Succinct Summation of the Week’s Events:
Positives,
1)Initial jobless claims fell to 230k from 246k and much lower than the estimate of 248k. The 4 week average fell to 236k from 240k. After jumping to the highest level since last November, continuing claims fell by 3k w/o/w to 1.858mm.
2)The March PCE inflation stats as well as income and spending were all as expected and the savings rate rose to 5.1%.
3)The Q1 Employment Cost Index saw private sector wages and salaries up by 5.1% y/o/y, twice the pace of pre Covid and the same rate seen in Q4. Overall, the ECI was up 4.8% y/o/y.
4)Apartment List released its National Rent Report today and said for April rents rose .5% m/o/m and that is the 3rd straight month of gains, “but represents a slight slowdown from last month at a time of year when growth is typically picking up steam. This month’s increase was also less than the typical April price change that we saw in pre-pandemic years. Even though prices are trending up again, a combination of sluggish demand and increasing supply is keeping rent growth in check.” The y/o/y gain is now 1.7%. This compares with the pre Covid pace in 2018 and 2019 of 2.8%. The vacancy rate rose to 6.8% and should go higher with the large amount of construction underway, though will fall off a cliff after these projects are done because nothing now is getting green lit.
5)The average 30 yr mortgage rate was up 12 bps w/o/w to 6.55% but mortgage apps rebounded with purchases up 4.6% w/o/w and refis higher by 1.7% w/o/w.
6)The S&P CoreLogic home price index in February rose 2.1% y/o/y which is the slowest pace since 2012. I believe this is a good thing as first time buyers need some relief here.
7)New home sales in March totaled 683k, 50k more than expected while February was revised down by 17k to 623k. A jump in sales in the Northeast and the West led the way with months’ supply slipping to 7.6 from 8.4. The volatile median home price was up 3.2% y/o/y.
8)There was a lower than expected US goods trade deficit in March of $84.6b vs the estimate of $90b. After a drop in February of 3.8%, March exports rebounded by 2.9% m/o/m while imports fell for a 2nd month, by 1.1% m/o/m.’’
9)For the week ended April 12th, C&I loans outstanding rose by $8.3b after the $6.8b rise in the week prior which followed a drop of $68b in the two weeks before that. After a sharp drop in the prior two weeks of $5b, real estate loans for construction and development rose by $1.2b. CRE loans outstanding were up $1b after a gain of $720mm in the week before but which followed a decline of $30b in the two weeks before. Credit card loans outstanding rose a touch.
10)The April Chicago manufacturing index did rise 4.8 pts m/o/m but remains below 50 for the 8th straight month.
11)The final UoM April consumer confidence index was unchanged with the initial read of 63.5 and up from 62 in March. It was though 67 in February and 64.9 in January. One yr inflation expectations were 4.6% vs 3.6% in March. The 5-10 yr outlook was 3% vs 2.9%. The UoM said “Buying conditions for durables improved 11% primarily on the basis of easing perceptions of unaffordability.” The economic outlook was up modestly but “These improvements were balanced by worsening assessments of personal finances due to higher expenses, reflecting the ongoing pain stemming from continued high prices.” Also of note, “Consumers still perceive relative strength in labor markets and incomes, but signs of weakening labor market expectations have emerged. About 44% expected the unemployment rate to rise in the year ahead, well above the 37% seen last month. The deterioration in unemployment expectations was visible across age, income, education and political identification.”
12)The Swedish Riksbank continues to play catch up with rate hikes by raising by 50 bps as expected to 3.50%. If we get another one, it will most likely downshift to 25 bps.
13)Germany’s IFO business confidence index for April rose to 93.6 from 93.2 and that was just above the estimate of 93.4. The internals were mixed though as the Current Assessment was down a touch, offset by a rise in Expectations. The IFO said simply, “German business’s worries are abating, but the economy is still lacking dynamism.” Manufacturing improved “somewhat” while for services, “the upward trend in the business climate over recent months came to an end.” Trade fell slightly while construction was up.
