Succinct Summation of the Week’s Events:
Positives,
1)March CPI rose .1% headline and by .4% ex food and energy. The core rate was as expected while the headline was one tenth below. Versus last year the headline gain was 5% vs 6% in February, about as anticipated. The core rate was up one tenth to a y/o/y gain of 5.6% which is where consensus was. Services inflation ex energy was up .4% m/o/m after a string of .5% and .6% increases. They are up by 7.1% y/o/y, the 4th straight month with a 7 handle but likely the peak as rents get accurately reflected in the coming quarters. Core goods prices picked up with a 2 tenths m/o/m increase (last August was the last time we saw a bigger gain) and by 1.5% y/o/y.
2)The Atlanta Fed’s Sticky CPI, which further parses the CPI stats, saw a moderation to 4.7% from 6.8% in February and 6.3% in January. The Sticky Core slowed to 4.5% from 6.9% in February and 6.2% in January.
3)The headline PPI for March fell .5% m/o/m vs the estimate of no change while February was revised up by one tenth. It was mostly energy prices as the core rate of down one tenth was about as forecasted when we include the February upward revision of two tenths. The y/o/y core gain of 3.4% was in line with expectations but a slowdown from 4.8% in the month before. The headline slowed to a rise of 2.7% y/o/y. Energy prices fell 6.4% m/o/m and by 7.2% y/o/y and driven by a drop in gasoline prices. Food prices though continued higher, rising by .6% m/o/m and 5.1% y/o/y.
4)Headline import prices in March fell .6% m/o/m and by 4.6% y/o/y. Import prices ex food/fuels were down by .4% m/o/m and 1.6% y/o/y as the comparisons are really tough and prices disinflate. A 2% m/o/m and 17.4% fall in industrial supply prices led the way.
5)The Atlanta Fed’s Wage Tracker rose 6.4% y/o/y in March and that is up from 6.1% growth in February and back within 3 tenths of its multi year high. For perspective, wage growth in this stat averaged 3.4% in the 20 yrs leading into Covid. For a ‘job switcher’, wages rose 7.3% y/o/y vs 6.7% in February. For those ‘staying’ they grew by 5.9% y/o/y from 5.8% in February. Demand for ‘high skilled’ labor is still being paid for as wages here accelerated to 6.4% and that is a fresh high dating back to data from 1997. If you’re aged between 16-24, you saw an 11.6% y/o/y wage gain, though off the multi decade high of 13% last October.
6)Core retail sales in March didn’t fall as much as expected with a .3% m/o/m drop vs the forecast of down .5% after a .5% gain in February. Looking at sales ex gasoline, so we include here the drop in autos and building materials, saw a sales decline of .6% m/o/m and negative for the 4th month in the past 5 with January up 3.6%. So, over these past 5 months, retail sales ex gasoline are up a total of 1.3% in nominal terms.
7)With another 10 bps drop in the average 30 yr mortgage rate according to the MBA to 6.30%, it helped to lift purchase applications in the important spring selling season. They rose 7.8% w/o/w, though lower by 31% y/o/y. Refi’s though were unchanged w/o/w and down by 57% y/o/y.
8)The preliminary UoM consumer confidence index rose 1.5 pts m/o/m to 63.5 and that was a bit better than the estimate of 62.1. This was 67 in February and 64.9 in January for context. Both Current Conditions and the Expectation components were up m/o/m. One yr inflation expectations jumped to 4.6% from 3.6% and that is a 5 month high. Longer term inflation expectations were unchanged at 2.9%. Positively on pricing but with a big caveat, the UoM said “high price mentions for durable goods reached its lowest point in 18 months. However, the prices consumers face day-to-day remain painfully high.” They also said, “About 42% of consumers blamed high prices for eroding their personal finances, up from 38% last month, and comparable to the average over the previous 12 months when overall inflation was even higher.” Expectations for employment deteriorated, falling by 8 pts to match the lowest level since August 2011. Those seeing ‘Higher Income’ fell 2 pts to 27 but has remained in a 26-29 range over the past 6 months. Spending intentions improved but only after the sharp drops in March. The UoM bottom line was this, “Rising sentiment for lower income consumers was offset by declines among those with higher incomes. While consumers have noted the easing of inflation among durable goods and cars, they still expect higher inflation to persist, at least in the short run.”
9)US industrial production in March rose .4% m/o/m which was twice the estimate and February was revised up by 2 tenths. The upside though was all due to a sharp rise in utility output. If we include the upward revisions to February, manufacturing production was pretty much as forecasted and we saw m/o/m declines with machinery and computer/electronics, along with mining.
10)The Monetary Authority of Singapore and the BoC followed the RBA and RBI in keeping policy unchanged.
11)March PPI in Japan rose 7.2% y/o/y, about as expected but down from 8.3% in February.
12)China’s exports in March were dramatically better than expected with a 14.8% y/o/y rise vs the estimate of down 7.1%. Exports to within Asia and Europe led the way and likely helped by the full reopening as backlogs get filled. Imports shrunk by 1.4% y/o/y but that too was above the forecast of a decline of 6.4%.
13)Australia saw a job gain in March of 53k, almost 3x the estimate of 20k. Their unemployment rate held at 3.5%.
Negatives,
1)Initial jobless claims rose to 239k from 228k last week and that was 4k more than anticipated. This brings the 4 week average up to 240k from 238k and that is just off the most since November 2021. Continuing claims fell to 1.81mm from 1.823mm and hovering around the highest since December 2021.
2)The March NFIB small business optimism index was less optimistic, falling to 90.1 from 90.9 and compares with 90.3 in January. That’s just off the lowest level in 10 years. The NFIB bottom lined it with this, “Small business owners are cynical about future economic conditions. Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.”
3)Over the two weeks ending March 29th, C&I loans outstanding have fallen by a large $68b to the lowest level since late September 2022. The last time we’ve seen a drop like that was in June 2021 and which was during a run of 6 months in a row of declines. Real estate loans outstanding for construction and land development for the week ended March 29th saw its biggest one week drop since January 2022. For commercial real estate loans, the amount outstanding is down by $30b over the past few weeks. The last time we saw a drop like that was in 2011.
4)The Fannie Mae Home Purchase Sentiment Index rose 3.3 pts in March but only a touch above the record low of this survey. They said “With the spring homebuying season now upon us, a large majority of consumers continue to believe that it’s a bad time to buy a home. Howeowners sharing this belief frequently cited ‘unfavorable mortgage rates’ as the primary reason for their pessimism, further corroborating the often-discussed disincentive – or ‘lock-in effect’ – that many mortgage holders who may be considering moving have toward giving up their lower rates. By contrast, surveyed renters once again indicated that high home prices are their primary concern for buying a home.”
5)The US budget deficit blew out by $378b in March, about $60b more than expected. The last 12 months now has the budget deficit as a % of GDP at 6.9%. The average is 3.7% over the past 40 years and we are now just entering the economic downturn.
6)Taiwan said its March exports fell 19.1% y/o/y, more than the forecast of down 15.4%, led by weakness in electronics.