Positives
1)Details on QT are out and the Fed beginning in May will start aggressively removing themselves from distorting and manipulating the markets on a daily basis.
2)Initial claims for the week ended April 2nd came in at just 166k, 34k less than expected and last week was revised down by 31k to 171k. These are amazingly low numbers but there was a “Revision to Seasonal Adjustment Factors” that the estimates didn’t include so we can blame this for the differential. This too was reflected in the continuing claims data which came in at 1.52mm vs 1.51mm in the week prior. The estimates were around 1.3mm but again, not reflecting this new framework.
3)The inflation adjustment at least in this high profile space over the past two years is beginning to take place. Manheim said wholesale used vehicle prices fell by 3.3% in March from February. Though it still is up 24.8% y/o/y.
4)Canada’s unemployment rate fell to 5.3% in March, the lowest since at least 1976 that I have data on. The number of jobs added though were just under the estimate but because of an unexpected decline in part time workers while the number of full time hiring was well better.
5)The Reserve Bank of Australia left its benchmark rate unchanged at .10% as expected but is getting less patient as they dropped the wording “prepared to be patient” from their statement with regards to policy. Governor Lowe said “Higher prices for petrol and other commodities will result in a further lift in inflation over coming quarters, with an updated set of forecasts to be published in May.”
6)Singapore’s March PMI rose to 52.9 from 52.5. Markit said there was some moderation in demand and output expansion “coupled with the plunging of business sentiment into pessimistic territory had reflected the negative effects from recent developments such as the Ukraine war.” Also, “Supply constraints and price pressures meanwhile clearly worsened for the trade dependent economy which is susceptible to global influences.”
7)Japan’s March services PMI lifted to 49.4 from 44.2 following easing covid restrictions. Business optimism in Japan remained positive but did slip to the lowest since last August. “Firms hoped that the end of the pandemic would boost domestic and external demand, though were concerned about the impact a resurgence in cases and the Russia-Ukraine was would have on services activity.”
8)The Reserve Bank of India lays the groundwork for rate hikes and begins the process of sterilization of excessive reserves.
9)India’s March services PMI rose to 53.6 from 51.8. That said, inflation remains the big concern. “The March results showed the sharpest upturn in input costs for 11 years.”
10)The March Eurozone services PMI was revised up to 55.6 from the 1st print of 54.8 and up a hair from the 55.5 in February. The reopening after omicron helped the mood but “the resilience of the economy will be tested in the coming months by headwinds which include a further spike in energy costs and other commodity prices due to Russia’s invasion of Ukraine, as well as worsening supply chain issues arising from the war and a marked deterioration in business optimism regarding prospects for the year ahead.” Markit said this on inflation, “Prices data pointed to an intensification of inflationary pressures in March, with both input costs and output charges rising at rates which far surpassed their previous records seen in February.”
11)The UK March services PMI was revised higher too, to 62.6 from 61 initially. That compares with 60.5 in February. Inflation pressures remained robust. “An unprecedented 40% of the survey panel reported an increase in their average prices charged in March, while only 3% signaled a decline. The resulting seasonally adjusted Prices Charged Index pointed to the strongest rate of inflation since the survey began in July 1996…Higher salary payments and increased prices paid for energy, fuel and raw materials” drove this.
12)Opening day is here, //www.youtube.com/watch?v=wTymfvJlw6M
Negatives
1)The minutes from the FOMC meeting three weeks ago basically told us that QT is starting next month and after 3 months will get to an annualized pace of $1.14 Trillion. That is a giant sucking sound of lost liquidity. And how exactly will the MBS roll off take place?
2)The March ISM services index rose to 58.3 from 56.5 but that was just under the estimate of 58.5 and it was 68.4 right before omicron hit. The breathe of the increase got better as 17 of 18 industries reported growth vs 14 in February and 15 in January. The ISM bottom line was unsurprising, “There was an uptick in business activity in March but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation. Labor shortages have eased slightly, as Covid cases have declined and public health restrictions have been relaxed. Geopolitical concerns – particularly the Russia/Ukraine war, which has impacted material costs, most notably fuel and chemical prices – have created uncertainty for many businesses.”
