The Boock Report

By

Succinct Summation of the Week’s Events – 3/11

Positives

1)The slight pullback in the average 30 yr mortgage rate (which will reverse higher next week with the lift this week in the 10 yr yield) to 4.09% from 4.15% in the week higher resulted in a lift in mortgage applications. Purchases rose 8.6% w/o/w but are still down 7.4% y/o/y. Ref’s were up 8.5% w/o/w but are down 50% y/o/y.

2)While dated, the number of job openings in January totaled 11.26mm vs 11.45mm in December which was a record high. The hiring rate held at 4.3% while the quit rate slipped to 2.8% from 3%.

3)The ECB said they will quicken the pace of tapering.

4)China said its February PPI rose 8.8% y/o/y, 2 tenths more than expected but consumer prices were tame, higher by .9% as expected.

5)Taiwan said its February exports jumped 35% y/o/y, more than double the estimate of up 15.7% and led by semi shipments which made up half of all exports by this crucial exporting country. Imports also grew by 35% y/o/y vs the forecast of up 21.4%.

6)Baseball is back! //www.youtube.com/watch?v=eItTJehqMIQ

Negatives

1)Putin won’t stop until he does and the results in Ukraine get ever more heartbreaking.

2)The US 2 yr inflation breakeven is up by 19 bps today to a new high of 4.65%. The 5 yr is higher by 8 bps to a new high of 3.59%. The 10 yr breakeven is fast approaching 3% at 2.96%, up 26 bps this week.

3)February CPI was as expected with an .8% and .5% m/o/m increase in headline and core. Versus last year, prices are up 7.9% headline and 6.4% ex food and energy. This is pre invasion data. Services inflation ex energy rose .5% m/o/m and 4.4% y/o/y while rents are still being badly undercounted. On the goods side, core goods prices rose .4% m/o/m and by 12.3% y/o/y. That’s the most since 1975.

4)While the Atlanta Fed said its February Wage Growth Tracker rose 5.8% y/o/y, and that’s the quickest pace since this data was first collected in 1997, it still is running below the rate of inflation. Only for those aged 16-24 are wage gains running faster than inflation.

5)Initial claims totaled 227k, 10k more than expected and up from 216k last week. The 4 week average was basically unchanged at 231k. Continuing claims, delayed by a week, was 1.49mm, about 40k more than expected but still below where it was pre covid.

6)The initial March UoM consumer confidence index fell to 59.7 from 62.8. That’s below the estimate of 61, the weakest print since September 2011 and is now only 4.4 pts from the November 2008. Most of the weakness was seen in the Expectations component which was down 5 pts m/o/m while Current Conditions was lower by .4 pts m/o/m. Also of note, one year inflation expectations jumped to 5.4% from 4.9%, the highest since 1981. There was no change in the longer term view on inflation as it held at 3%. Employment and income expectations were little changed. Spending intentions were mixed. Bottom line, “Personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid 1940’s.”

7)The February NFIB small business optimism index got less optimistic as it fell to 95.7 from 97.1. That is the lowest since January 2021. It’s easy to understand the reduced expectations as “Small business owners reporting inflation as biggest problem reaches highest level since Q3 1981.”  

8)The March Sentix Investor Confidence Index in Europe plunged to -7 from +16.6 and they said rather painfully but succinctly, “The economy is the euro zone is slumping dramatically due to the war in Ukraine.”

9)China’s February aggregate financing came in about one trillion yuan less than expected and money supply growth was as well.

10)Japan said that February PPI rose 9.3% y/o/y and .8% m/o/m. Both were above expectations and this also comes off a higher base as the prior month was revised up. That y/o/y increase is the most since survey data was first collected in 1981.