Succinct Summation of the Week’s Events:
Positives,
1)The February ISM services index was little changed m/o/m at 55.1 vs 55.2 in January but that was just above the estimate of 54.5. Industry breadth improved with 13 industries of 18 asked seeing growth vs 10 in January. Four saw a decline in activity vs 8 last month.
2)The S&P Global February services index was 50.6, around the breakeven level but above 50 for the first time since last June. S&P Global said “The upturn was led by a revival in spending on services by consumers and improved activity in the tech sector, but was also aided by a marked cooling in the recent downturn in financial services.” They also said, “The impact of higher interest rates and inflationary pressures remained a drag on customer spending, according to survey respondents.”
3)Initial claims fell by 2k w/o/w to 190k and that was 5k less than expected. The 4 week average is now 193k vs 191k last week. Continuing claims were down by 5k w/o/w to 1.655mm and that is a 4 week low.
4)February vehicle sales totaled 14.89mm at a SAAR. That was above the estimate of 14.68mm and compares with 14.07mm in February 2022 but down from 15.74mm in January and vs 16.83mm in February 2020. Ward’s Automotive said incentives and better inventories helped.
5)The S&P CoreLogic US home price index for December rose 5.8% y/o/y which is the 9th month in a row of y/o/y moderation. Looking at m/o/m and home prices are down for a 6th straight month and by .35% in December. Home price gains continue to be driven by those in the sunbelt with Miami, Tampa, Atlanta, Charlotte and Dallas leading the way. On the flip side, San Francisco, Seattle, Portland, San Diego and LA were the laggards with the first two seeing y/o/y declines.
6)Taking advantage of the dip in mortgage rates, though now having reversed, pending home sales in January jumped 8.1% m/o/m, well more than the estimate of up 1%. All regions saw increases in contract signings in the month. The NAR said simply, “Buyers responded to better affordability from falling mortgage rates in December and January.”
7)Core durable goods orders in January rose .8% m/o/m which was above the estimate of no change, though December was revised down a touch, by 2 tenths. Core shipments, which get plugged into GDP, grew by 1.1% m/o/m which was well above the forecast of up .2%.
8)The February China state sector focused manufacturing and non-manufacturing PMI rose to 56.4 from 52.9 with both rising about 2 pts m/o/m. That’s the best since at least 2017 that I have data on.
9)The private sector February Caixin manufacturing PMI rose to 51.6 from 49.2 and that was above the forecast of 50.7. Caixin said “Firms signaled renewed and solid upturns in both production and new orders as operations and customer demand revived. Fresh increases in employment and purchasing activity were also seen, while pressure on supply chains eased and lead times improved to the greatest extent in 8 years.”
10)China’s reopening helped to lift the February Caixin services PMI which rose to 55 from 52.9. Caixin said “Companies frequently mentioned that the easing of pandemic related restrictions, and reduced disruption to operations, had helped to lift activity and demand in the latest survey period.”
11)Hong Kong’s PMI was up 2.7 pts m/o/m to 53.9, the highest since May 2022. Manufacturing PMI’s also rose m/o/m in Taiwan, Vietnam, Thailand, Malaysia, and Australia.
12)India’s services services PMI was up to 59.4 from 57.2.
13)South Korea, the important semi, smartphone and auto manufacturing powerhouse saw exports fell 7.5% y/o/y, a bit better than the estimate of down 8.8%. Adjusting for working days, exports dropped 16% y/o/y. Semi exports plunged by 43% y/o/y, offset by a 47% spike in auto exports.
14)The trade data out of Vietnam, the growing manufacturing prescence, saw exports in February unexpectedly rise by 11% y/o/y, well better than the estimate of a drop of 21%. Because of the China Lunar New Year holiday, the US was their biggest export market in the January/February time frame. Industrial production in February also was better than estimated.
15)The UK services PMI was revised a touch higher to 53.5 from 53.3 initially and up notably from the 48.7 print in January and the highest since last June.
