Private nonfarm payrolls in the US are projected to increase by 241,000 (seasonally adjusted) in tomorrow’s January update of the ADP Employment Report, based on The Capital Spectator’s median point forecast for several econometric estimates. The median projection matches November’s increase.
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Yesterday’s update on consumer spending for December looks pretty ugly. Consumption slid 0.3% on a monthly basis in 2014’s final month—the first monthly bout of red ink since the previous January and the deepest retreat in five years. The news prompted some pundits to declare that the sky was falling. But the headline number isn’t as bad as it looks. Why? Because private-sector wages are still rising at a healthy (and slightly faster) pace.
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The expected risk premium for the Global Market Index (GMI) continued to tick lower in January. GMI — an unmanaged, market-value weighted mix of the major asset classes — is projected to earn an annualized 3.5% over the “risk-free” rate for the long term. (For details on the equilibrium-based methodology that’s used to generate the forecasts, see the summary below). Today’s updated estimate, which is based on data through the close of last month, fell 10 basis points from the previous 3.6% projection.
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● Obama Urged by Former U.S. Officials to Arm Ukrainian Forces | Bloomberg
● U.S. consumer spending in December weakest since 2009 | Reuters
● US ISM Mfg Index: Slower Than Expected Growth In January | RTT
● US Factories Brace for Oil Shock as Growth Cools | Bloomberg
● US Construction Spending Rose 0.4 Percent in December | AP/ABC
● PMI: UK construction growth unexpectedly rebounds in January | Reuters

US real estate investment trusts (REITs) remained the performance leader among the major asset classes in the first month of the new year. The MSCI REIT Index climbed a strong 6.8% in January (total return); for the trailing one-year period, US REITs are up a sizzling 33.5%. Meanwhile, January’s biggest loser: foreign high-yield bonds, which tumbled 5.7%, based on the Markit Global ex-US High Yield Index. As for US stocks, the new year arrived with a thud for the formerly soaring asset class: the Russell 3000 Index shed 2.8% last month.
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● China Mfg PMI: Operating conditions deteriorate fractionally in Jan | Markit
● Germany Mfg PMI: Output,new orders rise at slightly stronger rates | Markit
● Eurozone Mfg PMI: Output ticks higher at start of 2015 | Markit
● Oil prices fall on weak Chinese data, U.S. refinery strikes | Reuters
● MNI Survey: Japan Q4 GDP +3.7% Annualized, 1st Rise in 3 Qtrs | MNI
● US Demographics and GDP: 2% is the new 4% | Calculated Risk

The ISM Manufacturing Index is expected to decline slightly to 55.0 in tomorrow’s update (Feb. 2) for January vs. the previous month, based on The Capital Spectator’s median point forecast for several econometric estimates. The prediction is still well above the neutral 50.0 mark and so the current outlook remains firmly in growth territory for this benchmark of economic activity in the US manufacturing sector.
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US personal consumption spending for December is projected to rise 0.3% vs. the previous month in tomorrow’s update (Feb. 2), based on The Capital Spectator’s median point forecast for several econometric estimates. The prediction reflects a substantial slowdown in growth relative to November’s 0.6% advance. Note, however, that the previously released data on retail sales reflects a decline for December—a decline that implies that a downside surprise is higher than usual in tomorrow’s report. Not surprisingly, using a model based on retail sales alone anticipates that personal consumption spending will slide in December (see table below).
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