The latest preliminary update of the Markit US Manufacturing Purchasing Managers Index (PMI) for November offers a glimpse into the impact of the global economic slowdown on the United States. This survey indicates a deceleration in manufacturing growth, with the PMI falling to 54.7—marking its third consecutive monthly decline. This is the slowest rate of manufacturing activity since January, suggesting that the sector is experiencing a significant slowdown this month.
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According to the Labor Department’s report, new claims for unemployment benefits dropped by 2,000, settling at a seasonally adjusted 291,000 for the week ending November 15. While this change may seem minor, it further reinforces the ongoing decrease in jobless claims. The current reading remains close to a 14-year low of 266,000 recorded in mid-October. Analyzing historical data, these figures are among the lowest seen in the past four decades. This key labor market indicator continues to suggest positive trends for both employment and the broader economy.
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While the global economic outlook is currently facing challenges, there’s no definitive evidence that this slowdown is adversely impacting the US economy. Recent figures from October indicate that the overall trend in the United States remains encouraging. A diverse array of economic and financial indicators continues to signify growth. However, potential risks are emerging, including stagnation in Europe, recession in Japan, and a slowdown in China’s economy, which could pose threats to US economic momentum. Presently, data suggests a consistent inclination towards expansion in the US.
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● Flash Germany PMI: growth drops to 16-month low in Nov | Markit
● November flash PMI signals weakest eurozone growth for 16 months | Markit
● Flash China Manufacturing PMI flat in Nov at 6-month low | Markit
● Japan Flash Manufacturing PMI shows moderate growth in November | Markit
● US Stocks decline as Fed minutes show concern over deflation | Bloomberg
● Oil & gold price plunge doesn’t indicate global recession, experts say | The Guardian
The pace of new residential housing construction diminished last month, falling to an annualized rate of 1.009 million units in October—a decline of nearly 3% from September’s figures, as reported by the US Census Bureau. On a more positive note, newly issued building permits rose by nearly 5%, suggesting a brighter outlook for the near future. An encouraging report on the sentiment within the home building sector for November reinforces the notion that the recent slowdown in housing starts may be temporary. “Growing confidence among consumers is a key driver behind this optimism among builders,” stated David Crowe, chief economist at the National Association of Home Builders (NAHB). However, the forecast for overall growth in the housing market appears to remain modest at best, as indicated by the downward trends in both starts and permits year-over-year.
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New York Fed President William Dudley is inclined to overlook the recent decline in inflation expectations as indicated by the Treasury market. In a speech last week, he noted that he values survey-based measures of inflation expectations more than those based on market data. This distinction holds significant implications. “Survey-based metrics have generally remained stable, indicating that inflation expectations are well anchored,” he emphasized. In contrast, market-based estimates present a different narrative.
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● US home builders grow more confident in November | LA Times
● Senate defeats Keystone oil pipeline | USA Today
● US producer inflation rises, but underlying trend remains muted | Reuters
● Yellen inherits Greenspan’s conundrum as long rates decline | Bloomberg
● Abenomics on the line as Abe calls early elections in Japan | NY Times
● OECD raises growth outlook for India, advises on reforms | Reuters
Forecasts suggest that housing starts will rise to an annualized rate of 1.022 million in tomorrow’s update for October, according to The Capital Spectator’s median point forecast across several econometric models. This projects a slight increase from September’s rate of 1.017 million.
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The momentum factor in asset pricing is widely acknowledged and respected; however, there remains no consensus on the most effective definitions of what many consider to be the most durable anomaly in the markets. A brief examination of the extensive literature reveals numerous methodologies, including absolute versus relative momentum and price-based versus return-based strategies. Despite these differences, the unifying theme across all definitions and strategies is a focus on trending behavior over short- to medium-term horizons. Although opinions may vary regarding the best approach to measuring and capitalizing on this phenomenon, a productive starting point is to compare an asset’s latest closing price against various simple moving averages.
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● German Economic Sentiment in November increases for the first time in 2014 | ZEW
● UK inflation rate rises to 1.3% | BBC
● Analysts assert US economy remains strong despite decline in October industrial output | MNI
● Five additional Ukrainian soldiers killed; Germany’s foreign minister visits Kiev | Reuters
● Israel declares it will respond forcefully after synagogue attack results in four deaths | CNN
● ECB’s Draghi indicates the possibility of government bond purchases | ABC
In summary, while the global economy shows signs of deceleration, the US economy continues to reflect positive growth trends. Monitoring key indicators such as manufacturing activity and jobless claims will be crucial as we navigate these dynamic economic conditions. Though challenges remain, especially from international markets, the overall sentiment in the US remains cautiously optimistic.