1) Initial jobless claims for the week ended April 6th broke below 200k at 196k. That was 14k below the forecast and down from 204k last week (revised from 202k). That’s the lowest print since I was born. This brings the 4 week average down to 207k from 214k and that is also the lowest since 1969. Continuing claims, delayed by a week, fell to the lowest since January. This was an interesting opinion on why claims are so low, from USA Today. (h/t DDB)
2) The March CPI rose .4% m/o/m headline as expected while the core rate was higher by .1% which was one tenth less than expected. Versus March last year the headline rate is up by 1.9% and the core rate is higher by 2%. While the 2% core rate is the slowest since February 2018, it does mark the 13th straight month with a 2 handle. We have services inflation and goods deflation. If the Fed watched CPI instead of PCE, we wouldn’t be hearing the whining about not hitting their inflation target.
3) The March NFIB small business optimism index was basically unchanged at 101.8 vs 101.7 in February. Plans to Hire rose 2 pts after falling 2 pts in February. Finding the right help remains the biggest issue for small business as Positions Not Able to Fill rose 2 pts to match the highest on record, dating back to 1973. This led to an increase in current compensation plans and those planned for the future. While wage gains are no longer accelerating, fortunately they are now running above the rate of inflation. There was no or little change in some other key categories: Capital Spending plans, those that Expect a Better Economy, those that Expect Higher Sales and only a 1 pt rise in those that said it’s a Good Time to Expand (to 23 but was 30 last October) and 1 pt increase in the Profit Outlook (off the lowest level since December 2017). In another good forward looking indicator, Plan to Increase Inventory fell 2 pts to -1, the lowest since December 2017 “with stocks viewed as too large” according to NFIB. Credit conditions weakened to match the lowest since November 2013. Inflation pressures moderated as those that plan Higher Selling Prices fell 1 pt to 12, the least since January 2018 but that’s still twice the average over the past 5 years. The NFIB remains optimistic notwithstanding the slower trend, “Economic growth hit a small pothole in the first quarter with a government shutdown and bad weather all around. The most recent economic data indicate that the economy is headed back toward stronger growth.”
4) China exports in March jumped by 14.2% y/o/y, well more than the estimate of up 6.5%. Exports to the US were up just 3.7% but were pretty solid to Europe, up 24% and the rest of Asia. Smoothing out Lunar New year noise, exports were up 1.4% in Q1 y/o/y.
5) China reported its inflation data and they were exactly as expected for March. PPI (which correlates with industrial profits) rose .4% y/o/y and CPI jumped to a 2.3% y/o/y gain from 1.5% in the prior month. That was all due to a spike in food prices as prices ex food and energy grew by 1.8% y/o/y, pretty much on trend.
6) Industrial production in February in the Euro area wasn’t as bad as estimated. It was down .2% m/o/m, 3 tenths better than expected and January was revised up by 5 tenths to an increase of 1.9%. On a y/o/y basis though, it is still down 4 straight months for the first time since 2012.
7) UK manufacturing production was higher by .9% m/o/m, 7 tenths more than expected and January was revised up by 6 tenths. As seen in the March PMI figure, some was likely stockpiling ahead of what was possibly a hard Brexit on March 29th according to the ONS. The ONS also said they could not quantify the impact.
8) Pre Brexit stock piling in the UK did help to lift GDP growth for the 3 months ended February to .3% 3m/3m, one tenth more than expected and the 3 months ended January was revised up by one tenth to also a .3% gain. Annualizing the February growth puts GDP up to 2% but again, tough to say how much was front loaded.
9) The UK now has more time to figure out how to leave the EU.
10) Taiwan said exports fell in March by 4.4% y/o/y but that was well better than the estimate of a decline of 8.3%. Imports were higher by 6.6%, much above the forecasted drop of 12.6% y/o/y.
1) The March Cass Freight shipments index fell 1% y/o/y, the 4th month in a row that is negative. They said “When the December 2018 Shipments Index was negative for the first time in 24 months, we dismissed the .8% y/o/y decline as reflective of a tough comparison ‘because December 2017 was an all time high for the month’ and ‘also because of the stabilizing patterns we see in almost all of the underlying freight flow’. When January 2019 was also negative (down a mere .3%), we again made rationalizations, ‘January 2018 was…an all time high for the month.’ Then February was down 2.1% and we said, ‘While we are still not ready to turn completely negative in our outlook, we do think it is prudent to become more alert to each additional incoming data point on freight flow volume, and are more cautious today than we have been since we began predicting the recovery of the US industrial economy and the rebirth of the US consumer economy in the 3rd quarter of 2016’. With March down 1%, the 4th y/o/y negative month in a row, we are preparing to ‘change tack’ in our economic outlook.”
