1)Continuing claims fell to a new cycle low and fresh 50+ yr low at 1.343mm from 1.387mm last week.
2)Import prices in April were flat m/o/m vs the estimate of up .6% but half of that is explained by the 3 tenths upward revision to March which spiked by 2.9% in the month alone. Ex petro, prices rose .4%, 3 tenths less than expected and March was revised up by one tenth to 1.2%. Versus last year, headline prices are up 12% and ex petro by 7.8%. Take out all food and fuels and they were higher by 6.9%.
3)Christine Lagarde seems to finally be on board with a July rate hike, right after QE ends in June. “The first rate hike, informed by the ECB’s forward guidance on the interest rates, will take place some time after the end of net asset purchases. We have not yet precisely defined the notion of ‘some time,’ but I have been very clear that this could mean a period of only a few weeks.”
4)The May German ZEW investor confidence index in the German economy improved to -34.3 from -41 and that was better than the expected further fall to -43.5. “Thus, slightly less pessimistic” according to ZEW. The current situation though further deteriorated. With “a large majority of experts expecting an increase in interest rates during the next six months…they expect a decline of inflation rates from their very high current level.”
5)China, with its ports still open and many factories as well in Shanghai and other places but obviously well below normal capacity, said exports rose 3.9% y/o/y, just above the estimate of up 2.7% but that is the slowest pace since June 2020. Imports were flat y/o/y, better than the forecast of down 3% due to higher commodity prices.
6)Taiwan’s exports grew by 18.8% y/o/y, well better than the estimate of up 12.1%. Imports rose by almost 27% y/o/y vs the expected gain of 18%.
1)The preliminary April UoM consumer confidence index fell to 59.1 from 65.2 last month, 5 pts below the estimate and the weakest read since August 2011. For perspective, the April 2020 low was 71.8 and the 2008 recession low was 55.3. Both main components contributed to the decline. One year inflation expectations held at 5.4% for the 3rd straight month and the 5-10 yr guess was unchanged at 3% for the 4th straight month. We saw a rebound in expectations for income growth but noteworthy was the 12 pt drop in expectations for employment to the weakest level since November 2020. Worries over falling real wages was reflected writ large to the number of those who expect ‘Family Income Will Beat Inflation Over Next 5 Years.’ This fell to just 32.5%, the lowest since May 2014. Spending intentions weakened further. Those that said it’s a good time to buy a home fell a sharp 14 pts m/o/m to just 48. Go back to 1982 the last time we saw this when interest rates were in the double digits. Vehicle buying expectations fell another 1 pt m/o/m to just off a fresh record low dating back to the 1970’s and major appliance plans declined by 8 pts. UoM made the point that the declines in confidence were broad based and “visible across income, age, education, geography, and political affiliation.” And, consumers “mentioned inflation throughout the survey, whether the questions referred to their own personal financial situations, their outlook for the economy, or buying conditions.”
2)Initial jobless claims totaled 203k, 10k more than expected and vs 202k last week (revised from 200k). The 4 week average rose to 193k from 189k last week.
3)The Cass Freight April shipments index showed a 2.6% fall from March and down .5% y/o/y. They said “Freight was slowing even before the war in Europe again, but the effects of the additional surge of inflation and recent interest rate increases seem to have pushed volumes over the edge. After a nearly two year cycle of surging freight volumes, the freight cycle has downshifted with a thud. It’s possible the April data include some indirect impact from lockdowns in China, but with container ship backlogs still off North American ports, the direct effects on finished goods imports seem more likely in the June/July timeframe.” And their bottom line, “The prospect of freight recession is now considerable, as substitution from goods back to services spending picks up pace, and as inflation slows overall spending, particularly via higher fuel prices and by pressing up interest rates.”
4)The NAHB issued a report titled “Home Builders Warn of Significant Affordability Declines.” Their affordability index based on where the housing market stands today is at “just 48.7% of homes sold in the first quarter were affordable to median income families, the lowest affordability level recorded on the Housing Opportunity Index since the beginning of the revised series in the first quarter of 2012.”
5)Fannie Mae’s Home Purchase Sentiment Index was released for April and it fell to the lowest level since May 2020 “as surveyed consumers expressed heightened concerns about housing affordability and rising mortgage rates” to state the obvious. And it’s the first time buyer that is getting screwed the most. “The current lack of entry level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first time homebuyers in particular, evidenced by the larger share of younger respondents (aged 18-34) reporting that it’s a ‘bad time buy home.” Also, the consumer perception on getting a mortgage “also decreased across nearly all surveyed segments this month.”
