Positives
1)Core retail sales in April rose 1% m/o/m in nominal terms, 3 tenths more than expected. There was also the annual revision changes for the prior year plus that influenced the comparisons. Unfortunately inflation is eating much into this in real terms.
2)In the first full month covering the Russian invasion, foreigners bought a net $48.8b of US notes and bonds in March. But, we have to thank Europe and the UK for most of this as the two largest holders, Japan and China, further trimmed their holdings.
3)US industrial production in April rose 1.1% m/o/m, more than twice the estimate of up .5%. Upside to manufacturing production and utility output led the way. Auto production in particular improved. Capacity utilization rose to 79% from 78.2% and that is the highest since December 2018.
4)April retail sales ex fuel in the UK did rise more than expected but was driven mostly by alcohol, tobacco and ‘sweat treats’ said the ONS.
5)The May UK CBI industrial orders index surprisingly rose to 26 from 14. The estimate was for a slight decline to 12. CBI said “Manufacturers have reported output growth and order books improving in May. But cost pressures remain acute and are pushing manufacturers to raise prices. Sentiment among manufacturers has fallen in recent months as the outlook has deteriorated following Russia’s invasion of Ukraine, and investment plans are being scaled back.”
6)While real wages are falling and economic growth is slowing, the UK said jobless claims fell another 57k in April after an 82k drop in March (revised down from the 1st print of -47k). Also, thru March their unemployment rate fell to 3.7%, the lowest since 1974 as more jobs were added thru March than was expected.
Negatives
1)The profit margin news and shifting winds on consumer behavior from Walmart, Target and Ross Stores which also impacted the stocks of also reporting Home Depot and Lowe’s.
2)Initial jobless claims rose to 218k from 197k (revised down by 6k) last week and that was 18k more than expected and follows last week’s upside surprise. The 4 week average is at 200k vs 191k last week and vs 189k in the week prior. That is the highest since mid February.
3)The May Philly manufacturing survey saw a drop to 2.6 from 17.6 and that was well below the estimate of 15. That’s the weakest print since May 2020 when it was deeply negative. Prices paid and received moderated but remain above their 6 month averages. Disappointing too in the overall data was the 6 month business outlook which fell to 2.5 from 8.2 and that is well below the 6 month average of 18.2 and at the lowest since December 2008 at the depths of the housing crash. Capital spending plans dropped 10 pts to 9.6 and that is below the March 2020 covid low of 12.
4)The May NY manufacturing index was much weaker than expected and in contraction at -11.6. The estimate was +15 and that is down from 24.6 in April and is the 2nd month out of 3 below zero as March printed -11.8. Prices paid and received fell slightly. Looking ahead, the 6 month business outlook was 18 vs 15.2 in April, which was the lowest since April 2020, and is 10 pts below the 6 month average. Capital spending plans softened to the weakest since August 2021 and that goes for spending on tech too.
5)Housing starts in April totaled 1.724mm, 30k less than expected and March was revised down by 65k to 1.728mm. Separating out the two components, single family starts fell to the lowest level since October 2021 at 1.1mm. Multi family on the other hand rose to 624k from 541k and that is the most since 1986, 36 years ago. Permits were about as expected with a drop to the lowest since November. Single family permits are at the lowest since last October. Multi family permits fell slightly m/o/m but remain still above 700k.
6)Purchase applications fell 11.9% w/o/w to the slowest pace since May 2020 and are down 15.2% y/o/y. Refi’s fell another 9.5% w/o/w and are down 76% y/o/y.
7)The NAHB home builder sentiment index fell 8 pts m/o/m to 69 and that was well less than the estimate of 75. That’s the weakest since June 2020. All components saw sharp declines from April. The present situation was down 8 pts, the future outlook by 10 pts and Prospective Buyers Traffic by 9 pts to 52, just 2 pts above the breakeven level. The NAHB Chairman said simply, “Housing leads the business cycle and housing is slowing.” Its chief economist added, “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12 yr high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry level and first time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
8)Existing home sales in April totaled 5.61mm, just under the estimate of 5.64mm and March was revised down by 20k to 5.75mm. That’s the slowest pace of transactions since June 2020. Price growth did ‘slow’ to a median gain of 14.8% y/o/y and months’ supply ticked up to 2.2 months from 1.9 but it always rises in the spring and it is still well below the long term average of 6. First time buyers made up 28% of purchases vs 30% in March and vs 31% one year ago. 26% is the cycle low. Cash buyers and investors made up 43% of purchases vs 46% in March. The NAR stated the obvious now, “Higher home prices and sharply higher mortgage rates have reduced buyer activity.”
9)China’s April economic stats were pretty bad. Retail sales fell 11.1% y/o/y, almost double the estimate of down 6.6% and a contraction for a 2nd month. Industrial production also went negative with a decline of 2.9% y/o/y vs the estimate of a slight gain of .5%. Fixed asset investment ytd was about as expected, triggered by all the infrastructure spending.
10)Reflecting the distress in the Chinese residential real estate market, home prices in their 70 largest cities fell in April for the 8th straight month and with a growing number of homes seeing declines.
11)Japan’s April CPI ex food rose 2.1% y/o/y from .8% in March and outside of the consumption tax boost in 2014-2015 that lifted inflation above 2%, this is the first time since September 2008 that we’ve seen a 2 handle.
12)Japan’s April PPI rose 10% y/o/y, above the estimate of up 9.4% and it was up 1.2% in the month alone vs March. That’s the biggest print since 1980.
13)Japan said its exports grew by 12.5% y/o/y, just under the estimate of up 13.9%. Semi materials, steel and auto’s led the way. Imports were up by 28.2% y/o/y vs the forecast of up 35% but price is a main reason with the high cost of energy imports and also the negative of the weak yen.
14)Taiwan’s export orders in April fell 5.5% y/o/y, well worse than the forecast of up 11.5% and we can blame the China shutdowns for that. The Ministry of Economic Affairs said “Although the demand for emerging technology applications and digital transformation continues to grow, the lockdown in mainland China has resulted in reduced production capacity.”
15)Singapore saw April exports rise 6.4% y/o/y, about as expected but they did fall m/o/m by 3.3% due to softness in exports to China for reasons we clearly know. Product wise, the exports of electronic products led the way not surprisingly too.
16)Australia’s April jobs data was softer than expected. Only 4k jobs were added vs the estimate of 30k but the unemployment rate was as expected at 3.9%, the lowest since at least 1978 that I have data on.
17)The UK GFK consumer confidence index for May fell another 2 pts to -40. GFK said this is the lowest print since records were kept in 1974. They said “The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.”
18)April UK CPI rose 9% y/o/y with a core rate of up 6.2% as expected. The retail price index, which is used for the inflation linkers, was up 11.1% y/o/y. As for prices at the wholesale level, PPI input prices were up 18.6% y/o/y and output prices grew by 14%.
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.