2) The average 30 yr mortgage rate ticked up by 4 bps to 4.40% with the rise in the 10 yr. After last week’s big spike in refi apps, they fell 11.4% w/o/w but remain up by 42.5% y/o/y. There was almost no change in purchase applications from last week but are still up 12.6% y/o/y.
3) The number of job openings in February totaled almost 7.1mm, a still robust number of needed workers but down from 7.6mm in January, almost 500k less than expected and the least amount of availability since March 2018. Hiring’s dropped by 133k and is down for the 3rd month in the past 4 and brought the hiring rate down by one tenth to 3.8%. The quit rate held at 2.3%, the best in this expansion as the number of quitters was little changed.
4) The preliminary April UoM consumer confidence index fell to 96.9 from 98.4 and that was below the estimate of 98.2. All of the weakness was in the Expectations component which dropped by 3 pts. Current Conditions were up by .9 pts. Inflation expectations did fall by one tenth to 2.4%. Those expecting Higher Income fell by 5 pts but after rising by 7 pts in March. Those expecting lower unemployment in the coming 12 months fell by 3 pts but it jumped by 11 last month. Spending intentions were mixed. Noteworthy was those that said it’s a Good Time to Sell a house is 1 pt from a record high dating back 27 years. For those living in high tax states suffering from the cap on SALT deductions, that makes sense.
5) According to AAA, the price of gasoline is now up 5% y/o/y and the daily price has NOT fallen since February 11th.
6) While the ECB is now looking at reducing the negative impact of NIRP, many members including Mario Draghi really believe the benefits still outweigh the costs. But either way, you can lead a horse to water but you can’t make it drink. This week the ECB released its lending survey. Demand for loans from business in Q1 fell to zero from 9% in Q4. Business loan demand in Italy and Spain actually fell. Overall demand for consumer credit fell to the lowest in 5 years. The ECB might want to pay banks to lend via the upcoming TLTRO but if there isn’t demand, who cares and it’s called ‘pushing on a string’.
7) Germany saw its exports in February fall by 1.3% m/o/m, more than the estimate of a drop of .5%. Imports also were weaker than expected, dropping by 1.6% m/o/m vs the forecast of a decline of .6%.
8) The Bank of France said its business industry sentiment index was 100 for March, the estimate was 101 and that is unchanged from February. This index is a fraction off the lowest level since November 2016. The Bank of France forecasts .3% q/o/q economic growth in Q1.
9) The UK now having more time to leave the EU just adds to more months of cloudy visibility for the business community.
10) China aggregate financing totaled 2.86 Trillion yuan in March, well more than the estimate of 1.85 Trillion. Of this, bank loans increased by 1.69 Trillion, 440b more than expected. To smooth out the January/February Lunar New Year impact and the month after, total loan growth rose 40% y/o/y. Bank loans are up 19.5% ytd y/o/y. Household borrowing was particularly strong, rising by 460b yuan, the biggest increase in two years. Corporate bond issuance was also up solidly as was local government bond issuance. Money supply growth was higher by 8.6% y/o/y, above the estimate of up 8.2% and the quickest since February 2018. We can only hope that this lending binge gets to the people and businesses that had difficulty accessing it prior.
11) Chinese imports (many of which contribute to eventual exports) dropped by 7.6% vs the forecast of up .2% and that’s the 4th straight month of declines. Imports dropped by 4.8% y/o/y in Q1.
12) Singapore’s economy in Q1 slowed to a 1.3% y/o/y gain, one tenth less than expected, down from 1.9% in Q4 and matches the slowest pace of increase since Q3 2012. Manufacturing contracted in the quarter driven by declines in electronics and engineering.
13) In Japan, its February core machinery orders index rose 1.8% m/o/m after a 5.4% drop in January but that was less than the forecast of a 2.8% rise. Versus the same month last year, orders are down 5.5%, the 2nd worst since the summer of 2017.
14) Consumer confidence in March in Japan fell 1 pt m/o/m to 40.5 where no change was estimated. That’s the lowest since February 2016 and comes as the Abe government is debating whether to implement another hike in the VAT. Income Growth expectations fell to the least since November 2016. The Overall Livelihood component dropped to the lowest level since January 2015. The Bank of Japan probably wants a hike in the VAT because it would accomplish the same thing as achieving their 2% inflation target.
15) The Bank of Japan downgraded its assessment of 3 of 9 economic regions in Japan, raising it for one and keeping it the same for 5. For output, they cut its assessment for 7 of the 9 due to softness in semiconductors and machinery. They said “We have to cut our assessments on exports and output for some regions because we’re hearing more complaints about the impact of the global economic slowdown than 3 months ago.”