Positives
1)Initial jobless claims fell to 730k from 841k last week (revised down by 20k) and that is down from 825k last week. This brings the 4 week average to 808k from 828k. Those getting PUA fell to 451k from 513k last week and vs 342k in the week prior. Continuing claims, delayed by a week, totaled 4.42mm from 4.52mm in the week prior. That was 40k less than expected. Delayed by two weeks, continuing PUA fell another 167k to 7.52mm. Those still receiving Pandemic Emergency Assistance in contrast rose by 1mm to 5.06mm, the highest since the pandemic began.
2)When combining the upward revision in December to the January core durable goods number, the net result was a better than expected figure. The internals were mixed though as while all the core categories were higher y/o/y, vehicle/parts, computers/electronics and machinery orders all fell m/o/m. Metals and electrical equipment orders were higher m/o/m. Shipments of core goods exceeded expectations which means we’ll see an upward revision to Q1 GDP as a result. Inventories got leaner as the inventory to shipments ratio fell to 1.63 from 1.67, the lowest since February 2019.
3)The final read of the February UoM consumer confidence index was 76.8 from 76.2 initially and slightly above the estimate of 76.5. This though compares with 79 in January and 80.7 in December and is the lowest since August. Most of the m/o/m decline was in the Expectations component. The UoM said “All of February’s loss was due to households with incomes below $75,000, with the declines mainly concentrated in future economic prospects.” One year inflation expectations was 3.3%, the same as the preliminary print but up from 3% in January and 2.5% in December. That matches the highest level since August 2012 and helped by an increase in expectations for gas prices. There is a clear divide in confidence between Democrats and Republicans and “among those households who retained their jobs and those that lost jobs and incomes” according to the UoM.
4)The February Conference Board’s Consumer Confidence index rose to 91.3 from 88.9 and that was slightly above the estimate of 90. The components though were mixed as the Present Situation jumped 6.5 pts while Expectations fell by a touch. One year inflation expectations continued higher, up by 3 tenths to 6.3%, the highest since the supermarket driven spike last June. The average over the last ten years is 5.2%. The answers to the labor market conditions improved with jobs Plentiful up and those Hard to Get down. Expectations though for higher employment weakened as did for income. Spending intentions weakened across the board with vehicles, homes and major appliances. As for homes specifically, it is at the lowest level since last May.
5)Thanks to government transfers, personal income in January jumped 10%, about as expected and that drove a spending increase of 2.4%, also about as forecasted. The combination saw the personal savings rate jump to 20.5%, the highest since May 2020 when the CARES Act was kicking in. Looking just at private sector wages and salaries saw an .8% m/o/m increase vs .6% in the prior two months and 1% in the two months before that. Y/o/y it grew by 1.8% vs 2.2% and 1.9% in the months prior. Spending was mostly driven by an increase in the purchases of goods.
6)New home sales in January totaled 923k, above the estimate of 856k and up from 885k in December (revised up from 842k). Months’ supply was little changed at 4.0 vs 4.1 and the median home price was up 5.3% y/o/y (very volatile figure month to month because of the influence of mix). The average price went to a record high of $408,800 because of an increase in home sales priced above $500,000 relative to the gain in those priced below.
7)The Richmond manufacturing index for February was unchanged at 14 as expected. Prices paid and received were up sharply.
8)The February Dallas manufacturing index rose to 17.2 from 7 and well above the estimate of 5.0. This is pre freeze.
9)The KC manufacturing index covering February rose 7 pts to 24. The estimate was 15. Prices received rose to match the highest level since 2008. Prices paid are at a 10 yr high.
10)The consumer price index in Tokyo in February rose .2% y/o/y ex food and energy as expected and unchanged from January.
11)Spanish CPI in February missed what was forecasted with a .6% m/o/m drop, 4 tenths more than the consensus. The Spanish statistical office explained this by saying it was mostly due to a drop in electricity prices after a jump in January. Also weighing was the drop in prices for restaurants and hotels not surprisingly.
12)The rebound in China and manufacturing strength globally helped Hong Kong’s exports jump by 44% y/o/y in January but it is also being flattered by easy comps as China shut down last January. The estimate was up 31%. Also helping the number was a rush of exports ahead of China’s holiday and a 73% increase to Taiwan. Imports were higher by 38%, well above the forecast of up 29%.
