During this pivotal month, labor markets show surprising resilience.

The U.S. labor market shows signs of holiday volatility as jobless claims reach a one-month high.

Initial claims rose by 9,000 to 224,000 in the Thanksgiving week, exceeding economists' forecasts of 215,000. The four-week moving average edged up to 218,250, while continuing claims decreased to 1.87 million, suggesting underlying stability. Major employers across sectors, from Cargill to General Motors, have announced significant workforce reductions.

Despite the uptick in claims, the overall labor market maintains resilience as the year draws to a close.

As November data rolls in, Europe's construction sector hits critical lows.

Eurozone retail trade reverses course with a concerning decline in October 2024.

The volume of retail trade decreased by 0.5% month-over-month, completely erasing September's gains. The decline comes amid mounting political uncertainties and persistent consumer concerns, particularly in Europe's largest economy. Consumer confidence remains subdued since Russia's invasion of Ukraine, suggesting potential continued weakness.

Key factors driving the retail trade decline include:

German manufacturing shows unexpected resilience despite ongoing structural challenges.

Factory orders declined less than anticipated in October, dropping 1.5% against expectations of a 2% fall. The underlying measure, excluding large-scale orders, actually posted a slight increase of 0.1%. September's dramatic upward revision to 7.2% growth provides additional context for the sector's volatility. The combination of weak domestic demand, high borrowing costs, and structural issues including skilled worker shortages continues to pressure the industry.

The data suggests Germany's manufacturing recession may be approaching its bottom.

However, the sector's recovery remains threatened by persistent structural challenges and political uncertainty ahead of February's federal elections.

Construction activity across the Eurozone plunges deeper into contraction territory, led by significant weakness in Germany.

Germany's construction PMI fell to a seven-month low of 38.0 in November, while the broader Eurozone construction PMI declined to 42.7. The housing sector remains the epicenter of weakness, with German residential construction recording its steepest decline since August. New orders across the Eurozone fell at the sharpest rate in 14 months, indicating deteriorating demand conditions. Input costs have begun rising again after a period of decline, adding pressure to already strained margins. The combination of high interest rates, political uncertainty, and persistent cost pressures continues to weigh heavily on the sector's outlook.

Construction companies' confidence has dropped to its lowest level since April 2020, suggesting prolonged weakness ahead.

As 2024 draws to a close, UK construction and inflation tell contrasting stories.

UK construction defies broader European weakness with robust commercial sector growth.

The S&P Global UK Construction PMI rose to 55.2 in November, marking nine consecutive months of expansion. Commercial construction led the surge with its strongest performance in two-and-a-half years, while civil engineering maintained solid growth. However, the housing sector remained a significant drag, with residential construction declining at its fastest pace since June.

Rising costs and economic uncertainty cast shadows over the sector's otherwise positive momentum.

British businesses brace for margin squeeze as inflation concerns persist into 2025.

A Bank of England survey reveals 59% of companies expect reduced profit margins following the national insurance increase announced in the Budget. The majority of businesses plan to respond through price increases, with 54% indicating higher prices ahead. Employment levels are expected to fall as companies grapple with rising costs. The Bank of England's governor has identified the corporate response to national insurance changes as the "biggest issue" post-Budget.

These developments suggest a potentially prolonged period of above-target inflation.

The combination of price pressures and employment concerns points to emerging stagflation risks in the UK economy.

Current Yield Curve States:

Key Changes:

Variance Explained by Components:

Key Component Loadings:

Dynamic Factor Model Results:

Key ICF Findings:

Key Indicators:

Framework Implications:

Key Areas to Watch:

United States 🇺🇸

↓ Trade deficit widened to $73.8B in October (vs. expected $75B)

↓ Jobless claims rose to 224,000 (vs. expected 215,000)

• Import values fell 4% to $339.6B, exports declined 1.6%

• Travel spending by foreign visitors reached record $18.4B

United Kingdom 🇬🇧

↑ Construction PMI rose to 55.2 in November from 54.3

↑ Commercial construction activity highest in 2.5 years

↓ House building declined sharply (PMI: 47.9)

↓ Business margins expected to decrease due to national insurance hike

European Union 🇪🇺

↓ Construction PMI fell to 42.7 in November

↓ Retail trade volume decreased 0.5% in October

↓ German factory orders declined 1.5% in October

• ECB planning to speed up significant risk transfer approvals

Australia 🇦🇺

• RBA maintaining rates at 4.35% since late 2023

↓ GDP declined for seventh straight quarter per capita

Italy 🇮🇹

↓ 2024 growth forecast cut to 0.5% (from 1.0%)

↑ Bond spread with Germany at lowest since 2021

Bond Markets

↑ Italian-German 10-year spread below 110 basis points

• US sovereign debt markets sensitive to fiscal deficits

• European bond markets showing resilience despite political uncertainty

Currency Markets

↑ USD strength persisting against major pairs

• EUR/USD impacted by diverging economic data

• GBP affected by construction sector performance

This material is prepared for information only, and should not be considered financial, legal, tax or investment advice. The views expressed are solely those of the author and should not be taken as recommendations, advice or solicitation with respect to the purchase or sale of any financial investment. Securities and investments mentioned are speculative in nature and may involve risk to principal and interest and may not be suitable for all investors. If you are not a professional trader you should absolutely consult with a registered agent of a Futures Commission Merchant (FCM, the broker) before assuming any risk in these treacherous markets. The report is intended for sophisticated investors only and does not provide a basis for investment decisions. The document is intended for the recipient only and not for forwarding or distribution. Much of the analysis and price information is based on data from third-party sources and no representation is made with respect to the accuracy or completeness of such information. Trading is risky, and a risk‐management overlay is critical to the success of any trading campaign. This material is not to be construed as specific trading ‘advice’, as there is no consideration for position size, leverage, margins, and particularly, each individual reader’s risk-of-ruin factors. Macro Pea and its directors and employees shall not be held liable to any person for any losses, costs or claims resulting from reliance on the information provided. Any historical performance provided is for illustration only and past performance is not indicative of future results. Macro Pea may have positions in securities which may or may not be consistent with the information in this report and may add or dispose of securities without notification.