Both the November Dallas Fed index and the October pending home sales measure posted modest pull-backs to still-firm levels. The Dallas Fed headline fell to 12.0 from a 2-year high of 19.8 in October and 13.6 in September, hence capping a six-month climb from an April’s bottom, while the ISM-adjusted Dallas Fed fell to 52.3 from 55.5 in October and a 2-year high of 55.6 in September, versus the same 52.3 in August. We have a four-month string of positive headline readings and a six-month string of ISM-adjusted figures above 50. Pending home sales dipped -1.1% to 128.9 in October, after falling -2.0% to 130.3 (was 130.0) in September, leaving a partial two-month unwind of the 8.8% August surge to an all-time high of 132.9. Both pull-backs trim steep climbs for the producer sentiment and housing sector data through the end of Q3.
* The Dallas Fed index fell to 12.0 from a 2-year high of 19.8 in October, versus two consecutive all-time lows of -74.0 in April and -70.1 in March, and a prior all-time low of -59.9 in February of 2009.
* The Dallas new orders index fell to a 4-month low of 7.2 from a 2-year high of 19.9, versus an all-time low of -68.7 in April and a prior recession-low of -43.5 in March of 2009.
* The Dallas jobs index rose to 11.7 from 8.7 in October and a 12-month high of 14.5 in September, versus a recession-low of -23.5 in March of 2020 and a prior recession-low of -50.6 in March of 2009.
* The Dallas workweek index rose to 9.7 from 3.7, versus a 2-year high of 10.5 in August, a recession-low of -40.5 in April of 2020 and a prior recession-low of -48.1 in March of 2009.
* The production component plunged to 7.2 from 25.5, prices paid climbed to a 2-year high of 35.0 from 29.4, and prices received slid to 4.7 from 6.8.
* Pending home sales dipped -1.1% to 128.9 in October, leaving what is still a robust 20.2% y/y gain.
Dallas Fed
The Dallas Fed index fell by -7.8 points to 12.0 from a 2-year high of 19.8 in October and 13.6 in September, hence capping a six-month climb from an April bottom. We saw two consecutive all-time lows of -74.0 in April and -70.1 in March. Despite the headline pull-back, we have a four-month string of positive readings. The ISM-adjusted Dallas Fed fell to 52.3 from 55.5 in October and a 2-year high of 55.6 in September, versus the same 52.3 in August, leaving a sixth consecutive reading above 50. We saw an all-time low of 32.1 in April.
The Dallas survey is sensitive to the oil sector, and the U.S. total Baker-Hughes rig count has climbed 31% to 320 by the end of November from a 244k mid-August bottom, following a -69% drop from 793 at the start of March. The sentiment indicators remain strong despite a November moderation, as output rises in the face of plunging inventories and rising sales. The ISM-adjusted average of the major sentiment surveys is slipping to 57 from a 2-year high of 58 in October, 56 in September, and 54 in July and August.
For the forward-looking components, the 6-month activity index dipped to 25.8 from 28.4, and is up from -43.0 in April. The future employment index rose to 27.5 from 23.1, with orders increasing to 43.2 from 38.2. The future prices data showed prices paid moving up to 42.2 from 34.4, with prices received slumping to 21.4 from 24.0. Capital expenditures dipped to 16.2 from 19.0, versus -20.6 in April.
We expect the November ISM-adjusted average of the major sentiment surveys to fall to 55 from a 2-year high of 58 in October, 56 in September, and 54 in July and August, versus a 36 trough in April and a 2008-09 bottom of 37.1 in March of 2009. We assume a 57 average in Q4, after averages of 55 in Q3, 44 in Q2 and 52 in Q1.
We saw a record Q3 growth of 41.4% for industrial production and 33.1% for GDP, followed by respective estimated Q4 growth of 8.0% and 6.4%. This follows respective record declines of -42.8% and -31.4% in Q2, and -6.8% and -5.0% in Q1.
Our 540k November nonfarm payroll estimate follows gains of 638k in October and 672k in September, with a likely smaller downdraft in government jobs. We expect a 650k private payroll rise after gains of 906k in October and 892k in September. Our forecast tracks the downtrend for continuing claims and big production gains in the face of plunging inventories and rising sales. We have elevated producer sentiment despite a November pullback, firm MBA purchase index readings, and a housing boom. ADP gains have followed a lean trajectory through the 365k October gain, and vehicle demand and assemblies have been restrained into November.
Pending Home Sales
Pending home sales dipped -1.1% to 128.9 in October, after falling -2.0% to 130.3 (was 130.0) in September, leaving a partial two-month unwind of the 8.8% August surge to an all-time high of 132.9. Pending home sales have bounced measurably since the pandemic’s big two-month decline to a record-low of 69.0 last April. The housing sector has been on fire thanks to record-low mortgage rates and a flight to the suburbs.
Pending sales declined -5.9% in the Northeast and -0.7% in the Midwest in October. They edged up 0.1% in the South and were flat in the West.
We’ve seen enormous gains for most housing sector measures since Q2, though with a modest give-back in some measures since Q3. We’ve seen new 14-year highs for new home sales over the last four months and for existing home sales over the last three months, alongside the all-time high for pending home sales in August. We saw a solid October housing starts report, with gains of 4.9% for starts and 1.2% for starts under construction, a sustained 14-year high for permits, and a -4.5% pull-back for completions from a 13-year high in September.
