1) Initial jobless claims totaled 211k, 9k less than expected and last week was revised down by 5k to 216k (as part of annual revisions). This downtick brings the 4 week average lower to 217k from 221k last week and that’s the lowest since mid January. Delayed by a week, continuing claims rose 13k after a similar drop in the week prior.
2) The MBA said for the week ended March 22nd that mortgage applications rose by 9% w/o/w. Purchases grew by 6.4% w/o/w and 4% y/o/y while refi’s jumped by 12.4% w/o/w and 8.5% y/o/y. Helping of course was another 10 bps drop in the average 30 yr rate and which is down 19 bps in two weeks. At 4.45%, it’s the lowest since January 2018.
3) Fortunately for those looking to buy a home, particularly that first time Millennial, the pace of home price gains continues to slow. The S&P CoreLogic Case Shiller 20 city index for January saw a y/o/y growth rate of 3.6%, the slowest since September 2012. The average over the past 3 years was 5.6% per annum gains. Las Vegas and Phoenix saw the quickest gains while those in California (San Francisco, LA and San Diego) and New York saw the slowest. A precursor I’m sure to the influence of no SALT deduction.
4) New home sales in February totaled 667k, 47k more than expected and January was revised up by 29k to 636k. Lower rates were likely a help but smoothing the last 3 months puts the average at 630k, a touch higher than the full year 2018 average of 622k. The next few months is the real test, particularly for the high tax, no SALT deduction states. Months’ supply fell to 6.1 from 6.5 and that is the lowest since June. The median home price did fall by 3.6% y/o/y but pricing here is very volatile month to month due to mix shifts as there were more homes sold priced below $400k relative to those sold more.
5) The KC March manufacturing index bounced to 10 from 1. The estimate was zero. The KC Fed said “activity accelerated moderately, and expectations for future activity also increased.” This follows “3 straight months in which the pace of growth slowed.” I want to add this quote from a particular business on the inflation front that so many are becoming so comfortable with, “Effect of the September 2018 tariffs are starting to be seen on the retail shelves. All price increases go to the consumer.”
6) The final March UoM consumer confidence index rose .6 pts to 98.4 from the initial print. The estimate was for no change. It’s now bounced by 7.2 pts since January and when the partial shutdown annoyed people. It’s peak this cycle was last March when it touched 101.4. Positively, expectations for Net Income rose to the best since March 2018. One year inflation expectations were 2.5%, down one tenth from February. With respect to spending intentions, the UoM said “the data do not indicate an emerging recession but point toward slightly lower unit sales of vehicles and homes during the year ahead.” UoM said the gain in March in confidence was “entirely due to households with incomes in the bottom 2/3rds of the income distribution” as those in the top third fell. “Middle and lower income households more frequently reported income gains than last month, although income gains were still widespread among upper income households.”
7) The Mnuchin/Lighthizer trip to China seems to have been productive.
8) Mario Draghi is slowly coming around, “If necessary, we need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating the side effects, if any. That said, low bank profitability is not an inevitable consequence of negative rates.”
9) Bank lending in the Eurozone in February rose 3.7% y/o/y which is up from 3.4% in January but still below the best pace of growth in this recovery of 4.3% last September. Loan growth to households grew by 3.3% y/o/y from 3.2% in January. Money supply growth did pick up to 4.3% y/o/y from 3.8% in the month prior and that was better than the 3.9% that was expected.
10) The March German IFO business confidence index rose .9 pts m/o/m to 99.6 and that was better than the forecast of 98.5. Most of the gain came from the Expectations component was the Current Assessment was up a touch. This m/o/m improvement comes after 6 straight months of declines that took the index in February to the lowest since February 2016. The IFO said “The German economy is showing resilience.” Maybe so but at a lower rate of growth.
11) Germany’s CPI (cost of living) rose 1.5% y/o/y in March , one tenth less than expected and down from 1.7% in February.
12) With the Yellow Vest protests pretty much done, French consumer confidence in March improved for a 3rd month by 1 pt.
13) March French business confidence index and that was up by 1 pt. No change was expected. It’s now the 2nd month in a row of 1 pt gains.
1) February pending home sales (contract signings) fell 1% m/o/m and that was a bit more than the forecasted decline of .5%.
2) While it’s old news, Q4 GDP was revised down by 4 tenths to a 2.2% q/o/q annualized gain. The estimate was 2.3%. Versus last year’s Q4, growth was exactly 3%. Real final sales to private domestic businesses was revised to 2.6% from 3.1% and that’s the slowest since Q1 2018. Core PCE was revised up by 1 tenth to 1.8%, close enough to 2% for the Fed to care.
