5% from 3.7%. Defense spending is also at three-year highs after a revision to 12.9% from 13%.   

Morning Commentary
Initially stocks and commodities were little changed while Treasuries rose in the U.S., but stocks have since started to slip. The S&P 500 was down -0.21% as of 11:35 EST after government data showed personal incomes and spending trailed economist estimates last month while investors continue to weigh developments in government budget talks. In Europe, equities are little changed after Germany approved Greece’s latest rescue package and data was released indicating euro-area unemployment rose to the highest level on record. Most sovereign debt yields to German bunds in the area are moderately tighter, while the euro is up +0.216% versus the greenback.

Today’s Economic Data Lineup (EST)
8:30am: Personal Income, Oct. est. 0.2% (prior 0.4%)
8:30am: Personal Spending, Oct. est. 0.0% (prior 0.8%)
8:30am: PCE Deflator M/m, Oct. est. 0.1% (prior 0.4%)
8:30am: PCE Deflator Y/y, Oct. est. 1.8% (prior 1.7%)
8:30am: PCE Core M/m, Oct. est. 0.2% (prior 0.1%)
8:30am: PCE Core Y/y Oct. est. 1.7% (prior 1.7%)
9:00am: NAPM-Milwaukee, Nov. est. 47.0 (prior 43.3)
9:45am: Chicago PMI, Nov. est. 50.5 (prior 49.9)
11:00am: Fed to purchase $1.75b-$2.25b notes due 2/15/36-11/15/42
5:00pm: Fed’s Stein and Kocherlakota to speak in Boston
North America

  • U.S. consumers’ spending declined unexpectedly and incomes stagnated in Oct. as hurricane Sandy kept some in the Northeast from getting to work or from shopping at traditional malls and car dealerships. Purchases decreased -0.2%, the weakest reading since May, after gaining +0.8% in the prior month. The median of 79 economists’ estimates called for no-change in nominal sales. Incomes were unchanged, held down by a drop in wages caused by Sandy, according to the Commerce Department’s report.
  • The U.S. MNI Chicago Report’s business barometer climbed to 50.4 from 49.9 in Oct.; readings above 50 indicate expansion. The report’s index of new orders, considered a leading indicator, dropped to 45.3, its lowest level in over three years, an indication the gains may not be sustained. The total reading contrasts with earlier reports from Philly and NYC that showed Sandy had halted manufacturing in that part of the country.


  • The Italian unemployment rate rose to a seasonally-adjusted 11.1% in Oct. from 10.8%, more than forecast and the highest level in 13 years as businesses refrain from hiring after the country’s recession entered its second year. Economists had predicted a rise to 10.9% according to the median of eight estimates in a Bloomberg News survey.
  • The euro-area jobless rate rose to a record 11.7% in Oct. and inflation slowed for a second month in November as the fiscal crisis and tougher austerity measures deepened the region’s economic woes. Unemployment rose +1bps from Sept.’s 11.6% figure, the highest since the data series started in 1995 and in line with the median estimate of 34 economists. Inflation slowed more than expected to 2.2% on falling energy prices, according to a separate report.
  • German lawmakers approved Greece’s latest rescue package as Finance Minister Wolfgang Schaeuble warned that a default in the country where the debt crisis began could trigger the collapse of the single currency. Within the Bundestag, 473 voted in favor; 100 voted no and 11 abstained.


  • Indian GDP growth slowed last quarter to match a three-year low, with GDP rising 5.3% YoY in the quarter ended Sept. 30, in line with the median of 42 estimates and down from 5.5% in the prior quarter. Growth in domestic spending and exports moderated, adding to pressure on the government to extend an economic-policy overhaul to spur investment.
  • Japan’s factory output unexpectedly rose the most since Dec. on production for devices such as Apple’s iPhone – a bright spot in an economy otherwise poised to shrink for a second straight quarter. Industrial production increased +1.8% in Oct. from the previous month, when it dropped -4.1%. Economists anticipated a fall of -2%.


“The man who makes a success of an important venture never wails for the crowd. He strikes out for himself. It takes nerve, it takes a great lot of grit; but the man that succeeds has both. Anyone can fail. The public admires the man who has enough confidence in himself to take a chance. These chances are the main things after all. The man who tries to succeed must expect to be criticized. Nothing important was ever done but the greater number consulted previously doubted the possibility. Success is the accomplishment of that which most people think can’t be done.”
-C. V. White

Taylor Anderson
Chief Strategist

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