Instant view: Midwest business gauge up

NEW YORK (BestGrowthStock) – Business activity in the U.S. Midwest grew faster than expected in November, helped in part by stronger employment, a report showed on Tuesday.

U.S. consumer confidence rose in November to its highest level in five months, helped by improving labor market conditions and a jump in the expectations index, according to a private-sector report released on Tuesday.

KEY POINTS: * The Institute for Supply Management-Chicago business barometer rose to 62.5 in November. * The reading was 60.6 in October. Economists had forecast a November reading of 60.0. * The employment component of the index rose to 56.3 from 54.6 in October. New orders rose to 67.2, from 65.0. A reading above 50 indicates expansion in the regional economy. * The Conference Board, an industry group, said its index of consumer attitudes increased to 54.1 in November, the strongest since June, from a revised 49.9 in October. * The median of forecasts from analysts polled by Reuters was for a reading of 52.6. * The October reading was revised down from an original 50.2.

COMMENTS:

CONSUMER CONFIDENCE:

MICHAEL SHELDON, CHIEF MARKET STRATEGIST AT RDM FINANCIAL IN WESTPORT, CONNECTICUT:

“The headline numbers were certainly encouraging and follow on positive Michigan consumer data earlier this month. The headline number was the highest level since June this year when talk of a double dip was just starting to gain ground.

“In the forward looking part of report looking out six months or more, business conditions showed some improvement, the outlook for jobs rose one point and the outlook for income also increased by almost one point.

“Those are certainly positive. Unfortunately, in terms of purchase decisions those were more mixed with a slight gain in those looking to purchase an automobile, and a decline in those looking to buy a house.”

OMER ESINER, SENIOR MARKET ANALYST, ANALYST AT COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON

“Looks like a good number. On balance this morning’s data has been positive and suggests continued stabilization in U.S. economic reports. In terms of today’s trade, I expect the data to prompt the dollar to pare some of its overnight gains as risk appetite improves. Probably the aussie, the kiwi, the Canadian dollar, the higher beta currencies will make up some lost ground. The euro’s gains are likely to remain limited given the massive concern about contagion of the debt crisis in the broader euro zone.”

SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK:

“Confidence was higher than expected but we continue to see present situation lagging behind the rise in expectations. What is weighing on that is the employment aspects of this report, so that could in turn be disappointing if the recovery doesn’t gain traction.

“The bar has been set very low (for recent economic data) and that does leave a lot of room for upside surprises. There really hasn’t been anything to shake off the view that the recovery is going to be a recovery, but gradual.”

WAYNE KAUFMAN, CHIEF MARKET ANALYST AT JOHN THOMAS FINANCIAL IN NEW YORK:

“Well its a little better than expected and that’s nice to see. It backs up what we’ve been seeing in retail stores, which is that consumers have been spending. It is a good thing for the economy, and if we didn’t have the issues in Korea and Europe, the market would be doing a lot better than it is.”

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO/MITSUBISHI, NEW YORK:

“Confidence in the economy is improving. Jobs are being created so it’s not surprising to see a lift to consumer and business confidence. Something is going on out there in a positive light in terms of the outlook because consumers spent at a 3 percent annualized rate through October, which is quite normal. So, if anything, consumer confidence has been lagging actual spending. We’ll see where this goes. These data came before the latest European debt crisis. But the numbers are swinging into more positive outcomes and that sets us up for a better economic outlook for 2011 as we close out the year.”

CHICAGO PMI:

RYAN WANG, U.S. ECONOMIST, HSBC SECURITIES USA, NEW YORK:

“The Chicago PMI is quite strong. Most of the regional manufacturing surveys have looked pretty robust. You have been in a pattern of recovery since the recession. The depth of the decline is allowing this recovery to take place. You have a general improvement at the consumer and business levels.

The Beige Book tells us the Chicago-area manufacturing has been benefiting from the auto and heavy equipment sectors.”

STEVEN WOOD, CHIEF ECONOMIST, INSIGHT ECONOMICS, DANVILLE, CALIFORNIA:

“Manufacturing activity in the Chicago region expanded again in November, to its fastest pace since April, and has now been growing for 14 consecutive months. Moreover, it is growing robustly, unlike what has been reported for some other regions. However, because the substantial declines over the previous year, the level of manufacturing activity remains relatively low with ample unused capacity. The demand for manufactured goods is improving, indicating that customers are buying again. Because inventories are extremely lean, production has improved along with demand. The major regional manufacturing indexes were mixed in November, indicating that tomorrow’s ISM manufacturing survey will likely increase slightly, but with upside risks, and remain in modest expansionary territory.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK, NEW YORK:

“The bottom line is that this data supports a firmer ISM for tomorrow and we are now looking for 57.6 reading in that report, an improvement from the prior month. Certainly this report was stronger than we had originally thought and is a tribute to the strength in Chicago. This points in the direction of a stronger economic profile.”

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW YORK:

“Bottom line, the number was a definite positive but the manufacturing crystal ball becomes cloudy over the next six months as the inventory build story is played out, Europe is weighed down by its own issues and Asia fights inflation with rate hikes. U.S. end demand will also be key.”

BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:

“Ultimately, it’s the euro that’s dragging everything down, with the dollar and Treasuries having stabilized. But this is not just a euro sell-off but also a dollar recovery. It was beaten down on QE2 expectations but the U.S. data has turned more encouraging in the last several weeks. The Chicago PMI is an indicator of that and suggests we’re going to get positive ISM reports and a more upbeat Fed Beige Book this week. That should help dollar-yen pick up, and it takes any thought of QE3 off the table. All of those dollar-negative considerations being priced back out.”

JOHN BRADY, SENIOR VICE PRESIDENT AT MF GLOBAL IN CHICAGO:

“Stronger than expected, and it does lend itself to the idea that the economy is beginning to accelerate, but the market won’t care. At the end of the day, the data is going to play second fiddle to what’s going into Europe, and right now Europe is not only in the dentist’s chair, but the dentist is going for the back molar and is out of Novocain. If we break 1,160 (on the S&P) I’m expecting selling to accelerate.”

MARKET REACTION

STOCKS: U.S. stocks (Read more about the stock market today. ) maintained earlier losses but were slightly off their lows.

FOREIGN EXCHANGE: The euro trimmed its losses versus the dollar after the report.

BONDS: U.S. Treasuries trimmed their gains slightly.

Instant view: Midwest business gauge up