3) The March Conference Board consumer confidence index fell sharply to 124.1 from 131.4 and that was well below the forecast of 132.5. Context though is needed as the number jumped by 9.7 in February when the government reopened. That said, it is the 2nd lowest print since December 2017. The main area of weakness was the Present Situation which fell to the lowest level since May 2018. Part of this was a 7.2 pt drop in those saying current Business Conditions are ‘good.’ Expectations fell 4 pts but after jumping by 14.4 pts last month. One year inflation expectations rebounded by two tenths to 4.5%. Of note was some drop in the answers to the labor market questions. Those that said jobs were ‘Plentiful’ fell by almost 3 pts to the least since June 2018. Those that said jobs were ‘Hard to Get’ rose 2 pts to the most since September. Employment expectations fell almost 3 pts but after a 3.7 pt rise last month. Those expecting an increase in ‘Income’ did rise for a 2ndmonth but is still 2 pts below where it was a year ago. Notwithstanding the headline confidence drop, spending intentions did improve. The Conference Board had this bottom line: “Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report. Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term. However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.”
4) The Richmond manufacturing March index fell 6 pts m/o/m to 10 as expected. The internals were all over the place with the monthly volatility so I’ll leave it to this comment from the Richmond Fed, “Fifth District manufacturing activity grew moderately in March.” Finding workers is still an issue and “Respondents expected this struggle to persist in the near future but also anticipate continued growth in employment and wages.”
5) The Dallas manufacturing index for March fell to 8.3 from 13.1. The estimate was 8.9 but comes after a 12.1 jump in February. The capital spending component fell 6.6 pts to a 4 month low but the outlook did rebound. The overall business activity 6 month outlook also improved to a 4 month high.
6) The Chicago March manufacturing index fell 6 pts m/o/m to 58.7 and that was below the estimate of 61. It does though follow an 8 pt rise in February and a 7.1 pt drop in January. Averaging the 3 puts it at 60 which compares with 62.4 last year. Of note, backlogs fell below 50 for the first time since January 2017. Inventories fell back below 50 too. Employment was steady and prices paid receded. MNI bottom lined it by saying “survey evidence points to a slight slowdown since last year.”
7) February housing starts totaled 1.162mm annualized, 48k less than expected but January was revised up by a similar amount to 1.273mm. The internals though are most important because single family starts fell to 805k, the least since May 2017. Smoothing out the winter influence and holiday season puts the 3 month average at 863k for single family starts vs the 6 month average at 857k and the 12 month average of 872k. Permits for single family homes were unchanged at 821k which matches the least since August 2017 and the 3 month average of 824k is a deceleration from the 12 month average of 844k. As for multi family construction, the healthy part of the industry for reasons we all know, starts totaled 357k and brings the 3 month average to 329k vs the 6 month average of 348k and the 12 month average of 362k. Single family permits totaled 475k which is similar to the recent averages.
8) Upon any deal with China, it seems more likely that some tariffs will remain in place on China which also means that some of their tariffs will remain on us.
9) The March Economic Confidence index for the Eurozone fell to 105.5 from 106.2. The estimate was 105.9 and this index is now at the lowest level since October 2016. Manufacturing and services weighed on the headline figure as they make up 70% of it. Consumer, retail and construction confidence making up the balance did improve after recent weakness. This is the 9th month in a row of declines and the 13th month in the past 15 of a fall m/o/m.
10) The amount of negative yielding securities continues higher and is at $10.4 Trillion as of this writing.
11) German consumer confidence for April fell to 10.4 from 10.7 and while that matches a 2 yr low it still is at a high level.
12) Italian manufacturing confidence fell to 100.8 from 101.6 and that was .6 pts below the forecast. That’s the weakest since February 2015. Offsetting this was an improvement in Construction Confidence and Services’ Confidence. Retailers’ Confidence held unchanged.
13) UK mortgage approvals in February fell to the lowest pace since April 2013. The 35,299 loan approvals is down 11% m/o/m.
14) Turkey is back in the news with a new set of capital controls.
15) Somewhat influenced by the timing of the mainland lunar new year, Hong Kong’s exports in February fell 6.9% y/o/y, well below the estimate of a decline of 2.4%. Merging the exports to China over the first few months of 2019 still saw a decline of about 4.5%. Exports to the US dropped by 20.5%, to Japan by 20% and to Germany by 15%. Imports fell by 3.8% y/o/y which was a bit better than expected.
16) China’s industrial profits in the January-February time frame fell 14% y/o/y. The main areas of weakness was in autos, oil processing, nonferrous metals and chemicals. Ex this, there were flat y/o/y.