Positives
- While I’m not supportive of the means, we hope the ends to the tariff threats is an agreement with China over US IP.
- ADP said private sector job growth over the past 3 months has averaged 243k and with a 6 month average of 203k. Over time though it matches with the BLS as the 12 month average is 192k vs 187k in the BLS private sector component.
- In the last month that we’ll get a full picture of monthly auto sales, March total vehicle sales at a SAAR was 17.40mm, well more than the estimate of 16.90mm. This compares with 16.97mm in February, 17.07mm in January and vs an average of 17.7mm in Q4.
- The UK manufacturing PMI for March was basically unchanged m/o/m at 55.1 vs 55 in February and 55.1 in January. That was though a bit better than the estimate of 54.7. New orders though fell to a 9 month low. There was a slowdown in the persistent price pressures the UK has experienced. Markit is optimistic that the modest slowdown in UK manufacturing in Q1 will not last with “54% of companies expecting output to expand over the coming 12 months.”
- In February in Japan, regular pay rose .9% y/o/y after a 1.1% jump in January, the two best prints since 1997. Overall earnings in the month was up 1.3% y/o/y with a large 33% spike in bonus pay y/o/y.
- The China state sector weighted manufacturing PMI improved to 51.5 from 50.3. That was above the estimate of 50.6 but back to where it was in January at 51.3 and December at 51.6. The services index was up a touch at 54.6 from 54.4 as expected.
Negatives
- More trade tariff proposals are laid out and then another round is threatened. Many US companies and all consumers are in the crossfire. How and when does this end? There must be a better way of going about this without hurting our own in the process.
- Quantitative tightening is ramping up to $90b this quarter from $60b in Q1 and $30b in Q4 2017. US 3 month LIBOR has risen 40 straight days to 2.33%.
- Payroll growth in March was just 103k, well less than the estimate of 185k and the prior two months were revised down by a total of 50k. The private sector made up 102k of the total. The household survey saw a job decline of 158k but after robust growth in the prior two months. The unemployment rate held at 4.1% but the all in U6 rate fell 2 tenths to 8%, matching the lowest level in this cycle as there was a sharp drop in the number of ‘marginally attached’ workers. The participation rate ticked down by one tenth to 62.9% but the employment ratio held at 60.4%. Hours worked held at 34.5 as expected and with average hourly earnings up .3% m/o/m and 2.7% as forecasted, average weekly earnings accelerated to a 3.3% y/o/y growth rate, the best in years. It was up .3% m/o/m after a .4% gain in February. The pool of available labor fell by 156k to the lowest level since October 2007. The 3 month average is still a good 202k vs the 6 month average of 211k and 12 month average of 188k. This compares with the 2016 average of 195k, 2015 of 226k and the 2014 average of 250k. The slowing is a natural response to the reduced supply of labor.
- Initial jobless claims surprised with a 242k print for the week ended March 31st, well more than the estimate of 225k and up from 218k last week (revised from 215k). I’ll chalk it up to the Good Friday holiday. The 4 week average is still a very low 228k vs 225k last week. Continuing claims, delayed by a week, fell by 64k to the lowest level since 1973.
- The ISM services index for March fell .7 pts m/o/m to 58.8 and that was a hair below the forecast of 59. Of the 18 industries surveyed, 15 saw growth vs 16 last month. ISM said “The cooling off of the New Orders Index possibly prevented an even stronger reading for the NMI composite index. The majority of respondents remain positive about business conditions.”
- The ISM manufacturing index for March fell 1.5 pts m/o/m to 59.3 and that was slightly below the forecast of 59.7 and compares with 59.1 in January. It’s about in line with the 6 month average of 59.2. New orders fell 2.3 pts to 61.9, while still well above 50, is the lowest since August. Prices paid jumped another 4 pts to 78.1, the highest since April 2011. While the headline number fell m/o/m, the breadth was better as 17 industries out of 18 surveyed reported growth vs 15 in February. The ISM bottom lined the report by saying “Demand remains robust, but the nation’s employment resources and supply chains are still struggling to keep up.”
- With the average 30 yr mortgage rate holding at a 4 yr high for the 4th straight week, the MBA said mortgage applications to buy a home fell 2.1% w/o/w but remain up by 5.3% y/o/y and follows 3 straight weeks of gains. Refi apps fell 4.9% w/o/w and are lower by 11.1% y/o/y.
