Peter Boockvar

Succinct Summation of the Week’s Events:

Positives,

1)Initial jobless claims totaled 194k, little changed with the below 200k print last week of 195k. The 4 week average was little changed at 190k.

2)Core retail sales in January, the post holiday hangover, gift card used and discount and returns filled month, was better than expected with a 1.7% m/o/m increase vs the estimate of 1%. A sharp rebound in department store sales (?), along with sales at restaurants and bars helped.

3)The February NAHB home builder sentiment survey rose 7 pts m/o/m to 42. That was 5 pts better than expected but still is below 50. The Present Situation rose 6 pts m/o/m to 46 and the Future Outlook was higher by 11 to just under 50 at 48. The Prospective Buyers Traffic component was higher by 6 pts but is still well under 50 at 29.

4)The January NFIB small business optimism index was up .5 pt to 89.8 after falling by 2.1 pts in December. The components were pretty mixed though. The NFIB said “While inflation is starting to ease for small businesses, owners remain cynical about future business conditions. Owners have a negative outlook on the small business economy but continue to try to fill open positions and return to a full staff to improve productivity…Count small business owners among the crowd predicting a recession this year.”

5)The December Treasury International Capital flows data was reported and there were net foreign buyers of US notes and bonds totaling $20b though which is the smallest amount since last April. For 2022 in total, we saw a huge pickup in Treasury buying of $750b, the most on record let by non-central banks. Japan and China continued to be net sellers.

6)Cass Freight said this in their January report released midday yesterday where m/o/m shipments were flat seasonally adjusted from December. “After a soft holiday season with inventories overstocked and imports falling sharply, the outlook remains cautious, but volumes are on a high plateau…The resilience of volumes partly reflects share gains by the truckload sector, particularly contract and dedicated freight currently, amid declines in less than truckload (LTL) and intermodal volumes.” As for implied freight rates, they fell 2.4% y/o/y in January but were unchanged m/o/m. Cass said “Freight rates are on track to fall 6-7% y/o/y in the next few months based on the normal seasonal pattern of this index.”

7)UK retail sales in January Ex auto fuel sales rose .4% m/o/m instead of falling by 2 tenths as forecasted. That though was partially offset by a 3 tenths downward revision to December.

8)The UK January CPI ‘slowed’ to a still very high 10.1% y/o/y down from 10.5% in December and that was 2 tenths less than expected. The core rate moderated to 5.8% from 6.3% and that was 5 tenths below the estimate. Producer prices were mixed where inputs fell m/o/m but rose for output charges. On a y/o/y basis, input PPI was still up 14.1% and output charges were higher by 13.5%.

9)The UK reported a 6.7% y/o/y wage growth ex bonus print for the 3 months ended December. That is the 2nd highest level in at least 20 years that I have data on. While great to see higher wages for UK workers, it still remains well below CPI seen above. Their labor market is tight too with an unemployment rate at just 3.7% after more jobs than expected were added. The January jobless claims figure saw a decline of 12.9k and December was revised to a drop too.

10)Germany said its January PPI rose 17.8% y/o/y, a crushing number but a slowdown from the 21.6% increase seen in December, the peak of 46% last August and it was down 1% m/o/m.

11)Japanese exports in January were up by 3.5% y/o/y, better than the estimated of a drop of 1.7%. Imports though moderated to a gain of 17.8% from 20.7% in December and vs the estimate of up 20.6%. Energy prices are a big mover of their import data.

12)The Bank of Indonesia held interest rates unchanged at 5.75% as expected but the Philippines central bank hiked by 50 bps to 6%, also as forecasted.

Negatives,

1)Continuing claims, delayed by a week in its reporting, rose 16k to just under 1.7mm and is the most since mid December and just below a one yr high.

2)Staying elevated, January headline CPI rose .5% m/o/m and .4% core just as expected and follows the revisions done for 2022. The y/o/y gains are 6.4% headline and 5.6% core. Energy prices rebounded by 2% m/o/m and are up 8.7% y/o/y. Food prices continue to be robust, rising by .5% m/o/m and 10.1% y/o/y. Core services inflation rose .5% m/o/m and 7.2% y/o/y as rents, in a much delayed fashion, continues to accelerate higher (though that should slow notably in the coming quarters as we know). After a steady string of disinflation, core goods prices rose .1% m/o/m but the y/o/y pace slowed to just 1.4%.

3)The January headline PPI increase was .7% m/o/m vs the estimate of up .4% while the core rate increased by .5% m/o/m, two tenths more than anticipated. The y/o/y gains were 6% and 5.4% respectively vs 6.5% and 5.8% in the month prior y/o/y. Goods price gains were led by a rebound in energy prices which rose 5% m/o/m, led by gasoline. Food prices were lower by 1% m/o/m. Taking both out saw core goods prices higher by .6% m/o/m and 5.6% y/o/y led by motor vehicles and soft drinks which many drink every day. They fell for chemicals. On the services side, prices rose .4% m/o/m and 5% y/o/y. The BLS said this was driven by a 1.4% rise in ‘hospital outpatient care.’

4)While import prices fell .2% m/o/m and December was revised down by 5 tenths, it was all energy as import prices ex energy unexpectedly rose .2% m/o/m rather than falling by .3% as expected.

5)The February Philly manufacturing index was below zero and more so than expected. The print was -24.3 vs -8.9 in January and that was 17 pts less than expected. It’s also the 8th month in the past 9 that has seen contraction and is the weakest figure since 2009 not including Covid. The 6 month outlook fell to just above zero at 1.7 and cap ex expectations fell too.

6)Also in contraction, the February NY manufacturing index rose to -5.8 from -32.9 and that was better than the estimate of -18. It is still below zero for the 3rd straight month and 6th month in the past 7. There is hope as the 6 month outlook improved to 14.7 from 8 though capital spending plans declined m/o/m.

7)US industrial production in January was weaker than expected, seeing no change from the 1% drop in December (revised down by 3 tenths). The estimate was for a bounce of .5% off that initial print in December. The main drag was the 10% drop in utility output which I’m guessing has a lot to do with the mild winter so far. Manufacturing was light relative to expectations if we include the December downward revision. Capacity utilization slipped one tenth m/o/m to 78.3% and that is the lowest since September 2021.

8)Single family starts and permits in January continued to fall. Multi family starts dropped too but lifted a touch for permits.

9)With a 20 bps jump in the average 30 yr mortgage rate w/o/w to 6.39%, purchase applications fell 5.5% w/o/w and refi’s were down by 12.5% w/o/w. Versus last year purchases are down by 43% and refi’s by 76%.

10)Australia reported a softer jobs figure with an unexpected drop in payrolls and a rise in its unemployment rate.

11)Singapore’s January non-oil exports fell 25% y/o/y, more than the expectation of a 22% drop. It was driven by a sharp fall in electronics exports.