Chicago PMI Up, Consumer Confidence Jumps, Retail Spikes

On Tuesday, Chicago manufacturing reports and Consumer Confidence led the good news of the day.

Chicagoland continues to report accelerating month-to-month growth in their manufacturing sector. New orders rose in November vs October to extend what is now extremely strong order growth trending. Production is now cranking and like other regions is raising the demand for manufacturing employment which was reported strong in November as well as October. The healthy production is also holding down and unfilled orders, which now reflect a contracting rate.

The Chicago report covers both non-manufacturing and manufacturing and indicates that we will continue to see strength in the nationwide purchasing reports for November also to be released this week.

Consumer confidence improved in November at a rate better than any economist had projected this month. The Conference Board's reading jumped more than four points to 54.1 fueled by gains in their "expectations component." That measurement points to overall improvement in future months.

Retail sales also moved higher in the November 27 week according to ICSC-Goldman's index released on Tuesday. The improvement now registers a year-on-year rate of plus 3.5 percent. For November as a whole, ICSC-Goldman has measured a three to four percent year-year gain.

Redbook reported a spike higher in same-store retail sales during the week just past. Its reading at a plus 4.9 percent on-year rate is now the strongest retail growth rate of the whole recovery.

All of these reports underscore a solid recovery that is on track and jobs growth (particularly in manufacturing) that continues to increase.

A Small Price to Pay: $25B And Falling

The Troubled Asset Relief Program will cost taxpayers far less than initially feared, with the new price tag estimate now just in at $25 billion. That according to the Congressional Budget Office report released on Monday.

The nonpartisan group underscored that, "it was not apparent when the TARP was created two years ago that the costs would be this low. Because the financial system stabilized and then improved, the amount of funds used by the TARP was well below the $700 billion initially authorized and the outcomes of most transactions made through the TARP were favorable for the federal government."

The once much debated program, now has fewer and fewer skeptics. And it seems each month brings better news from the CBO. In August, the CBO report predicted a cost of $66B. Just last month the the Treasury Department estimated that TARP cost could end up being as little as $29 billion. Monday's report bested even that. At the $25B estimate, the program will cost less than half of what it took to clean up the massive savings and loan crisis of the 1980s.

The program which provided the equivalent of U.S. taxpayer loans to automakers, big banks, and bad loan brokers has ended up costing far less than expected because of a number of reasons. Most banks that received bailout funds repaid their TARP money sooner than even the most optimistic forecasters had projected 18 months ago. In addition, participation in a program designed to aid struggling homeowners with their mortgages has turned out to be much lower than forecast.

Indeed we now are seeing objective measures that point to 2008 gloom and doom claims that were massively overblown and our report that "TARP is Working" in early 2009, was right on.

Markets Likely to Applaud Irish Bailout Terms

On Monday, markets will likely applaud the 85 billion euro bail-out of the Irish economy from the International Monetary Fund and European Union financing.

Over the weekend, the rescue package was approved at a meeting of European Union finance ministers in Brussels.

The overall financing includes up to 35 billion euro to support the Irish banking system - 10 billion euro of which will likely be needed immediately.

The Irish government applied for the loan last Sunday when it conceded the bank crisis was too big for the country to handle on its own.

IMF managers and directors say the Irish authorities propose "a clear and realistic package of policies to restore Ireland's banking system to health." The program and funding will put its public finances on a sound footing, "and bring Ireland's economy back on track."

The Real Stock Market Chart for 2009, 2010 (and 2011?)

You may remember our famous chart that predicted the bottom for the bear market of 2007, 2008 and 2009 and then predicted the ensuing bull market to follow.

The methodology was simple. Compare a stock chart from the bear market of 1973 and 1974 with that of recent bear trends of 2008 and 2009.

The downward similarities were so striking that one would be led to believe that what happened next in the market in 1975 and 1976 would be a good prediction for what would happen in 2009 and 2010...

And what a prediction it has turned out to be. We published the chart three (3) days prior to bottom of the bear. We joked that we had no idea what would happen next and then showed the chart for the bull run of 1975 and 1976.

Since that chart was published, the graph has turned out to be the most visited page every day on The Good News Economist blog from that day back in March of 2009 until the present day!

So what did actually happen? Here you go... Look familiar?


(Click chart to enlarge)

Any guesses on what the 2011 chart might look like?  (Hint:  Take a peek at 1977)

(Click chart to enlarge)

Charts Source:  Google Finance

More Positive Signs for Jobs

On Thursday the government's report of jobless claims held onto the big improvement of the prior week and only rose 2,000 to a lower-than-expected level of 439,000. The four-week average of 443,000 is now down more than 15,000 from a month ago and signals solid improvement for November payrolls.

Also reported on Thursday by the Conference Board were leading economic indications that continue to strengthen. Gains now reflect two strong back-to-back 0.5 percent gains for the Board's index of leading economic indicators. A big central positive is the factory work week, strength that is likely to continue given persistent uplift underway in the manufacturing sector.

Philly Fed data has been lagging national data recently -- but not in November. Thursday's report of the November index registers general business conditions jumping from a zero-flat trend to a ballooning 22.5. This indicates very sharp month-to-month growth. New orders also rose more than 15 points to 10.4. Shipments were also up more than 15 points, to 16.8.

And all this is translating into jobs. The region's factory jobs index rose more than 10 points to 13.3.

Other readings confirm strength: unfilled orders rose while delivery times and inventory contraction slowed. Input prices show steep month-to-month pressure at an accelerating rate yet output prices, that is prices manufacturers receive for their finished goods, continue to contract though now only slightly.

This report points to accelerating strength for what is already solid growth for the national manufacturing sector. Interestingly, these results contrast with Monday's weak Empire State report from the New York Fed, a report that had been significantly stronger than Philly's recently. Month-to-month swings in regional data shouldn't cloud what is generally a positive outlook and continued leadership for the nation's manufacturing sector.

Industrial Production Index Shows Factory Output Jumped

Manufacturing rose quite handily in October. That is according to the Industrial Product report released on Tuesday.

By major components, manufacturing increased a healthy 0.5 percent, following an upwardly revised 0.1 percent rise in September (previously a 0.2 percent dip). Excluding motor vehicles, manufacturing rose 0.5 percent, following a 0.1 percent increase the month before.

The output of durable goods increased 0.9 percent, with increases in most major categories. The production of nondurable goods moved up 0.2 percent in October after having risen 0.4 percent in September.

It really is the manufacturing component that matters in this report since the utilities component can swing sharply on adverse weather. The manufacturing component is quite healthy and should lead us to discount any weakness in the Empire State report yesterday.

Manufacturing Continues to Lead Recovery; Jobs Growth

On Monday we will continue to watch for signs of significant hiring strength in the manufacturing sector.

Last month the Empire State manufacturing index jumped to 15.73 from 4.14 in September.

You may have noticed in the raw data, two series that suggest continued improvement ahead. First, the new manufacturing orders index rose to 12.90 from 4.33 in September. That type of strength in new orders almost always translates into healthier production. But of perhaps more interest was the employment index which jumped to a very strong 21.67 from 14.93 and 14.29 in the two prior months which were already strong. Manufacturers would not be hiring if they were not expecting to continue to expand production.

On Monday we will likely see a report that indicates a sector that continues it's year-long streak of growth and jobs expansion.