Joe Biden Inherited the US Economy at A Great Moment
The transition of power in the US is now official and overall it went smoothly. There was the Capitol Hill scenario, although that wasn’t anything to shake the markets. There were some expectations for protests on inauguration day this week, but nothing happened. So, Joe Biden is now the new president of the United States, who got the power at a really good moment for the US economy.
The US economy bounced strongly in Q3 after the lock-down crash in Q2 and unlike Europe which is headed into another recession, it has been keeping a strong pace of recovery. The GDP expanded by 33.4% in Q3, while it is expected to increase by more than 4% in Q4. The employment sector has been performing fairly well as well, with the unemployment rate falling below 7%, while JOLTS jobs have been exceeding expectations too.
In November they increased to 6.65 million, but was expected to cool off in December, as the ADP employment report showed last week. Although, JOLTS jobs beat expectations once again, keeping up the strong pace of recovery/expansion, showing that the US economy is performing really well.
November JOLTS Jobs Openings Report December
- November JOLTS job openings 6,527K vs 6,400K expected
- October JOLTS job openings were 6,652K (revised to 6,632K)
- Pace of hiring +4.2% vs. +4.1% last month
- 3.156M people quit a job in November vs 3.150m prior.
- The quitting rate remained unchanged at 2.2% vs 2.2% prior
- Separations rate 3.8% vs. 3.6% in October
- Layoffs and discharges 1.4% vs. 1.2% in October
Inflation took a deep dive in the first several months of 2020 in the US, as crude Oil prices tumbled lower, slashing down prices for goods and services. Although, it held its head above water at 0.1% in April/May, while in other regions inflation turned negative. In the Eurozone inflation softened further in the last few months, falling to -0.3% since September. The US CPI inflation softened a bit as well, but it picked up again in November and today’s December data is showing another increase.
Inflation is keeping a positive trend and after the stimulus packages form the government and the FED, it should pick up further in the coming months, which would force the FED to evaluate the monetary policy, as the recent comments have shown. So, once the sentiment changes, the USD will turn quite bullish, given that everything remains stable politically and socially in the US.
December US Inflation Report
- US December CPI YoY +1.4% vs +1.3% expected
- November CPI YoY was +1.2%
- Core CPI YoY ex-food and energy 1.6% vs +1.6% expected
- CPI MoM +0.4% vs +0.4% expected
- Prior CPI MoM was +0.2%
- CPI MoM ex-food and energy +0.1% vs +0.1% expected
- Prior core CPI MoM ex-food and energy was +0.2%
- Real average hourly earnings YoY +3.7% vs +3.2% prior
- Real average weekly earnings YoY +4.9% vs +4.7% prior
ISM Manufacturing Report
| MANUFACTURING AT A GLANCE | ||||||
| December 2020 | ||||||
| Index | Series Index | Series Index | Percentage | Direction | Rate of Change | Months |
| Dec | Nov | Point | ||||
| Change | ||||||
| Manufacturing PMI® | 60.7 points | 57.5 points | 3.2 points | Growing | Faster | 7 |
| New Orders | 67.9 points | 65.1 points | 2.8 points | Growing | Faster | 7 |
| Production | 64.8 points | 60.8 points | 4 points | Growing | Faster | 7 |
| Employment | 51.5 points | 48.4 points | 3.1 points | Growing | From Contracting | 1 |
| Supplier Deliveries | 67.6 points | 61.7 points | 5.9 points | Slowing | Faster | 14 |
| Inventories | 51.6 points | 51.2 points | 0.4 points | Growing | Faster | 3 |
| Customers’ Inventories | 37.9 points | 36.3 points | 1.6 points | Too Low | Slower | 51 |
| Prices | 77.6 points | 65.4 points | 12.2 points | Increasing | Faster | 7 |
| Backlog of Orders | 59.1 points | 56.9 points | 2.2 points | Growing | Faster | 6 |
| New Export Orders | 57.5 points | 57.8 points | -0.3 points | Growing | Slower | 6 |
| Imports | 54.6 points | 55.1 points | -0.5 points | Growing | Slower | 6 |
| OVERALL ECONOMY | Growing | Faster | 8 | |||
| Manufacturing Sector | Growing | Faster | 7 | |||
The US manufacturing sector continues to impress. In fact, manufacturing rebounded well worldwide in summer after the lock-downs, but the US manufacturing has performed extremely well. It keeps increasing and today’s report showed another jump, taking the ISM indicator above 60 points.
We saw a cool off in November, but the expansion resumed again in December and now this indicator is heading for all time highs. This should be positive for the USD, but the Buck is waiting for politics to set a path for the future.
ISM manufacturing increased above 60 points early this month, while later on, US services showed a jump above 57.2 points in December, from 45.5 in November. So, the US economy is expanding pretty fast, which is a nice bonus to Biden.
Markit January prelim US services PMI
- January prelim US services PMI 57.5 vs 53.4 expected
- December services PMI was 54.8
- Manufacturing 59.1 vs 56.5 expected
- Prior manufacturing 57.1
- Composite 58.0 vs 55.3 prior — second fastest since 2015
- The rate of input cost inflation was the fastest on record (since October 2009), notably in PPE and transportation
- Services pace of new business growth softened on covid
- Manufacturing new orders rose markedly
- Full release
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