Succinct Summation of the Week’s Events:
Positives,
1)We had a needed sense of calm this week with banks and the Fed’s balance sheet falls by $28b w/o/w after the nearly $400b spike over the two weeks prior.
2)The February headline PCE rose .3% m/o/m and 5% y/o/y pretty much as expected. The core rate was higher by .3%, one tenth under the forecast and January was revised down by one tenth. The y/o/y gain was 4.6% and at least vs this metric, the fed funds rate is finally above.
3)The income and spending figures for February were about as forecasted.
4)In the April Apartment List National Rent Report the March increase was .5% from February, “the second straight monthly increase and and slight acceleration over last month’s pace. This month’s increase is of a similar magnitude to the typical March price change that we saw in the pre-pandemic years.” The y/o/y increase though has slowed to just 2.6% and that compares with the 2018 and 2019 pace of 2.8% and “is likely to decline even further in the months ahead” thinks Apartment List. Keep in mind that the BLS is still saying rents are rising by 8-9%. Their measure of the vacancy rate is at 6.6% “which now puts it back in line with the average pre-pandemic rate.” And, we have a “record number of multi family apartment units currently under construction” and could result in “property owners competing for renters, rather than the other way around.”
5)Positive for first time home buyers, the January S&P CoreLogic US home price index slowed to a 3.8% y/o/y gain from 5.6% in December. The lack of inventory in many markets though is preventing prices from falling more.
6)The March Conference Board’s consumer confidence index rose a touch to 104.2 from 103.4 but it was all due to a lift in expectations as the present situation fell m/o/m. One yr inflation expectations rose one tenth to 6.3%. The answers to the job questions were mixed as were spending intentions.
7)With another dip in the average 30 yr mortgage rate, both purchases and refi’s rose w/o/w.
8)Pending home sales in February rose .8% m/o/m after the 8.1% rebound in January, all on the drop off the highs in mortgage rates. The estimate was for a 3% drop.
9)The March German IFO business confidence index improved to 93.3 from 91.1 and that was above the estimate of no change. Both the Current Assessment and Expectation components were higher m/o/m. The IFO said succinctly, “Despite turbulence at some international banks, the German economy is stabilizing.”
10)German consumer confidence rose 1 pt and GFK said “Income expectations are currently benefiting from the recent noticeable drop in energy pries, especially for gas and heating oil. Nevertheless, inflation will remain high this year, even if it will be somewhat lower than the 6.9% measured in 2022 according to the forecasts available so far. The expected loss of purchasing power is preventing a sustained recovery in domestic demand. Accordingly, private consumption is unlikely to make a positive contribution to economic growth in Germany this year. This is also signaled by the still very low level of consumer sentiment.”
11)China’s state sector PMI rose to 57 from 56.4 but all due to a further lift in the services component to 58.2. Manufacturing was down but was above the forecast and still above 50.
12)Hong Kong exports fell in February by almost 9% y/o/y but that was much better than the expected drop of 28% because exports to China didn’t fall as much as feared. A Hong Kong spokesperson said “The accelerated recovery of the mainland economy, coupled with the removal of cross boundary truck movement restrictions between Hong Kong and the Mainland, should alleviate part of the pressure.”
13)Springsteen at MSG Saturday night and I’ll be there.
14)Baseball opening day is here.
Negatives,
1)Initial jobless claims rose to 198k from 191k last week and that was 2k higher than estimated. Continuing claims were modestly higher by 4k to 1.689mm but that was just below the estimate of 1.7mm.
2)The March Chicago PMI continued the string of manufacturing figures that reflect contraction at 43.8 vs 43.6 in February.
3)The Dallas manufacturing index for March falls to -15.7 from -13.5.
4)The Richmond March manufacturing index rose 11 pts but still is below zero at -5.
5)The final March UoM consumer confidence index was 62, below the first print of 63.4 and down 5 pts from February. That’s also a 3 month low with both components lower. One yr inflation expectations slipped to 3.6% vs 4.1% in February and down 2 tenths from the preliminary view. The longer term view was unchanged at 2.9%. The UoM said “This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of SVB. Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead.”
6)The March Eurozone Economic Confidence index fell to 99.3 from 99.6. The estimate was for a modest rise to 100. All five components fell m/o/m in manufacturing, services, consumer, retail and construction. This figure was 105 in February 2020.
7)French consumer confidence fell 1 pt with all the protests going on even though they have 7 yrs to plan for a 2 yr rise in the retirement age to 64. It’s 65 in Germany.
8)The March CPI in Tokyo rose 3.4% y/o/y ex food and energy, up from 3.1% in February and 2 tenths above the estimate. That’s a fresh multi decade high. Also, their unemployment rate ticked up by 2 tenths to 2.6% and the job to applicant ratio fell to 1.34 from 1.35.
9)Exports in March out of Vietnam fell almost 15% y/o/y, worse than the estimate of down 6.5%.