A few things

In the context of the inflation debate, if there is a word that is opposite ‘transitory’ it would be ‘sticky.’ The Atlanta Fed’s sticky CPI print for March out yesterday was up 3.5% (one month annualized change). That is up from 2.3% in February, 1.1% in January and 1% in December. The sticky core rate was higher by 3.7% vs 2.5% in February, .9% in January and .6% in December. They define ‘sticky’ as prices that are “slow to change” based on the frequency of their price adjustment. This as opposed to their ‘flexible’ measure. To repeat what I said yesterday, companies are only just beginning to pass on their own cost pressures to the rest of us. We’ll see March import prices at 8:30am which all of a sudden is an important number to watch.

The Cleveland Fed’s trimmed CPI rose .24% m/o/m in March, the quickest pace since July 2020. 

STICKY CORE CPI

Here are some comments of note from Jamie Dimon in the quarterly press release:

“consumer spending in our businesses has returned to pre-pandemic levels.” Thank you Uncle Sam

“We are also seeing good momentum in Travel and Entertainment…”

“Home lending originations were very strong, up 40% with almost 75% of consumer mortgage applications completed digitally, but we expect this to slow with the recent rise in interest rates.”

“Loan demand remained challenged…”

“Corporate clients continued to access capital markets for liquidity and repay revolvers.” The latter is a factor in why commercial and industrial loans outstanding for the entire industry is down so much.

C&I LOANS OUTSTANDING ($2.57 Trillion)

Coincident with the drop in the 10 yr Treasury yield, the average 30 yr mortgage rate fell by 9 bps w/o/w to 3.27% but that wasn’t enough to help mortgage apps. Purchases fell by 1.5%, down for the 3rd straight week but still is up 51% on easy comps. Refi’s fell by 5% and that marks 6 straight weeks of declines. They are also down for the 11th week in the past 13 which reflects how sensitive refi’s are to changes in still historically low mortgage rates even though many people still having mortgages with rates well above current levels. On the purchase side we know the industry is dealing with low inventories, aggressive price increases and now along with higher rates over the past few months.

Singapore’s economy grew more than expected in Q1 at a 2% q/o/q rate, above the estimate of 1.7% and after a 3.8% performance in Q4. It was up .2% y/o/y vs the estimate of down .5%. Unlike most other central banks, the Monetary Authority of Singapore, that tweaks its FX position rather than price fixes interest rates, kept policy unchanged but hinted at a possible change this year by being less dovish. Some central bankers know that if the emergency is over than it is time to talk about reducing the extent of the emergency policy. Singapore is a country of only 7mm people but it is a key cog in the Asian growth story. The Singapore dollar is higher in response vs the US dollar.

After the recent rally, the euro heavy dollar index is quietly back to a 4 week low.

DXY

Old news and a volatile number, Japan’s February machinery orders fell 8.5% m/o/m, well worse than the estimate of up 2.5%. Just as seen mostly everywhere in the world, manufacturing with an export focus has clearly outperformed the domestic services business and this number does include investment for domestic use. JGB yields did fall in response as did the Nikkei. I still remain positive on Japanese stocks.

Also old news, the February Eurozone industrial production figure fell 1% m/o/m, a bit light relative to the 1.3% expected decline. Europe awaits a better vaccine rollout and the eventual rollout of its 750b euro grant/loan program which even when it starts will take a few years to dole out. The UK must be relieved it is finally free of their bureaucratic malaise. Little is going on with European markets today and the euro is unchanged just below $1.20.