- The US trade deficit in February hit the highest level since October 2008 (the Atlanta Fed trimmed its GDP forecast by 2 tenths in response to 2.3%). The positive though was the record high seen in exports.
- In Japan, overall household spending in February was up .1% y/o/y instead of rising by .4% as expected. “The pick up in consumption seems to be stalling” said a government official today.
- German industrial production in February fell 1.6% m/o/m vs the estimate of up .2%. The German Economy Ministry said “Growth momentum should be weaker than in the previous year. But good orders and positive sentiment suggest the trend in manufacturing will continue to point upward.”
- German factory orders in February rose .3% m/o/m but that was well below the estimate of up 1.5%. The y/o/y gain of 3.5% was the slowest since last April. The German Economy Ministry acknowledged the moderation but remains hopeful. “The trend in manufacturing orders has weakened markedly. Despite the muted start to the year, orders should continue to grow. The global economy continues to be in an upswing, so that demand for German industrial goods should remain high.”
- The Markit Eurozone Retail PMI index for March basically flat lined as it fell to 50.1 from 52.3, a one year low. Markit said “The stagnation reflected a weaker rate of growth in Germany, stagnation in France and a return to contraction in Italy.”
- In February, Eurozone retail sales rose just .1% m/o/m, below the forecast of up .5% and January was revised down by 2 tenths. Maybe the weather was the reason here too. But, even internet sales fell for a 3rd straight month.
- In Europe, March CPI was up 1.4% y/o/y as expected but a pick up from the 1.1% pace seen in February. That matches a 4 month high. The core rate remained up 1% y/o/y but that was one tenth less than expected.
- The eurozone services PMI was revised down a hair to 54.9 from the first print of 55 and that is a 7 month low. Hopefully the slowdown is temporary “with employment and backlogs of work rising and business optimism remaining above its long run trend level” according to Markit. Markit said too “some of the loss in growth momentum also appears to have been the result of temporary factors, such as bad weather and short term capacity constraints, notably shortages of supplies and labor.”
- Markit confirmed the initial manufacturing PMI print of 56.6 which matches the lowest level in a year. Markit blamed part of the softness to “short term capacity constraints” that “limit the economy’s ability to grow so quickly for long periods.” Also, “export growth has more than halved since late last year, linked in part to the appreciation of the euro, and in some cases demand is being stymied by higher prices.”
- The EU unemployment rate in February fell one tenth to 8.5% as forecasted. That is the lowest rate since December 2008.
- The UK services PMI fell almost 3 pts m/o/m to 51.7 and that was below the estimate of 54. That is also the worst print since July 2016. Let’s blame this too on the weather, “survey respondents noted that snow disruption and unusually bad weather in March had been a key factor holding back business activity growth.” It wasn’t all weather though as “survey respondents often cited subdued consumer demand, while there were also some reports that Brexit-related uncertainty had led to delayed decision making and risk aversion among clients.”
- The China services PMI from Caixin (mostly private companies) fell to 52.3 from 54.2 and that was 2.2 pts below expectations. That is also a 4 month low. New orders and employment both fell and Caixin said “expectations towards business activity over the next 12 months declined to the lowest reading since September, suggesting that weakening demand has affected firms confidence.”
- The Chinese Caixin manufacturing PMI fell .6 pts to 51 and the estimate was for a modest rise to 51.7. That’s a 4 month low but “Encouragingly, confidence towards growth prospects improved to a 1 year high amid forecasts of greater investment and expectations of better market conditions” according to Caixin.
- The services PMI in Japan fell m/o/m to 50.9, the lowest since October 2016.
- Singapore’s PMI dropped to 53.7 from 55.3 but just back to its 53.6 level in January. PMI’s fell also m/o/m in South Korea (back below 50), Taiwan, Vietnam, Malaysia (still below 50), Indonesia, and Thailand (back below 50).
- The Japanese quarterly Tankan manufacturing report for Q1 fell 2 pts q/o/q to 24, 1 pt less than expected. The Q2 outlook also was below the forecast and down q/o/q. The services index also missed the mark for Q1 and the outlook. The small business side held steady and that was a touch better than expected. Capital spending plans did slow to 2.3% from 6.4% but that was still better than the estimate of up 1%.