• ISM manufacturing index jumps up in January

   The U.S. ISM manufacturing index rose to 53.1 in January from 50.2 in December, which was well above

  market expectations of 50.7.

   The details of the report were mainly positive across the board. Production is up to 53.6 (from 52.6), while

  new orders were up 53.3 (from 49.7). The employment sub-index also faired well – up to 54.0, which is the

  highest level since last June. Inventories increased to a whopping 51.0 on the month, up from 43.0 in

  December.

   New import and export orders both fell on the month to 50.0 and 50.5, respectively. However, both remain

  in expansionary territory.

  Key Implications

   This month’s release of the ISM manufacturing index shocked everyone, coming in well above what the

  market had expected. Don’t think this month’s release was a fluke either – with new-orders still coming in

  above inventories, expect production activity to continue to expand in the coming months.

   Net trade ended the final quarter of 2012 on a weak note, with imports and exports declining by 3.2% and

  5.7%, respectively – singlehandedly the largest decline in both since the recession. This morning’s data

  release showed that new manufacturing orders in January for both imports and exports had weakened, but

  still expanding nonetheless. Over the coming months, we expect new orders to pick-up as there have been

  signs of stronger than expected growth coming out of the emerging markets – China in particular.

   The non-farm payroll release that came out earlier this morning showed 4k jobs were added to

  manufacturing in January. The string of gains in manufacturing jobs is consistent with the increase shown

  in the ISM employment sub-index. Job creation will continue at a modest pace over the next several

  months, but will be restrained by the ongoing uncertainty surrounding how Congress will proceed on

  handling both the debt-ceiling and the large-scale automatic spending cuts (set to kick in March 1st, 2013).

  Once Washington can provide some clarity on these issues, we believe that it will instill more confidence in

  businesses and provide an extra kick to job growth.

  
  
  This message and any attachments may contain confidential or privileged
  information and are intended only for the use of the intended recipients
  of this message. If you are not the intended recipient of this message,
  please notify the sender by return email, and delete this and all copies
  of this message and any attachments from your system. Any unauthorized
  disclosure, use, distribution, or reproduction of this message or any attachments is prohibited and may be unlawful.
  

• Auto sales kick off the year on a strong note

   U.S. auto sales kicked off the year pretty much where they left off in 2012. According to

  Ward’s data, January’s seasonally adjusted annualized rate came in at 15.2 million units.

  This is slightly below December’s 15.3 million unit tally, but still a 14% increase over

  January 2011 levels.

   Nearly all automakers recorded an increase in sales relative to year-ago levels. Of the

  top eight leading brands, Toyota (+27%) led the way, followed by the Detroit Three –

  Ford (+22%), Chrysler (+17%) and GM (+16%) – and Honda (13%), who all had double

  digit gains. Sales increases were a marginal 2% at Hyundai, Kia and Nissan.

  Key Implications

   Although we’re only one month in, 2013 is shaping up to be another great year for auto

  sales. January is typically a weak month for auto sales. So the fact that they maintained

  the strong pace set at the end of 2012, and did so with lower incentives – Truecar

  estimates that incentive spending was down 12% from December and 8% from year-ago

  levels – suggests that momentum is running strong.

   While it is possible that January’s tally is inflated by Hurricane Sandy, several auto

  market-specific factors– including pent-up demand, aging vehicles, and a number of new

  models for the 2013 model year hitting the market – remain in place and will continue to

  prop up sales this year. An easing in credit conditions will also play a key role, as lenders

  are offering a number of attractive, low cost options. For details on trends in the auto

  credit market, see a recent report entitled “Auto Finance a Bright Spot for Auto Lenders“,

  available on our website.

   In addition, there are other factors in the broader economy that will help sustain a sales

  pace of over 15 million units this year. The housing market recovery appears to be

  gaining more traction, stock markets have been rallying and the economy has been

  consistently creating jobs. All these factors will help to boost consumer confidence, and

  in turn allow consumers to feel more comfortable making big-ticket purchases. That said,

  there is still a risk that the failure of American politicians to agree on spending cuts and

  another lift in the debt ceiling could derail confidence and the recovery. However, this is

  not our base case scenario.

  
  
  This message and any attachments may contain confidential or privileged
  information and are intended only for the use of the intended recipients
  of this message. If you are not the intended recipient of this message,
  please notify the sender by return email, and delete this and all copies
  of this message and any attachments from your system. Any unauthorized
  disclosure, use, distribution, or reproduction of this message or any attachments is prohibited and may be unlawful.
  

Digest powered by RSS Digest