1)Dallas Fed President Robert Kaplan hopefully is elevating the taper discussion amongst his colleagues with his expression today that “we’re now observing excesses and imbalances in markets” and “we’ve got real excesses in the housing market…It’s not yet the speculative situation that we had back in ’07, ’08 and ’09, but I think it bears watching and keeping a close eye on.” He repeated his desire to start raising rates in 2022, well earlier than the median dot plot. When one is approaching the curves on the road, they are supposed to slow down.
2)The April Chicago manufacturing index jumped to 72.1 from 66.3 and that was 7 pts better than expected. Go back to December 1983 the last time we saw such an extreme level. “Anecdotal evidence suggested an anticipated increase in business activity, partly because firms are overbuying due to raw material shortages.” To this, “Prices paid at the factory gate skyrocketed a further 11.1 points in April, surging to a 41 year high. Raw material shortages and transportation problems continue to weigh on companies cost burden.”
3)The April final UoM consumer confidence index improved to 88.3 from the initial print of 86.5 and the estimate of 87.5. Current conditions remained the same with the 1st read but Expectations were revised up by 3 pts. One year inflation expectations settled out the month at 3.4% vs 3.1% in March, 3.3% in February, 3% in January and 2.5% in December. But, that was off the early month figure of 3.7%. Employment and income expectations both rose m/o/m. Spending intentions were more mixed as they fell for buying a home, likely due to the skyrocketing price gains but rose somewhat for buying a car. Consistent with high home prices, those that said it’s a good time to sell a home rose 8 pts m/o/m. They fell 2 pts for plans on buying a major appliance. The UoM’s bottom line was this: “The renewed confidence is due to record federal stimulus spending, both recent and planned, as well as the positive impact from a growing share of the population who are vaccinated.”
4)The April Conference Board Consumer Confidence index jumped to 121.7 from 109 and that was well better than the estimate of 113. It was all due to a 29.5 pt m/o/m increase to the Present Situation component though as Expectations were about unchanged, up just 1.3 pts m/o/m. One year inflation expectations held at 6.7%, matching the highest since October 2008. The main catalyst behind the confidence gain was the sharp improvement in the answers to the labor market questions, definitely helped by us getting closer to a full reopening and the increasing demand for labor. Those that said jobs were Plentiful jumped to 37.9 from 26.5, the best since last March. Those that said they were Hard to Get fell to 13.2 from 18.5, the least since January 2020, so below the pre Covid February level. Notwithstanding the big gains in these answers, expectations for more jobs actually slipped a touch to 34.5 but only after jumping by 8.5 pts last month to 35.9. Income expectations for an increase rose 2.5 pts m/o/m to the most since March 2020. Intentions to take a vacation rose to the highest since October for obvious reasons. Spending intentions grew for auto’s and homes but fell for major appliances.
5)Thanks mostly to government handouts (up 96% m/o/m), personal income spiked 21.1% m/o/m in March after a 7% drop in February. That was just above the estimate of up 20.3%. This led to a 4.2% increase in personal spending as expected and the wide spread between the two means that the savings rate went to 27.6% from 13.9% in February and 20% in January after the December spending bill. Looking at the private sector income data, wages and salaries rose 1.1% m/o/m after no change in February and an .8% increase in January. That’s up 5.6% y/o/y. Also we saw the Employment Cost Index for Q1 and that increased by .9% q/o/q, 2 tenths more than forecasted. Private sector wages and salaries rose 3% in Q1 y/o/y vs 2.8% in Q4, 2.7% in Q3, 2.9% in Q2 and 3.3% in Q1.
6)Delayed by two weeks, those continuing to receive PUA fell by 335k and is just below 7mm at 6.974mm, the 1st time below 7mm since the holiday distorted January 1 print. Those continuing to receive emergency assistance fell by 413k after rising by 448 in the week before.
7)The Dallas manufacturing index for April rose to 37.3 from 28.9 and above the estimate of 30. The Wages and Benefits component jumped 9 pts to 37.1, the highest level on record dating back to 2004. Prices paid came within .3 pts of a record high while those received is at a record high.
