1)Thanks in part to the late December passage of another fiscal spending plan where unemployment benefits were extended and juiced by $300 and some income earners got another $600, retail sales jumped 6% m/o/m in the ‘control group’ in January after a 2.4% decline in December and .9% drop in November.
2)The February NY manufacturing index rose to 12.1 from 3.5 and that was twice the estimate.Prices paid jumped to 57.8 from 45.5 and that is the most since May 2011. Prices received rose 8 pts to 23.4, also the highest since May 2011.Looking out to the next 6 months, business activity confidence rose to 3 pts to 34.9 after dropping by 4.4 pts last month. The six month average is 35. Positively, capital spending plans for both plant/equipment and technology improved sharply. Expectations for inflation, both prices paid and received jumped as well.
3)The February Philly manufacturing index fell slightly to 23.1 from 26.5 but that was still above the estimate of 20.With respect to pricing, prices paid rose 9 pts to 54.4, the highest since August 2018 but those received gave back the 20 pt launch in January.With respect to the 6 month outlook, business activity expectations fell to 39.5 from 52.8 and that is below the 6 month average of 48.7. Expectations for prices paid and received rose while capital spending fell by 10 pts after rising by almost 12 pts last month.
4)The February Markit US manufacturing and services composite index rose a hair to 58.8 from 58.7 with services higher by .6 pts to 58.9 and manufacturing down by .7 pts to 58.5. Here was the inflation commentary: “Input costs across manufacturing and services soared higher as demand outstripped supply, rising at by far the steepest rate since comparable data were first available in 2009. Service providers registered the steepest increase in cost burdens since October 2009, while manufacturers recorded the quickest rise since April 2011. As a result, firms raised their selling prices at the sharpest rate on record (since October 2009), with panelists stating the increase was due to the partial pass through of greater costs to clients.”
5)The NAHB home builder survey for February was 84, up 1 pt from January and 1 pt better than the consensus. As 50 is the breakeven between expansion and contraction, builders are very enthusiastic in response to a desperate need in the industry for more supply, particularly on the lower end. The internals however were more mixed as the Present Situation was unchanged but at a still VERY high 90 while the Expectations component fell 3 pts to 80, high but the lowest since August. Prospective Buyers Traffic rose 4 pts m/o/m after dropping by 5 last month. Concerns with record high lumber prices were expressed.
6)Permits were higher for both single family and permits in January. For the former they grew by 46k m/o/m to 1.27mm. Multi family permits jumped to 612k from 481k.
7)US industrial production in January rose by .9% m/o/m, 5 tenths more than expected but partially offset by a 3 tenths downward revision to the increase seen in December. The manufacturing component was higher by 1% m/o/m, 3 tenths more than forecasted.Capacity utilization rose to 75.6% from 74.9% thanks to a rise in tech (computers, semis) and mining.
8)The Cass Freight shipments index jumped 8.6% y/o/y and expenditures rose at a 19.5% y/o/y pace. “Freight rate increases accelerated in January at the fastest pace since 2009-2011, with the exception of a few months in late 2018. As these higher volumes meet rising contract rates, it is clear that this index is headed for growth rates over the next several months not seen since 2010-2011.”
9)Japan said its February manufacturing and services PMI rose to 47.6 from 47.1 with manufacturing getting back above 50 at 50.6. Services though, because of the selective shutdowns, fell to 45.8 from 46.1. The vaccine gives hope and why “Businesses were optimistic that business conditions would improve in the coming 12 months.”
10)Japan said its machinery orders figure for December, a good proxy on cap ex, rose 5.2% m/o/m, well better than the estimate of down 6.1%
11)Benefiting from the economic rebound in China and most of Asia along with an incredible containment of Covid and the rise in commodity prices, particularly in iron ore, Australia reported an increase of 29.1k jobs in January, in line with expectations. Also, the unemployment rate fell two tenths to 6.4%.
12)Non oil exports in Singapore jumped 12.8% y/o/y in January, well above the estimate of up 5.2%. Also here was a bump up to China ahead of their holiday and easy comps to China as they shut down last January. The shipments of chemicals and electronics led the way while pharma exports were little changed.
13)The February Eurozone manufacturing and services PMI rose a touch to 48.1 from 47.8 with weakness in services thanks to covid offset by strength in manufacturing which is a global thing. On inflation Markit said “One concern is the further intensification of supply shortages, which have pushed raw material prices higher. Supply delays have risen to near record levels, leading to near decade high producer input cost inflation. At the moment, weak consumer demand, notably for services, is limiting overall price pressures, but it seems likely that inflation will pick up in coming months.”
14)The UK saw a nice snapback in its composite index with services jumping to 49.7 from 39.5 as they are doing a great job rolling out the shots. Manufacturing was 54.9 vs 54.1. Similar wording as written for the Eurozone was stated for the UK on price pressures.