6)Headline CPI in April rose .3% m/o/m, one tenth more than expected and the core rate was up by .6% m/o/m, two tenths more than expected. On a y/o/y basis, consumer inflation is up 8.3% y/o/y and 6.2% y/o/y, a slight comedown from the 8.5% and 6.5% y/o/y gains seen in March but we know this gets to the tougher comparison story, and nothing more. Services inflation ex energy jumped .7% m/o/m and up by 4.9% y/o/y. Owners’ Equivalent Rent rose .5% m/o/m and Rent of Primary Residence was up by .6% with both up 4.8% y/o/y. An accurate measure would have them up twice that. The prices for airlines and hotels spiked. Goods prices ex energy and food rose .2% m/o/m and up by 9.7% y/o/y but that is a slower pace mostly because of tough comps. While used car prices fell for .4%, and down for a 3rd month (but still up 23% y/o/y), new car prices jumped 1.1% m/o/m and 13.2% y/o/y.
7)Headline PPI in April rose .5% m/o/m as expected but after a two tenths upward revision to March to up 1.6%. The core rate was higher by .4%, less than the estimate of up .7% but March was revised up by 2 tenths to 1.2%. If we take out food, energy and trade, the increase m/o/m of .6% was as forecasted and March was left unchanged up .9%. Versus last year, headline PPI was up 11% after 11.5% in March while the core rate was higher by 8.8% from 9.2% and also ex trade, by 6.9% vs 7.1% in March. Goods prices jumped 1.3% m/o/m and by 1% ex food and fuel and are up 16.3% and 10.1% y/o/y respectively. Auto’s and equipment led the increase. Services prices were flat m/o/m but only after the 1.2% rise in March and are still up 8.1% y/o/y. Trade prices fell m/o/m but after jumps of 1.9%, 1.7%, 1.2% and 1.9% in the 4 months before. Prices for transportation/warehousing rose sharply, by 3.6% in April after the 5.7% rise in March and 2% gain in February. Specifically, truck transportation skyrocketed by 4.4% in the month alone.
8)As for those overseas importing and paying with a weaker currency, export prices rose .6% m/o/m after massive jumps in the prior months and are up 18% y/o/y. Ex food and energy, prices rose by 1.2% m/o/m and 7.5% y/o/y.
9)With another acceleration higher in the average 30 yr mortgage rate to 5.53% from 5.36%, the highest in 23 years, people rushed to lock in on the purchase side as applications rose 4.5% w/o/w but still are down 7.7% y/o/y. Refi’s fell another 2% to another multi year low and are down 72% y/o/y.
10)The CNBC story this week on Uber where the CEO told its employees that “We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board” was particularly noteworthy. It follows similar commentary from Meta and Twitter, among others.
11)The NFIB April small business optimism index was unchanged m/o/m at 93.2, holding at the lowest since April 2020. There was another 1 pt decline in those that Expect a Better Economy to a new record low in this survey to -50% dating back to 1974. The NFIB said “Small business owners are struggling to deal with inflation pressures. The labor supply is not responding strongly to small businesses’ high wage offers and the impact of inflation has significantly disrupted business operations.”
12)There was a huge increase in consumer credit outstanding in March. The rise totaled $52.4b, double the estimate and after a jump of $37.7b in February. These are the two largest monthly increases on record. Of the March increase, $31.4b was revolving credit, mostly credit cards. How much was to maintain one’s lifestyle with the shrinking savings rate and how much was just the shift to more services where credit card usage is higher, from goods? I don’t know.
13)Reflecting the aggressive shutdowns and slowing housing market, aggregate financing totaled 910b yuan in China in April, less than half the estimate of 2.2T yuan and the lowest since February 2020, the last time they shut down like this. Bank loans were only 645b vs the estimate of 1.53T.
14)China reported its April inflation data and both PPI and CPI rose more than expected with the former up 8% and the latter by 2.1%. With respect to CPI, it was mostly food and energy as ex those, prices grew by .9% but we know what almost 50mm people between Shanghai and Beijing are dealing with. With PPI, that 8% print compares with 8.3% in March and vs the estimate of up 7.8%.
15)With rising costs even in Japan and limited wage growth, household spending fell 2.3% m/o/m, worse than the estimate of down 3.3%.
16)In the ‘you can’t make this stuff up’ category, coming from the institution that went to all ends of the earth over the past decade to generate higher inflation, Christine Lagarde told employees in a memo last week that they will not see wage increases that equal inflation as “an indexation of salaries to inflation is not desirable and not intended.” Wages for them rose by 1.5% in January. She feels their pain though, “I understand that the figure has disappointed many of you because of high inflation. We understand why inflation is a concern for many of you, as it is for many people outside the ECB.”
17)The May Sentix Investor Confidence index fell to -22.6 from -18 and 1 pt weaker than expected. That’s the lowest since June 2020. Sentix said “At the beginning of May, the downturn deepened further. Europe is hit particularly hard…And for Germany we report an all time low in economic expectations. In other words: it’s coming thick and fast.”