8)The private sector weighted Caixin manufacturing PMI in contrast rose to 51.9 from 50.6 and that was one point above expectations but still below the 53-55 prints we saw in Q4. Caixin said “Manufacturers stayed confident about the economic recovery and keeping Covid under control as the gauge for future output expectations was still higher than the long term average. In the future, the focus will be on inflation as the price gauges have maintained an upward trend for several months. Policymakers have expressed concerns about rising commodity prices on several occasions and urged adjusting raw material markets and easing businesses’ cost pressure. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”
9)Japan’s jobless rate in March fell to 2.6% from 2.9% where the estimate was for no change. The jobs to applicant ratio ticked up to 1.10 from 1.09 where also no change was anticipated. That 1.10 matches the highest since last June.
10)Tokyo said CPI in its region in April was flat ex food and energy after rising by .3% y/o/y in March. The estimate was for another increase of .3%. The .6% headline CPI drop was led by a 1.4% fall in food prices which is likely temporary in light of the spike in food prices elsewhere. Cell phone charges drove the core rate to below expectations as prices here fell 27% y/o/y and itself took off 4 tenths from CPI.
11)Industrial production in Japan in March jumped 2.2% m/o/m rather than declining by 2% as expected.
12)With a stop and start reopening, Japan said retail sales in March rose 1.2% m/o/m, double the estimate and comes after a 3.1% rise in February.
13)Hong Kong said its March exports rose 26.4% y/o/y to a record high in absolute dollars, well better than the estimate of up 15.8%. The Hong Kong government said “The global economic recovery led by the mainland and the US should continue to support Hong Kong’s export performance in the period ahead.”
14)South Korea’s economy grew by 1.6% q/o/q and 1.8% y/o/y, above the estimates of up 1.1% and 1.2% respectively. Its economy is now back above its pre Covid size in Q4 2019.
15)Eurozone Q1 GDP contracted by .6% q/o/q after a 7 tenths decline in Q4. The estimate though was for an .8% fall. Germany’s economy fell by 1.7% q/o/q, a touch worse than expected while France saw a modest gain of .4% q/o/q vs the estimate of no change.
16)There was a sharp increase in the Economic Sentiment index for the Eurozone for April which rose to 110.3 from 100.9 with manufacturing, services, consumer, retail and construction confidence all contributing to the gain. That was well above the estimate of 102.2 as the pace of the vaccine rollout picks up.
17)With the UK economy more fully reopening with the successful vaccine rollout, the CBI retail sales index jumped to +20 from -45 and that was double the estimate. That said, the internals were still mixed. According to the CBI, “Hardware and DIY and furniture & carpets subsectors saw sales significantly above seasonal norms, supported by a consumer focus on home improvement. Grocers and non store retailers also reported that sales were good for the time of the year. However, clothing and footwear store sales remained well below seasonal norms.”
18)Hope that Mario Draghi is an economic savior was evident in the April Italy economic confidence index which rose to 97.3 from 94.2. That’s the best since February 2020 and again was led by strength in manufacturing. Construction, services and retailers confidence also improved m/o/m.
19)Hopefully for the Jets Zach Wilson is the guy to end 52 years of misery. Hopefully it will work out better than this, //www.youtube.com/watch?v=rZxNeFLuY98.
1)Jay Powell and the FOMC confirmed that they will remain on track with a monetary policy that maybe is best suited in the depths of an emergency, like one year ago, but has no semblance of logic under the current economic circumstances. As for their desire to look out for the lower income wage earners of the economy, they have made owning a home unaffordable, gasoline prices are at two year highs, food prices are at 10 year highs and another consumer product company, the CEO of Colgate Palmolive said today that he “doesn’t see high commodity costs abating anytime soon” and that “high commodity costs are forcing price increases.”
2)Core PCE for March rose .4% m/o/m, one tenth more than expected and follows a one tenth increase in February and 3 tenths in the prior two months. That core m/o/m increase is the biggest since October 2009. The y/o/y figure influenced by easier comps (will be much more easier in April), rose 1.8% y/o/y. Headline inflation was higher by .5% m/o/m as expected after a 2 tenths gain in February, 3 tenths increase in January and 4 tenths in December. The y/o/y increase was 2.3%.
3)Initial jobless claims totaled 553k, 13k more than expected and compares with 566k last week which was revised up from 547k. The 4 week average falls to 612k from 656k. Those filing for PUA fell to 122k from 133k. Delayed by a week, continuing claims were up by 9k after falling by 57k in the week prior.
