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March 12, 2021 By Peter Boockvar

Succinct Summation of the Week’s Events – 3/12


Positives

1)Initial jobless claims came in at 712k, 13k less than expected but last week was revised up by 9k to 754k. The 4 week average fell to 759k from 793k as a print of 848k dropped out. PUA rose by 42k w/o/w to 478k. Delayed by a week, continuing claims totaled 4.14mm, below the estimate of 4.2mm and down from 4.34mm which was revised up by 42k.

2)The CPI in February rose .4% m/o/m headline as expected. The core rate rise of .1% was one tenth below the estimate. Versus last year the headline increase was 1.7% while the core rate was up 1.3%. Core goods prices fell back by two tenths m/o/m but are up 1.3% y/o/y. Services prices ex energy was up by .2% m/o/m and also 1.3% y/o/y. Energy prices rose 3.9% m/o/m and 2.4% y/o/y. Food prices were higher by .2% m/o/m and 3.6% y/o/y.

3)The average 30 yr mortgage rate rose another 3 bps to 3.26% and is now up 30 bps over the past month. We might have seen some jumping off the fence behavior in response this week as purchases rose 7.2% w/o/w although are still up a modest 2.4% y/o/y which is a definite slowdown from the double digit increases we’ve seen for months.

4)The UoM March consumer confidence index was better than expected with a rise to 83 from 76.8 and that was better than the estimate of 78.5. It is also the best since March 2020 when it printed 89.1 from 101 in February. Both Current Conditions and Expectations were higher m/o/m. One year inflation expectations moderated by two tenths to 3.1% off the highest level since 2012 and vs 3% in January and 2.5% in December. A lot of the optimism came from an 11 pt rise in the employment component but income expectations were unchanged. Also, business expectations saw a nice rebound over the last few months. The improvement in confidence also came with a rise in spending intentions. “The gains were widespread across all socioeconomic subgroups and all regions, although the largest monthly gains were concentrated among households in the bottom third of the income distribution as well as those aged 55 or older” said UoM.

5)As of January there was almost 7mm job openings in the US, approaching pre Covid levels. The demand is growing for labor but the supply side needs to step up. The extended and enhanced unemployment benefits will stretch that out.

6)With about 1/3 of their population now vaccinated this is old news but the UK economy didn’t contract as much as expected in January with a 2.9% m/o/m GDP decline vs the estimate of down 4.9%. Construction helped to partly offset a miss in manufacturing, services and decline in exports in the first month outside the EU. The UK economy thru January is about 10% below where it was pre Covid.

7)Reflecting the outperformance of manufacturing relative to services during the winter, the Eurozone January industrial production figure was better than expected and December was revised higher. 

8)Germany said its exports in January rose 1.4% m/o/m which was well better than the estimate of down 1.8% and December was revised up by 3 tenths. China demand helped. 

9)Distorted by the lunar holiday but still pretty robust, aggregate financing in February in China totaled 1.71T which was almost double the estimate of 910b and up from a large 5.17T increase in January. Of the 1.71T, 1.36T are bank loans vs 3.58T in January. After moderating to 9.4% growth in January, M2 growth was 10.1% vs the estimate of no change. Corporate borrowing and household loans for property were the main factors for the rise in lending.

10)China’s CPI in February fell .2% y/o/y, one tenth less than expected after a .3% drop in January. A 15% drop in pork prices y/o/y kept a lid on things. Ex food and energy saw core prices flat y/o/y and thus tame. However, coincident with the rise in commodity prices and other industrial strength and ever rising shipping costs, PPI rose 1.7% y/o/y vs .3% in January and two tenths higher than anticipated. That’s the biggest gain since November 2018.

11)China said its exports in February year to date (to smooth out the influence of the Lunar New Year) rose 61% y/o/y on easy comps as they were shut down in the same period last year and on a recovering global economy. That was well better than the estimate of up 40%. Also helping was the fact that less workers went home for the holiday and instead kept on working. Imports grew by 22.2% vs the forecast of up 16%.


Negatives

1)The shaky foundation of the world’s bond markets is revealed further and those central banks that have chosen to fight back this week had some mixed results. Fresh multi year highs were seen in US inflation breakevens. While the 3 yr note auction was great, the more market driven 10 and 30 yr auctions were mediocre.

2)Delayed by two weeks, those still receiving continuing PUA jumped by 1.1mm to 8.4mm, the highest since mid December and continuing Pandemic Emergency Assistance rose 985k to 5.45mm to the highest since the pandemic.

3)With the rise in mortgage rates refi’s fell 5% w/o/w and now are down 43% y/o/y as comparisons were tough in mid March last year as rates collapsed. 

4)The February PPI saw a gain of .5% headline and .2% core m/o/m exactly as expected. The y/o/y increases are now 2.8% and 2.5% respectively up from 1.7% and 2% in January. Those m/o/m gains come after the sharp increases of 1.3% headline and 1.2% core seen in January from December. Notable were the sharp increases in inflation in the pipeline. Processed goods prices rose 2.7% m/o/m after a 1.7% increase in January and 1.4% in December. Those are monthly numbers, not y/o/y. Ex food and energy prices rose 1.8% for the 2nd month after a 1.2% jump in December. For unprocessed goods, one step before in the production chain, prices spiked 4.3% m/o/m after a 3.8% increase last month all driven by food and energy. While core unprocessed prices fell 1.3% m/o/m that is only because it spiked by 8.9% in January and 4.5% in December.

5)The NFIB small business optimism index for February was little changed at 95.8 vs 95 in January, 95.9 in December and vs 101.4 in November. I’m going to start with the inflation component where those looking to raise prices jumped 8 pts to 25%, the highest since August 2008 when crude oil was touching almost $150. The NFIB said “Low inventories and solid sales are expected to present more opportunities to raise prices.” Plans to Hire and Capital Spending plans each rose 1 pt m/o/m. Those that Plan to Increase Inventory fell 2 pts to the lowest since May. While there are still 10mm people out of work vs pre pandemic, it’s still hard to find the right employee as Positions Not Able to Fill jumped 7 pts to 40%, the highest since this question was first asked in 1980. Current Compensation Plans held at 25%, the highest since March 2020 before it fell sharply because of the shutdowns. Compensation Plans for the months to come rose 2 pts to back near its recent high. After falling sharply in the two prior months by 9 pts, earnings trends improved by 5. Those that Expect a Better Economy rose 4 pts after falling by 7 last month. Those that Expect Higher Sales weakened by 2 pts and those that said it’s a Good Time to Expand also fell by 2 pts. 

6)The desperate demand for semi’s along with Taiwan’s dominant place in the industry helped lead to a 9.7% y/o/y increase in exports in February but that was well below the estimate of up 16%. Imports grew by 5.7% vs the forecast of up 14.3%. I will say that because of the China holiday, the January/February data is definitely distorted.

Filed Under: Free Access, Weekly Summary

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About Peter

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.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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