1)The January CPI rose .3% headline and was flat at the core level. The headline figure was as expected while the core rate was below the estimate of up .2%. Versus last year the headline gain is 1.4%, the same pace as in December. The core rate is higher also by 1.4% vs 1.6% in the month prior. The rise in goods prices is being offset by the slowdown in service price increases. Core goods prices rose .1% m/o/m and are up 1.7% y/o/y, matching the quickest gain since April 2012. Services prices ex energy were flat m/o/m and up 1.6% y/o/y, about half the pace seen pre pandemic. The Fed is sure lucky that a home price calculation is not in the CPI and PCE inflation stats but ignoring it is like a child who covers his eyes and thinks they are invisible.
2)The number of job openings in December rose to 6.65mm, the most since July.
3)China’s January consumer price index unexpectedly fell by .3% y/o/y although still rose 1% m/o/m. Both consumer goods prices and the cost of services fell y/o/y. Food prices rose 1.6% y/o/y. The core rate was lower by .3% y/o/y. A new round of travel restrictions likely were an influence as many are staying home for the Lunar New Year holiday as they were encouraged not to travel. Also, there are major base effects here as one year ago CPI spiked 5.4% y/o/y. The PPI was higher by .3% y/o/y as forecasted. That’s the first increase in a year and comes with the rise in commodity prices and transportation costs.
4)Ahead of the Lunar New Year, there was a sharp rise in financing extended in China in January as is seasonally typical. It came in at 5.17 Trillion, above the estimate of 4.6 Trillion with 3.58 Trillion of that being bank loans. There was a sharp increase in loans to non financial companies and households. The contrast to this lending jump was a smaller than expected increase in M2 money supply of 9.4% vs 10.1% in December and vs the estimate of up 10% as the PBOC has tried to reign in credit growth.
5)The trade data out of Taiwan, a tech bellwether, continues to remain robust. Exports in January rose 37% y/o/y, well above the estimate of up 25%. Imports were higher by 30% y/o/y vs the forecast of up 24%. The caveat though is some of this activity was a rush to get stuff done before the Chinese Lunar New Year and we’ll see some mean reversion in February. Tech related products, particularly semi’s, led the way.
6)German exports were little changed in December, rising .1% from November but that was better than the estimate of down .6%.
7)Germany reported an in line industrial production figure when including the upward revision to November. Production was flat m/o/m after a 1.5% rise in the month prior. The Economy Ministry said “The outlook for the industrial sector continues to be subdued in light of the pandemic and the latest bottlenecks in the semiconductor industry. This is also suggested by weaker orders and damped sentiment among businesses.”
8)Spain said its December industrial production fell .6% y/o/y but better than the estimate of down 2.2%.
1)Initial claims totaled 793k, 33k above expectations but down slightly from the revised 812k print last week from 793k originally. This brings the 4 week average to 823k from 856k. Those initially signing up for PUA fell to 334k from 369k. Delayed by a week, continuing claims fell again, by 145k and are down to 4.5mm. Delayed by two weeks, those continuing to receive PUA jumped 1.5mm to the highest since early December. Those continuing to receive the emergency kind was higher by 1.2mm to the most since mid December.
2)The MBA said mortgage applications fell w/o/w with both purchases and refi’s lower. Purchases fell by 4.7% and are now at the lowest level in 5 weeks though remain up 17.5% y/o/y. Refi’s dropped by 4.2% w/o/w but after an 11.4% rise last week. They are higher by almost 46% y/o/y.
3)The NFIB small business optimism index fell again to 95 from 95.9 and that is the weakest since May when it printed 94.4. The NFIB said “The Covid-19 pandemic continues to dictate how small businesses operate and owners are worried about future business conditions and sales.”
4)The initial February UoM consumer confidence index fell to 76.2 from 79 and that was below the estimate of 80.9. Most of the decline was in the Expectations component which fell 4.2 pts while Current Conditions slipped by .5 pt. One year inflation expectations picked up further, rising to 3.3% from 3% in January, matching the highest level since 2012. Interestingly, back then the average gallon of gasoline was around $3.50 vs $2.50 today so this could be more than just prices at the pump but there was a particular rise in those expecting higher gas prices. There was little change in employment expectations and an uptick in wages. There was a notable decline in those that said it’s a good time to buy a vehicle which fell 8 pts to the lowest since October 2008. Yes, back in the teeth of that recession. Reflecting my belief of aggressive price increases, those that said it’s a good time to buy a house fell 6 pts to the lowest since May 2020 while those that said it’s a good time to sell rose 9 pts to the highest since March 2020 right before everything hit the fan and this component collapsed in April. Again, politics was a big influence on the overall data as Democrats remain the most confident since pre Trump while the Republicans are the most depressed since they thought Hillary was going to win.
5)The Fed’s balance sheet rose to a fresh record high, up by $31.6b to $7.44 Trillion. After hearing more Fed members speak this past week, I’ll repeat again that they all seem to have forgotten what caused the two recessions prior to Covid. I say they forgot because they seem so nonchalant with the excessive level of market speculation and valuations (high yield is now yielding less than 4%). To remind them, it was bubbles in stocks and then housing, each egged on by monetary policy, that eventually imploded that led to the recession, not the other way around that was previously the case. I’ll argue that the next recession we have, whenever that might be, will be triggered by a popping of the variety of asset bubbles we are living thru, whether the pin is inflation, higher market driven rates or an eventual Fed taper and rise in short rates.
6)The January wholesale price index in Germany jumped by 2.1% m/o/m after a .6% rise in December. The y/o/y change was still zero but that compares with a decline of 1.2% in the month prior.
7)French industrial production declined by 3% y/o/y in December, more than the forecast of down 1.7%.
8)Italy’s industrial production in December fell by 2% y/o/y vs the estimate of down 1.4%.