Global Business Confidence:

Global business confidence has notably improved in recent weeks. It rose last week to its highest level on a four-week moving average basis since the summer of 2006. Sentiment has improved most in the U.S., but remains strong in South America, Europe and Asia outside of Japan. Businesses are responding more positively to all of the questions asked in the survey. Most notable is the improvement in sales strength and to the broadest questions regarding overall business conditions and the outlook six-month hence. Hiring has also improved, although it lags investment in equipment and software, and pricing remains soft. Business confidence is consistent with a global economy that is expanding at a rate at the high end of its potential.

GDP: 3.2%
Real GDP grew 3.2% at an annualized pace in the fourth quarter of 2010. This was below the consensus estimate for 3.6% growth and was an improvement from the 2.6% pace in the third quarter. Private inventories were an enormous drag on growth, subtracting 3.7 percentage points; this bodes very well for the near-term outlook and means that current demand is very strong. Consumer spending, investment and trade were all positives for growth in the fourth quarter; government was a slight negative. The economy will see very strong growth in 2011 as the tax and spending deal passed in December stimulates demand and the labor market picks up, creating a self-sustaining expansion.

 

Agricultural Prices:+ 7.0%
The all-farm products price index increased sharply by 7% in January, fueled by higher prices for crops. Crop prices jumped 11.4%; livestock prices remained unchanged. Higher prices were received for corn, soybeans, wheat and cattle, while eggs, milk, turkey and broilers fetched lower prices. With the spike in prices received this month, farm products price index is up 21% from one year ago. The food commodities index advanced 4.6% in January and is 16% higher than a year ago. Producers paid 2.7% more for inputs into farm production last month, 6.6% more than a year ago. Taxes, cash rent, other services and feed grains were amongst the components that added to the cost of production in January.

Personal Income: +0.4%
Consumer spending continued to grow strongly in December, supported by healthy income growth and moderating saving. Personal income growth remained at a healthy 0.4% in December as wage growth improved and the return on assets was strong. Spending growth accelerated to 0.7%, strongly supported by rising energy spending. The saving rate dipped to 5.3%. Real spending grew 0.4%, continuing recent trends as the top-line PCE deflator rose 0.3%. Core prices were essentially unchanged for the fifth month in the last six as low inflation continues to support consumer budgets.

Senior Loan Officer Opinion Survey: -10.5%
In the fourth quarter of 2010, banks loosened lending standards on loans to large businesses further, while holding lending standards for smaller businesses the same. The Fed's Senior Loan Officer Survey also found that demand for business loans had picked up somewhat compared with the third quarter. The business loan category was the only lending category that recorded any significant changes. Lending standards for commercial real estate loans were unchanged, as were lending standards for prime mortgages. A larger net percentage of banks tightened loans on nontraditional mortgages last quarter.

Employment Situation: +36,000
Despite a number of indicators that hinted at a strengthening labor market in January, payroll employment increased by only 36,000, far below expectations. December and November data were revised slightly higher, however. The decrease in the unemployment rate, derived from a different survey, was also surprising; it fell to 9% from 9.4%. A declining participation rate explains part of the decline. 
 

Monster Employment Index: +7%
The U.S. Monster employment index rose 7% on a year-ago basis in January. Hiring showed signs of broadening in January, with 12 of 20 industries tracked by the index recording an increase in recruitment. On a monthly basis, the index dropped 8 points from December, as employers scaled back hiring following the holiday season.

Productivity and Costs: 2.6%
Nonfarm business productivity increased 2.6% (SAAR) in the fourth quarter, as output saw a large gain, with a smaller increase in hours worked. This increase was above the consensus estimate of 2%. Real hourly compensation fell in the fourth quarter. Unit labor costs fell 0.6% in the quarter, the fifth decline in the past six quarters. There are no inflationary pressures coming from the labor market. Slowing productivity growth and falling unit labor costs will lead firms to hire as demand increases.

Factory Orders (M3): 0.2%
Orders for manufactured goods rose 0.2% in December. The previously released durable goods orders figures were revised to show a drop of 2.3% (previously a 2.5% decline). Orders for nondurables rose 2.3%. Shipments of durable goods increased 1.6%-revised slightly higher from the first release. Unfilled orders fell for the first time in eight months, while inventories rose for the 12th convective month. Overall, the report was in line with expectations and is consistent with a sturdy recovery in manufacturing.