15)The German ZEW February expectations index on the economy rose to 71.2 from 61.8 and that was above the estimate of 59.5 as investors look past the current selective shutdowns and to the vaccine rollout instead. According to the ZEW, “Consumption and retail trade in particular are expected to recover significantly, accompanied by higher inflation expectations.” As for the current situation, it still remains challenged as this component fell to -67.2 from -66.4.
1)The Fed’sbalance sheet exploded higher this week by $115b to a fresh record high of $7.56 Trillion. A lot of the increase was another jump higher in MBS holdings.
2)Initial jobless claims totaled 861k, well above the estimate of 773k and up from 848k last week which was revised from 793k. The 4 week average fell by 4k to 833k.Those receiving PUA jumped to 516k from 342k.Continuing claims, delayed by a week, fell to 4.49mm from 4.56mm in the week prior. The estimate was 4.43mm. Delayed by two weeks, those continuing to claim PUA fell 258k after rising by 725k in the week before. Those still receiving emergency assistance fell by 718k but after rising by 1.17mm in the week prior.
3)US wholesale inflation spiked in January with a 1.3% headline m/o/m increase, well more than the 4 tenths rise and the core rate was up by 1.2% m/o/m vs the estimate of up 2 tenths. Versus last year, prices grew by 1.7% headline and 2% core and this is BEFORE the base effect jumps we are going to see in the next few months.
4)Housing starts in January totaled 1.58mm, down 100k from December and below the estimate of 1.66mm. All of the decline and then some was in the single family category where they fell to 1.16mm from 1.32mm. That’s a 4 month low and likely in response to the issues that builders are facing with high lumber prices and finding labor. Multi family starts rose to the highest since July at 418k from 357k last month.
5)While the average 30 yr mortgage rate is still very low at 2.98%, that is the highest since mid November, coincident with the rise in the 10 yr yield and it did lead to a decline in purchases and refi’s. Purchases have fallen for the 3rd week in 4 which the uptick in mortgage rates joins almost double digit price increases. The y/o/y increase though was still almost 15%. Refi’s fell 4.7% w/o/w but are higher by 51% y/o/y.
6)If we include the downward revision to December, January existing home sales were a touch light relative to expectations. Totaling 6.69mm, the level compares with 6.65mm in the month prior (revised from 6.76mm) and just off the highest level since 2006. There is still so little supply as months’ supply remained at just 1.9 BUT this time of the year they always fall. First time buyers totaled 33% of purchases vs 31% in the month prior and the same level as one year ago. The NAR said “We have to get more inventory.” The median home price rose 14.1% y/o/y but figure the average price is rising at an 8-10% pace. Still well above the rate of inflation and the Fed should be acknowledging this as the benefits of low mortgage rates no longer an offset.
7)Thanks to the weaker dollar and the general rise in prices on a variety of goods and commodities, import prices jumped 1.4% in January m/o/m from 1%. The estimate was 1%. Ex petro, import prices rose .9% m/o/m, more than double the estimate of up .4%. They are now up 2.6% y/o/y ex petro, the biggest increase since December 2011. The gain was driven by industrial supplies and food/beverage price spikes. Petro prices rose 8.3% m/o/m.
8)Japan said its January CPI core/core rate went from -.4% y/o/y to +.1% y/o/y. The estimate was zero. The headline rate fell .6% y/o/y but with what’s happening with food and energy prices, this will invert higher in coming months.
9)Japan reported trade data that was somewhat below expectations. Exports in January rose 6.4% y/o/y vs the 6.8% expected gain. Ahead of the Chinese Lunar New Yr, exports to China jumped by 37.5% y/o/y while exports to the US declined by 4.8% and by 1.6% to the EU. Imports fell by 9.5% y/o/y vs the forecast of down 5.5%.
10)In Australia, its PMI fell to 54.4 from 55.9 with both components falling.
11)In Germany, its PPI jumped 1.4% m/o/m in January, 5 tenths more than expected and higher by .9% y/o/y, 6 tenths above the estimate.
12)UKJanuary CPI rose .7% y/o/y, one tenth more than expected and up one tenth from December. The core rate held at 1.4%, one tenth above the estimate. Wholesale prices surprised to the upside.
13)Sweden said CPI in January rose 1.6% y/o/y from .5% in December. The core rate was higher by 1.8% y/o/y from 1.2% in the month prior.
14)As for the pile of debt that a rise in rates would impact, the Institute of International Finance this week said global debt in 2020 went to $281 Trillion, up $24 Trillion to a fresh record high. That is 355% of global GDP. About half the debt increase was from government and the other half from the private sector (both business and households).