Jobless Claims Rise, Import Prices Fall, Manufacturing Mixed, TIC Flows Decline, Housing Index Jumps

- Initial Jobless Claims for last week rose to 357K versus estimates of 314K and 313K the prior week.
- Continuing Claims rose to 2560K versus estimates of 2500K and 2489K prior.
- The Import Price Index for January fell -1.2% versus estimates of a -1.1% decline and a 1.1% increase in December.
- Empire Manufacturing for February rose to 24.4 versus estimates of 10.6 and 9.1 in January.
- Net Long-term TIC Flows for December fell to $15.6 billion versus estimates of $60.0 billion and an upwardly revised $84.9 billion in November.
- Industrial Production for January fell -.5% versus estimates of unch. and a .5% increase in December.
- Capacity Utilization for January fell to 81.2% versus estimates of 81.7% and 81.8% in December.
- The Philly Fed for January fell to .6 versus estimates of 4.1 and a reading of 8.3 in January.
- The NAHB Housing Market Index rose to 40 in February versus estimates of 35 and a reading of 35 in January.

BOTTOM LINE: The number of Americans filing first-time claims for state unemployment benefits rose last week by the most since September 2005, partly a reflection of winter storms that gripped portions of the nation, Bloomberg reported. The four-week moving-average rose to 326,250 versus 308,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2% versus 1.9% the prior week. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Prices of goods imported into the US fell in January by the most in three months, reflecting lower crude oil and natural gas costs, Bloomberg reported. Prices of goods from newly industrialized Asian countries including Singapore and South Korea fell .4%. Prices of US products exported to other countries rose .3% versus a .7% gain the prior month. I continue to believe inflation fears have peaked for this cycle and that inflation will decelerate further from below-average levels over the intermediate-term.

Manufacturing growth in NY stated accelerated more than forecast this month as orders and shipments rose, Bloomberg said. The Six-month Outlook component of the index surged to 38.5 versus 32.5 the prior month. The New Orders component rose to 18.9 from 10.3 prior. The Inventory component rose to -7.5 from -19.2 the prior month. A negative number indicates stockpiles are contracting. I continue to expect manufacturing to improve modestly over the coming months as inventories are rebuilt as companies gain confidence in the sustainability of the current expansion.

The US attracted less investment from overseas investors in December, Bloomberg reported. Americans bought more emerging market debt in the 4th quarter than in over a year, JPMorgan reported. As well, US investors purchased the largest amount of overseas debt in December in history, while cutting back on equities purchases. China, Japan and the UK increased their holdings of US government debt, while Caribbean-based investors sold some of their holdings. I expect net long-term TIC flows to rebound sharply next month.

Industrial Production in the US fell last month as companies delayed orders and makers of autos and building materials reduced stockpiles, Bloomberg reported. Capacity Utilization, which is closely monitored by the Fed, fell to the lowest in almost a year. I expect industrial production will bounce back over the coming months, while capacity utilization remains below rates that would worry the Fed.
Manufacturing in the Philly region stalled this month as orders declined and shipments weakened, Bloomberg said. The Expectations component of the index slipped to 20.3 versus 22.4 the prior month. As I said above, I expect manufacturing to rebound over the coming months as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

Confidence among US homebuilders unexpectedly surged this month to the highest since June, Bloomberg said. This was the largest jump since September 2002, even as sub-prime worries intensified and weather turned colder. The Sales Expectations component for the next six month surged to 55 versus 48 in January. This component is 49% higher from September cycle lows of 37 and only 9 points away from the long-term average of 64. The Buyer Traffic component rose to 31 from 26 the prior month. I continue to believe housing is in the process of stabilizing at relatively high levels of activity.