13)Reflecting solid semi exports, South Korea said in the 1st 20 days of February their exports rose 16.7% y/o/y. Average daily exports jumped by 29%. Semi exports were higher by 27.5% while autos were up by 46%.
14)Europe’s February economic confidence index rose to 93.4 from 91.5 and again led by manufacturing. Services confidence, that of the consumer and construction rose slightly m/o/m and fell at retail.
15)The February German IFO business confidence index rose to 92.4 from 90.3 and that was above the estimate of 90.5 with both components higher. The IFO said simply, “The German economy is proving robust despite the lockdown, especially thanks to strength in industry.”
16)German consumer confidence rose m/o/m.
17)Within the December UK labor report, wage growth was good, in part due to mix, with a 4.1% y/o/y gain in weekly earnings from 3.6% in the month prior. Positively too, the January jobless claims count fell by 20k after a 20.4k decline in December.
18)Pitchers and catchers have reported to camp.
Negatives
1)The world’s bond markets revolted. The US had its worst 7 yr auction since it was initiated in 2009. As heard this week, some central bankers acknowledge it, some want to fight it and others whistle by.
2)The Fed’s balance sheet rose another $33b to a fresh record high of $7.59 Trillion. Considering the growing size of US debts and deficits, with another $1.9 Trillion about to spent, you ain’t seen nothin’ yet.
3)The jump in mortgage rates had an immediate impact on mortgage applications. With the average 30 yr rate rising 10 bps w/o/w to 3.08%, purchases fell 11.6% w/o/w and are down in 4 of the last 5 weeks to the lowest level since May. The y/o/y increase has slowed to 6.9%. Refi’s declined by 11.3% w/o/w but are still up 50% y/o/y.
4)The January PCE rose .3% m/o/m both headline and core. The headline rate was as expected but the core rate was above the estimate of an increase of one tenth. The y/o/y increase for both is 1.5%. Goods prices rose .5% y/o/y and positive for the 1st time since February 2020 and driven by a rise in durable goods. Services inflation held at 1.9% and has been pretty steady between 1.8-2% over the last six months. Core services prices rose 1.5% and also has been steady between 1.3-1.5% over the last half year. Food prices jumped 3.6% y/o/y while energy prices fell by 4.5%.
5)REVISED COMMENTS: The Chicago February manufacturing index fell to 59.5 from 63.8 and that was a bit below the estimate of 61. The six month average is 60.2. New orders FELL to the lowest since August 2020. Backlogs though rose to the most since October 2017. Inventories fell but are still above 50. Supplier deliveries, reflecting supply issues, rose to the highest since May. Employment ROSE to a 16 month high. Prices paid were little changed but at the highest since September 2018. “Companies again noted price increases for raw materials, especially tin.”
6)The trade deficit of goods widened to $83.7b in January, above the estimate of $83b and not far from the record low of $86.1b seen in November. That compares with $83.2b in December. Exports were up by 1.4% m/o/m while imports grew by 1.1%.
7)Pending home sales fell 2.8% m/o/m in January, worse than the estimate of no change, partly offset by an 8 tenths upward revision to December. The biggest declines were seen in the Northeast down by 7.4% m/o/m and the West, down by 7.8%. The index level is at the lowest level since July. The lack of supply is certainly the main factor in why transactions are slowing but I’d argue that 10% annual price increases are having an impact too.
8)S&P CoreLogic said that its US home price index in December rose 10.4% y/o/y while its 20 city index was higher by 10.1%. These are unsustainable gains and price out some first-time families.
9)French business confidence in February fell a touch to 90 from 91. The estimate was 92. Manufacturing remained the bright spot, rising 1 pt m/o/m while services, retail and employment fell from January as Covid is still impacting business.
10)French consumer confidence fell m/o/m.
11)French CPI in February was flat m/o/m, 3 tenths more than expected after a .3% rise in January. Versus last year prices rose .7%, two tenths more than expected.
12)The UK change in employment for the three months ended December fell by 114k, more than the estimate of down 30k. The unemployment rate rose one tenth to 5.1% as expected.
13)The UK CBI retail sales survey rose 5 pts but to a still deeply negative -45 and the estimate was for a 10 pt rise. CBI said “With lockdown measures still in place, trading conditions remain extremely difficult for retailers. Record growth in internet shopping suggests that retailers’ investments in on-line platforms and click and collect services maybe paying off, but the re-opening of the sector can’t come soon enough to protect jobs and breathe life back into the sector.”
14)Hong Kong announced a hike in their stamp tax.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.