The Banking and Strategy Initiative

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US Economy: Auto PMI (Chicago) foretells of a great December resurgence, Pending home sales up 7.3%

Chicago PMI and Pending home sales data as leading indicators are historically not given due credit by Economists and traders. The Chicago region PMI, brought about the story of America’s recovery into our front pages definitely as the Detroit autos added to the regions bonhomie with record rise in production, employment and not to forget, the 70 score on New Orders. New Orders and Backlogs ( from prior new orders) make 2 out of 3 sub plots in the PMI tale and with the new orders at 70, the backlog moving up to 58 ( almost) it is a miracle that  kept Chicago PMI at 62.5 verifying that all jobs numbers are not from a fall of the cliff for labor disenchanted and working part time.

We also follow fuel consumption by Americans and the miles travelled when it comes due in the next 10 days which is likely part of the sobering trend that Americans should not be spending beyond their means especially on Oil guzzlers. Oil inventories were not a picture as large drawdowns continued in Oil and gas inventories, imports up to 9 million barrels per day and a domestic production of 5.9 mln barrels per day.

However, the Pending Home Sales index did come back above 100.3 raising hopes for the Existing home sales data in the new year as these are contracts signed with owners looking for credit to complete the purchase on existing property which may not come due to the deterioration in prices.

The Chicago PMI means the Philly and NY indices will be boosted this month after the ISM factors in the rise in production, even if it is only to boost inventories which is a good sign of confidence post Holiday season in November from this data

December Auto Sales

While America bought 4000 less Large Cars from 2010 November last month to only 2,004 cars  (WSJ Market Data) it has been growing Mid size and Small SUV categories while keeping the faith in Pick ups and Cross overs to grow the run rate back to 13.7 mln cars a year till November,. The run rate will likely go up by another 3-4% in December

According to web reports doing the rounds, the run rate is likely to end at 13.5 mln for December and thus forecasts for 2012 are nearing 14 mln units in light vehicle sales. December will see a 9% rise in retail sales to more than a million cars and light trucks, with a additional 235,000 units in fleet sales despite lower incentives

This means new vehicle sales are up 25% on November (without seasonal adjustments). Used Car sales are up to 2.854 mln units up 10% from November. This probably means Honda returns to more than 109k units up 30% from December, slowly but surely and Chrysler, Hyundai and Nissan also score a 100k units in sales. GM and Ford are likely posting 233k and 204k units in Sales counting to more than 15% in market shares for each. Toyota the new no. 2 in 2007 is sitll churning out good numbers expecting 174k sales in December, with Camry’s new edition getting into the good books of Consumer Reports again. The economy i s so good that UAW has decided to play again, this time for the European car makers at VW and Daimler.

Internationally US car makers will face pressure in China due to new 13% duties for GM for using imported compnents and the continuing drop in monthly sales in Europe while Asia grows for US carmakers as well as Nissan and VW, with Honda and Toyota working out supply issues



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