ISM Nonmanufacturing Index: 59.4
The ISM nonmanufacturing survey hit a new high for the recovery in January, rising by 2.3 points to 59.4. The activity and new orders components also hit new highs, pointing to further strengthening in the economy outside of manufacturing in February. The rise is a promising sign of the broadening in the recovery we have been expecting. The rotation to service sector strength will promote a true labor market rebound and make the expansion more resilient.
 

Semiconductor Billings: -3.0%
Global semiconductor sales were down 3% in December after falling by 1% in the previous month. The three-month moving average of sales came in at $25.1 billion in December, down from $25.9 billion in November. Sales fell across all regions.

Business Employment Dynamics: +6,935,000
The job market strengthened measurably during the second quarter of 2010, but it is doubtful whether the pace of job creation was sustained through the end of the year. Private sector job gains accelerated to 6.9 million, from 6.1 million in the first quarter. This was the strongest pace of job creation since mid-2008. At the same time, separations dropped to 6.2 million, the slowest pace since the survey began in the early 1990s.

Jobless Claims: 415,000
As expected, initial claims decreased by 42,000 to 415,000 for the week ending January 29; the prior week's data were revised up from 454,000 to 457,000. This was largely payback for the prior week's weather-driven surge, and this new level of claims is more consistent with underlying labor market conditions. Initial claims have been volatile over the last several weeks because of weather, though they are generally indicative of gradual progress in the labor market. Continuing claims decreased by 84,000 to 3.925 million for the week ending January 22, though there remain millions more on extended and emergency benefits not counted in this figure.

Challenger Report: -11,481
The January Challenger report started the year off well, even though more jobs were eliminated than in December. Only 38,519 workers were affected by job cut announcements; the prerecession average was closer to 50,000 monthly. The January figure marks the lowest January since Challenger, Gray and Christmas began tracking job cuts in 1993.

Employment Cost Index: 0.4%
Employer costs rose 0.4% in the fourth quarter of 2010, in line with both expectations and the third quarter growth rate. Growth of 0.4% was uniform across both components: wages and salaries and benefits. The total index and its two components also saw growth tick higher on a year-ago basis. The trends in the fourth quarter are consistent with the overall trend of weak wage growth throughout the year and a slowing influence of benefits growth. Slowly rising compensation is not yet a significant relief for consumers.

Construction Spending (C30): -2.5%
The year ended on a gloomy note for construction as spending for December fell substantially after seasonal adjustment. Total December construction spending fell 2.5% from its revised level in November and was 6.4% below its level in December 2009. While private nonresidential construction spending registered a slight decline, residential construction spending had a much larger decrease, while public construction spending also fell substantially.

MBA Mortgage Applications Survey: 491.7
Mortgage applications had a strong week, rising 11.3% from the previous week; the MBA market index now stands at 491.7. Both refinance and purchase applications posted solid gains this week, as well. The refinance index jumped 11.7%, to end the week at 2,261.2. Meanwhile, the purchase index stands at 188.7, an increase of 9.5%.
 

Chain Store Sales: 4.8%
Chain store sales started the year on a strong note despite the drag from severe winter weather. Chain store sales grew 4.8% in January, according to the ICSC. Growth far exceeded recently downgraded expectations and was accompanied by a significant number of retailers upgrading their earnings expectations. It seems likely that larger paychecks due to the reduction in Social Security withholdings boosted spending.

Oil and Gas Inventories: 343.2 mil barrels
Crude oil inventories rose by 2.6 million barrels during the week ending January 28, in line with expectations. Distillate inventories fell by 1.6 million barrels, surpassing expectations of a 1 million barrel decline, while gasoline inventories surged by 6.2 million barrels, well above the expected 2 million barrel increase. Refinery capacity utilization unexpectedly increased from 81.8% to 84.5%. Petroleum demand was little changed. This mixed report shouldn't have too much of an effect on oil prices.
 

Natural Gas Storage Report: -189 bcf
Working gas in underground storage fell by 189 billion cubic feet during the week ending January 28, slightly exceeding the consensus estimate of a 187 bcf decline. This report will disappoint some investors who were looking for an even greater decline.
 

Source: Economy.com