4)The MBA said mortgage apps fell w/o/w. Purchases were down by 4.8% and are now lower in the 4th week in the past 5. Purchases are still up 34.1% y/o/y but easy comps are the main factor. Refi’s fell 1.1% w/o/w and are down 18.4% y/o/y.
5)Pending home sales in March rose 1.9% m/o/m, below the estimate of a rebound of 4.4% and February was revised down to a drop of 11.5% from the initial print of down 10.6%. The Midwest is the only region that saw a m/o/m drop. Here was the National Assoc of Realtors advice on dealing with the current marketplace, “Potential buyers may have to enlarge their geographic search areas, given the current tight market. If there were a larger pool of inventory to select from, ideally a 5-6 month supply, then more buyers would be able to purchase properties at an affordable price.”
6)Even before distorted covid comps kick in, S&P CoreLogic said its home price index in February rose 12% y/o/y vs 11.1% growth in January, 10.1% in December, 9.2% in November, 8.1% in October, 6.7% in September, 5.4% in August, 4.2% in July and 3.5% in June. The 20 city index saw prices up by 12% y/o/y too with a 17.4% price increase in Phoenix leading the way. San Diego saw a price gain just behind this at 17%, Seattle at 15.5% and Boston at 13.7%. Lagging was Chicago at 8.6% and Las Vegas at 9.1%.
7)Core durable goods orders in March rose .9% m/o/m, about half the estimate of up 1.7% and follows an .8% fall in February. Core shipment growth, plugged into GDP, rose 1.3% m/o/m, just below expectations and comes after a 1.1% drop in February. The inventory to shipment ratio fell to 1.68 from 1.71 and vs 1.63 in the month prior.
8)While REAL GDP for Q1 at 6.4% was just below the 6.7% estimate, the nominal GDP gain of 10.5% was well more than the forecast of 9.3% as the price deflator spiked by 4.1% instead of by 2.6% as estimated. Headline PCE prices jumped by 3.5% q/o/q. The core PCE q/o/q was higher by 2.3%, about as expected.
9)The April Richmond manufacturing index held at 17. The estimate was for a 5 pt m/o/m gain. Prices paid and received both jumped again. Six months ago prices paid was 2.18. In April it’s at 7.11, the highest on record dating back to 1997. Prices received six months ago was 1.14 vs 4.83 in April, the highest since 2008 and the 2nd highest on record.
10)The Eurozone said its April CPI rose .6% m/o/m after a .9% increase in March and that was one tenth more than expected. The y/o/y, easy comp read, increase was 1.6% headline and .8% core. Goods prices rose .7% m/o/m and services by .5%.
11)Reflecting the selective covid restrictions that were back on, Germany said its April unemployment change was up 9k instead of falling by 10k as expected. The unemployment rate though held steady at 6% thanks in part to their wage subsidization program.
12)We saw consumer confidence numbers out of Germany and France. The on and off covid restrictions influenced the German one where confidence weakened to -8.8 from -6.1. The estimate was for a gain to -4.2. French consumer confidence was left unchanged.
13)The April German IFO business confidence index unexpectedly fell to 99.5 from 100.3. The estimate was for a gain to 101.2. The IFO said succinctly “Both the 3rd wave of infections and bottlenecks in intermediate products are impeding Germany’s economic recover.”
14)China’s state sector weighted manufacturing and services composite PMI for April fell to 53.8 from 55.3 with both components lower. The reason given was due to the same supply issues that are now being faced by companies globally. The release came with this quote from, “China’s economy continued to recover steadily but some surveyed companies said problems such as chip shortages, poor international logistics, shortages of containers, and rising freight rates are still serious.”
15)April consumer confidence did slip to 34.7 from 36.1 in Japan as they went thru another round of selective covid restrictions.
16)The Bank of Japan did nothing as expected this week but Kuroda stuck to his 2% inflation obsession, 8 years later.
17)The trade data out of Vietnam, helped by easy comps and the global manufacturing strength was robust but not as much as expected. Exports in April rose 45% y/o/y vs a 19.2% gain in March but less than the forecast of up 53%. Imports were higher by 43.5% vs the estimate of up 42%.
18)Singapore reported a miss in its March industrial production figure relative to expectations but all due to the volatile pharma sector. Tech was strong. The Economic Development Board said “In particular, growth of the semiconductors segment was supported by demand from cloud services, data centers and 5G markets.” Chemical production was also strong while shipyards and aerospace were soft.