Macro Report

Week’s Takeaway:

This week’s data show a broad improvement overall but fail to reach the threshold of recovery in the industrial sector. Labor market data continues to improve, as do consumer expectations for inflation, next year.

Notes:

Additional October FED Manufacturing Surveys showed a move in the right direction with better-than-expected readings, but both Richmond and Kansas City remain in contraction territory. Richmond printed up to -14, from September’s reading of -21, and above the expected -17, and Kansas City came in at -4, up from -8, and better than the expected -7. The preliminary S&P Global US Manufacturing PMI moved in a similar direction, printing up to 47.8, from last month’s 47.3, and better than the expected 47.5.

September housing data show a continued divergence in the trends for new and existing home sales. New sales jumped by 4.1% to their highest annualized level since May, while existing sales were down by -1% compared to the expected 0.5% increase. Given the fact that the Federal Reserve is so reluctant to provide forward guidance with the cutting cycle, and with a clear signal that there is a vast amount of refinancing demand, we anticipate existing inventories to remain low going into next year and for new home sales to benefit from this dynamic.

Preliminary durable goods new orders data also came in slightly better than the expected, printing down -0.8% verses the anticipated -1% decline. This provides another troubling signal for the automotive sector, as the ex. Transportation component actually printed significantly better than expectations, rising 0.4% versus the expected -0.1%.

Initial claims also continued their downward trend, printing 227k, versus an expected 242k. Initial claims data is now back to Hurricane Helene levels. Continuing claims came in at 1,897k, above the expected 1,875k.

Finally, and encouragingly, the final University of Michigan Consumer Sentiment Survey came in above expectations, printing at 70.5, versus an expected 69. This is the highest reading in 6 months. A main contributing force here, was the 1yr inflation expectation declining to 2.7%, from the preliminary reading of 2.7%. While the current reading remains above the FEDs target, the final data suggests consumers anticipate further disinflation in the coming months.

Next Week’s Notes:

Next week will conclude the October data releases and provide the first-of- the-month data releases. These will offer valuable insights into the steel consuming sectors, as well as the labor market and economic indicators.

In the manufacturing sector, the final Fed Manufacturing Survey for October, the Dallas index, is expected to hold steady at -9. We will also receive the October PMIs, with the final results from the S&P Global US Manufacturing PMI and the ISM Manufacturing PMI anticipated to rise to 47.6 from 47.2 in September.

For the other steel consuming sectors, Construction Spending MoM for September is forecasted to remain flat at 0.0%, which would be a recovery from August’s -0.1%. Wards Total Vehicle Sales for October is projected to decline slightly to 15.75m from 15.77m. Additionally, Pending Home Sales data for September will be released.

On the macroeconomic front, GDP for Q3 is expected to stay at 3.0% growth. The Conf Board Consumer Confidence index for October is projected to increase slightly to 99 from 98.7. The preferred gauge of inflation by the Fed, the Personal Consumption Expenditures (PCE) Price Index for September is also set to be released. The PCE YoY is forecasted to rise by 2.1% in September, down from 2.2%, while the Core (Ex Food & Energy) PCE YoY is anticipated to see a slight downtick to 2.6% form 2.7%.

Finally, the monthly jobs reports will be published, beginning with September’s JOLTS Job Openings, projected to fall to 7900k from 8040k. The Employment Cost Index is expected to remain unchanged at 0.9% for Q3. Change in Nonfarm Payrolls for October is anticipated to drop to 120k from 254k, while Change in Manufacturing Payrolls is forecasted to decline to -30k from -7k. The Unemployment Rate is expected to hold at 4.1%. Additionally, we will receive October’s Challenger Job Cuts YoY and the weekly updates on Initial and Continuing Jobless Claims.