3)The Atlanta Fed released its March Wage Tracker that is a 3 month moving average of median wage growth and it showed a 6% increase vs 5.8% in the month prior. We have data going back to 1997 and the peak prior to this recent move higher was 5.4% back in late 2000. If you’re aged 16-24 though, wages for you are now rising by 11.8% y/o/y from 11.4% in February. If you’re considered a ‘high skilled worker’, wages are up just 4.4%, though that is still the most since February 2009 that was on the downside of that recession. For those who are switching jobs, your wage growth is now on average 7.1% from 6.6% in February and a new high in this survey. While this is obviously good news for wage earners, next week’s March CPI is expected to print 8.4%. And, corporate profit margins have topped out with this being their largest cost.
4)The March 2022 Logistics Manager’s Index rose to the highest level in the history of the index. At 76.2, it compares with the long term average of 65.2. What has driven this? “The first three months of 2022 have been marked by high levels of inventory, and insufficient capacity to deal with it.” LMI added this on the growing inventory situation, some of which is purposeful as companies don’t want to get caught short again, and some will take time to work off likely because of over ordering. The higher inventory “trend started at the end of 2021 when inventories increased by 2.4% in December 2021, an all time month to month record. This was driven particularly by downstream retailers, who saw inventories up by 4.5% in December, handily outgaining manufacturers and wholesalers. This influx, combined with a cool down in consumer demand due to the move away from goods and back towards services with easing Covid restrictions, as well as price pressure due to burgeoning inflation, has left firms with more inventory than they know what to do with. Because of this, both inventory costs and warehousing prices reached all time high levels in March. Warehousing Capacity also hit a record in March, reaching an all time nadir of 36.1 this month. Transportation prices remain high and transportation capacity is still contracting this month.” On that last point though, “in the Upstream portion of our respondent base we saw some loosening in the transportation market.”
5)Truckstop.com said its Market Demand Index for the week ended April 1st fell to the lowest since December 10th. The main factor in the decline was the increase in trucking capacity available which could mean less loads to carry. They also said their metric of Dry Van Rate per Mile fell to the lowest since early December too. Also out was the DAT Freight & Analytics data that said “Van spot rates drop below $3 per mile, first time since December.” They specifically said the reefer rate is “cooling the fastest.” Reefer is short for refrigerated. On the other hand, “the flatbed market is heating up right on cue and linehaul spot rates are currently running around 26 cents per mile higher than this time last year.
6)For the week ended April 1st, the average 30 yr mortgage rate rose another 10 bps w/o/w to 4.90% and by a whopping 80 bps over the past month according to the MBA. In turn, refi’s fell another 10% after a 15% drop last week and a decline of 14.4% in the week prior. They are now down 62% y/o/y. The level of refi’s are now at a 3 year low. On the purchase side, after some stability over the past month as buyers jumped to lock in rising mortgage rates, applications fell 3.4% w/o/w and are down 9% y/o/y.
7)This is February data but there was a sharp jump in the amount of revolving (mostly credit cards) and non-revolving (mostly auto’s and student loans) credit outstanding. The estimate was for an increase of $18.1b and it was more than twice that at $41.8b. Of this, $18b was from revolving and the balance in non-revolving.
8)The March Caixin China services PMI which focuses on private business fell to 42 from 50.2 and that was well worse than the estimate of 49.7. Now the covid shutdowns have the obvious impact but Caixin also said “Overseas demand remained weak, with the gauge of new export business falling to its lowest since October 2020.” Consumers stretching?
9)While still strong (whether natural demand or a scramble for inventory in response to the war), Taiwan saw exports rise 21.3% y/o/y in March, just under the estimate of up 22.4% and after a 35% y/o/y increase in February. Not surprisingly the exports of machinery, electrical equipment and electrical products led the way. Imports grew by 20.3% y/o/y, 400 bps below the forecast.
10)Australia’s services PMI was 55.6 from 57.4 in February.
11)The April Eurozone Sentix investor confidence index fell to -18 from -7 and well worse than the forecast of -9.4. “When it comes to the question of when the recession began in the Eurozone, economists are likely to determine the beginning of the 2nd quarter of 2022 as the start of a recession in retrospect. This is at least the conclusion we have to draw from the current data of the sentix business cycle indices. At the beginning of April, the sentix economic indices collapsed…Both the current situation and the expectations indexes are now negative, and the economy is thus beginning to shrink.” As for help from other regions of the world, “At the moment, no other global region can provide a real counterbalance. Even the Asian region is already stagnating.”
12)The Eurozone February (so somewhat dated relative to the March CPI just seen last week) PPI was up another 1.1% m/o/m after the 5.1% spike in January. Versus last year, PPI was higher by 31.4%. Higher energy prices are certainly the main contributor but even ex energy prices rose 12.2% y/o/y.
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.