16)The Eurozone and UK manufacturing PMI’s were left little changed from the initial prints already seen
Negatives,
1)The February ISM manufacturing index was 47.7 vs 47.4 in January but below the estimate of 48 and less than 50 for the 4th straight month. The breadth improved slightly as 4 companies of 18 surveyed saw growth vs just 2 in January. Those seeing a contraction totaled 14 vs 15 last month.
2)The S&P Global manufacturing index is also below 50 and they said, “The deterioration in operating conditions stemmed largely from further contractions in output and new orders, although rates of growth slowed in both instances. Weak domestic and foreign client demand reportedly drove a further drop in total new sales as firms adjusted their spending activity and inventory holdings down accordingly.” In contrast to ISM, employment did improve. Also as seen in ISM, “the rate of charge inflation accelerated again to a marked pace as firms sought to pass on higher costs to customers. Conversely, input costs increased at a softer rate.”
3)The February Conference Board’s consumer confidence index fell to 102.9 from 106 and that was below the estimate of 108.5. For perspective, this was 132.6 in February 2020. The components though were mixed as the Present Situation rose for a 3rd month, by 1.7 pts but Expectations fell 6.3 its to the lowest since last July. One yr inflation expectations moderated to 6.3% from 6.7%. That’s the least since April 2021 but is still above the 20 yr average leading into covid of 5%. The current view on the labor market improved but expectations for it deteriorated. Spending intentions weakened. The Conference Board highlighted that the decline in confidence “reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more.”
4)Apartment List released its March National Rent Report and it saw a .3% m/o/m increase in new rents (doesn’t include extension of expiring leases) in February, “marking a return to positive rent growth after five straight m/o/m declines. This month’s increase is of a similar magnitude to the typical February price change that we saw in pre-pandemic years.” The y/o/y increase was 3% which is just above the 2019 pace of 2.8% “and is likely to decline further in the months ahead.” The supply side continues to pick up with the vacancy rate at 6.4%, the highest in two years” with a lot of construction taking place. This added supply could result in “property owners competing for renters, rather than the other way around.” In terms of breadth, rents rose in 62 of the 100 largest cities with Boston leading the way.
5)Mortgage applications fell 5.7% w/o/w after the 13.3% drop in the week prior. Both purchases and refi’s were down about 5.5% w/o/w and remain sharply lower y/o/y. With the rise in the average 30 yr mortgage rate to 6.71% vs 6.18% just 3 weeks ago, the bottom line is obvious.
6)For the 2nd week of retail earnings reports, we heard a lot about the ‘challenged’ US consumer.
7)The February Tokyo CPI figure rose 3.4% y/o/y headline as expected, down from 4.4% in the month before but helped by energy subsidies. Prices rose 3.2% ex food and energy. That core/core number was up from 3% in January and one tenth more than expected.
8)Singapore’s PMI dipped below 50 at 49.6 from 51.2. Japan saw softness with its 47.7 manufacturing print and we saw little change for India and Indonesia, though both are above 50.
9)South Korea’s February manufacturing PMI held below 50 at 48.5. The positive though was “cost pressures continued to show signs of easing as the rate of input price inflation was at its softest since November 2020.” And, when looking towards the coming year, “confidence across South Korea’s manufacturing sector strengthened in February amid hopes of a domestic and global economic recovery which would trigger new product launches and encourage new client acquisitions.”
10)The February Eurozone CPI was hotter than expected with an 8.5% y/o/y increase, 2 tenths more than expected but down on tenth from January. The core rate saw a rise of 5.6% vs 5.3% in the month prior where no change was anticipated. Services inflation accelerated to 4.8% from 4.4% in the two months prior y/o/y and non-energy industrial goods prices were up 6.8% y/o/y vs 6.7% in January and 6.4% in December.
11)Economic confidence in the Eurozone in February was little changed from January with the index at 99.7 but that was below the estimate of 101. Manufacturing and services confidence fell after rising in January but consumer confidence rose to the highest since March 22 at -19 as energy prices have thankfully calmed this winter. For perspective though, it was at -6.2 in February 2020.
12)The Eurozone February services PMI was revised slightly lower to 52.7 from 53 initially but that is up from 50.8 in January and the best since last June.