Positives
1)Initial claims totaled 223k, 7k less than expected and down from 239k last week. Continuing claims were 1.621mm, just above expectations but at their pre Covid pace.
2)UK GDP for December wasn’t as soft as forecasted and thus a bit less negatively impacted by omicron even though it still was negative. IP and construction were positive but consumer spending, not surprisingly, was soft.
3)German exports rose .9% m/o/m in December, better than the estimate of down .5% while imports jumped by 4.7% instead of falling by 2.1% as forecasted.
4)China in its attempt to cushion the pain of the stress in its residential real estate industry, said January aggregate loans totaled 6.17 Trillion yuan (definitely influenced though by the timing of the Lunar New Year as it usually spikes in January), well above the estimate of 5.4 Trillion. Of the total, bank loans were 3.98 Trillion. Money supply (M2) rose 9.8% y/o/y, higher than expectations of up 9.2%.
5)China’s private sector Caixin services PMI for January fell to 51.4 from 53.1. The estimate though was 50.5. With respect to pricing, “Input costs and prices charged increased, and service providers were under greater cost pressure. Neither gauge changed much from the previous month, but the gauge for input costs was apparently higher than the one for prices charged. Surveyed companies said high labor and raw material costs were the primary causes. Tightening epidemic control measures also increased service providers’ operational costs.” With regards to the outlook, “Businesses grew less optimistic. The gauge for future output expectations fell to its lowest in 16 months in January, though the figure remained in positive territory.”
6)In order to contain inflation, the Bank of Mexico hiked rates by 50 bps to 6% and the Bank of Russia did so by 100 bps to 9.5%.
7)A bit longer than what I usually post but still funny, //www.youtube.com/watch?v=JVQbWNgvNgo
Negatives
1)In a world of record debt to GDP ratios and excessive asset price valuations in certain parts, global interest rates have jumped for a 2nd week.
2)CPI in January rose by .6% headline and core m/o/m and 7.5% and 6% y/o/y respectively, both 40 yr highs. The headline increase was two tenths more than expected and December was revised up by one tenth to also a .6% gain. The core rate was above the estimate by one tenth. Energy prices rose by .9% m/o/m and 27% y/o/y. Food prices also grew by .9% m/o/m and by 7% y/o/y. On the services side ex energy, prices rose .4% m/o/m and 4.1% y/o/y and this is STILL with WAY under counting with respect to rents. On the goods side, core goods prices rose by 1% in the month alone and by 11.7% y/o/y.
3)The Cleveland Fed 16% trimmed CPI for January rose .6% m/o/m and 5.4% y/o/y.
4)The January Atlanta Fed’s sticky CPI was up by 7.5% on an annualized basis and by 4.2% y/o/y. This and the Cleveland survey reflect the breadth of the inflation.
5)The Fed’s balance sheet rose by another $4.8b to a fresh record high of $8,878,009,000,000.
6)The preliminary February UoM consumer confidence index fell to 61.7 from 67.2 and that was much worse than the forecast of 67 and the weakest since October 2011. Current conditions declined by 3.5 pts m/o/m while Expectations fell to 57.4 from 64.1. One yr inflation expectations rose 1 tenth to 5%, the highest since it was 5.1% in July 2008. The 5-10 yr inflation guess held at 3.1%. It was 2.5% too in January 2020. Expectations for employment fell 4 pts m/o/m to the lowest since November 2020. Those expecting Higher Income held at the highest since July 2021 but there was a 1 pt increase in those that said they expect lower income. The percentage of those that expect their family income to exceed inflation over the next 5 years fell to 36.4% from 37.1% but just above the 36.1% that we saw in December. Those that said it’s a good time to buy a home fell 6 pts to 71 but it was at 63 a few months ago. Those that said it’s a good time to sell is within 1 pt of the highest since 1992 when this question was added. Those that said it’s a good time to buy a car declined by 5 pts to 41, the lowest on record, by far, since this question was first asked in 1978. Spending intentions for a major household item was unchanged at the lowest since 1980. The UoM said this, “The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government’s economic policies, and the least favorable long term economic outlook in a decade.” What was most interesting was this, “the entire February decline was among households with incomes of $100,000 or more; their Sentiment Index fell by 16.1% from last month, and 27.5% from last year. Noteworthy, the entire decline also occurred among Democrats and Independents, with Republicans reporting a slight gain in early February, although still having the lowest level.”
7)Another 5 bps increase to the average 30 yr mortgage rate to 3.83%, the highest since January 2020, led to a drop in mortgage apps. Purchases fell almost 10% w/o/w and are lower by 12% y/o/y. Refi’s declined by 7.3% w/o/w and 52% y/o/y.
8)The Fannie Mae Home Purchase Sentiment Index fell 2.4 pts in January to 71.8 which is the lowest since May 2020 “as affordability constraints continue to weigh on the housing market…In January, a survey record low 25% of respondents reported that it’s a good time to buy a home, compared to the 69% of consumers who reported that it’s a good time to sell” according to the press release. Specifically for 1st time buyers, “Younger consumers – more so than other groups – expect home prices to rise even further, and they also reported a greater sense of macroeconomic pessimism. Additionally, while the younger respondents are typically the most optimistic about their future finances, this month their sense of optimism around their personal financial situation declined. All of this points back to the current lack of affordable housing stock, as younger generations appear to be feeling it particularly acutely and, absent an uptick in supply, may have their homeownership aspirations delayed.
9)Inflation negatively impacted the NFIB small business optimism survey which fell to 97.1 for January from 98.9. That is the weakest since February 2021. The NFIB chief economist said “More small business owners started the New Year raising prices in an attempt to pass on higher inventory, supplies, and labor costs. In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.” The NFIB also said “Inflation will remain stubbornly high this year but should slow down in the 2nd half of the year as some of the economic disruptions get untangled.”
10)Japan said that January PPI rose .6% m/o/m and 8.6% y/o/y, both above expectations.
11)Taiwan, the most important tech spots in the world right now, saw its exports in January rise by 16.7% y/o/y which is just below the estimate of up 18.3%. Exports of electronics components, which include semi’s, were up 19.7%. Exports to China rose 5.7% and to the US by 34%. Imports were up 25% as expected.
12)Taiwan also said its January CPI was higher by 2.8%, 4 tenths more than expected with a core rate higher by 2.4%, 8 tenths above what was forecasted.
13)Rising prices even in Japan, outside of mobile phone fees, still can’t get workers much of a raise as base pay rose .2% y/o/y in December, the same pace as seen in November.
14)Singapore’s January PMI fell .7 pts to 54.4 but it was at 52 in November. Markit said “Foreign demand notably improved at a survey record pace, supporting the growth in output at the start of the year. Amongst the sectors, the wholesale and retail sector saw the strongest expansion in activity.” With the supply problems, “Supply chain issues persisted, however, as lead times continued to lengthen at a severe rate. That said, the level of price inflation showed signs of easing across both input costs and output prices in January, which had been a positive sign.” Omicron is still an issue, albeit much less, but “Business sentiment meanwhile eased to the weakest since May 2021.”
15)Germany reported a less than expected December industrial production figure with it falling .3% m/o/m. It though was up ex energy and construction, with the latter down by 7.3%.
16)The Swedish Riksbank was incredibly dovish, not bothered at all about higher inflation pressures as they will continue on with QE and not hike rates until 2024. They said “Even if the risk of too low inflation is assessed to have declined, it still remains.” But, “There are major differences between countries. In Sweden, the high inflation is entirely explained by rapid increases in electricity and fuel prices. Excluding energy prices, however, inflation is close to 2%.”
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.