14)Consumer confidence in Germany and France improved in April. The German figure rose to the best in a year, though still is well below zero at -25.7. Lower energy prices was a key reason. “In addition, the government has introduced various programs both for households and companies to compensate for the high energy prices – at least partially. Together with the expected growth in tariff-based income, more and more households are anticipating that the loss in purchasing power originally feared due to inflation will be much lower.”
Negatives,
1)Q1 GDP rose 1.1% q/o/q annualized, below the estimate of 1.9% with inventories the biggest drag and personal consumption the biggest contributor.
2)Pending home sales in March fell 5.2% m/o/m, worse than the forecast of up .8%. Weakness was seen in all regions except down South. The NAR is blaming the limited inventory choices of existing homes which is certainly the case with home builders gaining market share. Their chief economist said “The lack of housing inventory is a major constraint to rising sales. Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.” According to Bankrate, the average 30 yr mortgage rate averaged 6.97% in March.
3)Non defense capital goods orders ex aircraft in March fell .4% m/o/m, 3 tenths worse than expected and also of note, February was revised down by 6 tenths. Shipments too were weaker than forecasted and February was also revised down.
4)The April Conference Board’s Consumer Confidence index fell to 101.3 from 104 and there was no change expected. A 6 pt drop in the Expectations component was the main culprit, especially the employment figure, as the Present Situation was up 2 pts m/o/m. One yr inflation expectations were up 6.2% vs 6.3% in March and 6.2% in February. It was though 7.5% one yr ago. There was some slight improvement in the answers to the labor market questions but after a drop last month. Of note though, and dragging down the Expectations component as stated, those expecting ‘More Jobs’ fell by 3 pts to 12.5, the least since early 2016. Those expecting higher income fell .5 pt but rose by 1.8 pts last month. Spending intentions weakened across the board with autos, homes and major appliances. Bottom line from the Conference Board, “Consumers became more pessimistic about the outlook for both business conditions and labor markets. Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months. They also expect fewer jobs to be available over the short term.”
5)The April Philly non-manufacturing activity index fell to -22.8 from -12.8. The Philly Fed said the responses “suggest continued weakening in nonmanufacturing activity in the region. The indexes for general activity at the firm level, sales/revenues, and new orders all declined. Both price indexes remain somewhat elevated, and the respondents continue to anticipate growth over the next six months at their own firms.”
6)The Dallas services outlook index was -14.4, negative for the 11th straight month.
7)The Richmond manufacturing index joined most of the others with under zero prints for April. Their index dropped to -10 from -5. That’s less than zero for the 6th month in the past 7.
8)The Dallas April manufacturing index fell to -23.4 from -15.7 and that was twice the estimate of -12. The 6 month business outlook also deteriorated further.
9)The KC manufacturing April index fell to -10 from zero.
10)US bank deposits fell by $76.2b for the week ended April 12th after the rebound in the week prior of $60.7b. At $17.2 trillion, that’s the least since July 2021.
11)While I believe the BoJ is setting us up for the end of NIRP and further YCC widening, they still did nothing this week even as inflation continues higher as Tokyo said April CPI rose 3.8% y/o/y ex food and energy, 3 tenths more than expected.
12)Taiwan’s economy contracted by 3% in Q1 y/o/y, more than twice the estimate of down 1.25%.
13)The Eurozone economy grew .1% q/o/q and by 1.3% y/o/y, both one tenth under the estimate but kept afloat by the mild winter.
14)Germany reported a bigger than expected rise in unemployment for April of 24k, 3x the estimate and the most since last August.
15)The April Eurozone Economic confidence index was little changed at 99.3 vs 99.2 in March and below the estimate of 99.9. For context, it was 105.2 in February 2020. Improvement in service, retail and consumer confidence was offset by a drop in manufacturing and no change in construction.
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