1)The May Markit manufacturing and services composite PMI rose to 68.1 from 63.5 mostly driven by a jump in the services component which increased to 70.1 from 64.7. Manufacturing was higher by 1 pt to 61.5. With services, dating back to 2009 the print is the best on record as “Firms linked the upturn to stronger client demand amid greater customer confidence and the reopening of non essential businesses. Price pressures though came along with this. On the manufacturing side, “The uptick in the headline figure was supported by faster expansions in output and new orders, with new orders also rising at the sharpest rate on record. Nonetheless, a further marked deterioration in vendor performance limited operating capacity and reportedly held back output growth.” Input costs are at a 13 year high.
2)Initial jobless claims fell to 444k, 6k less than expected, from 478k last week which was revised up by 5k so call it a push relative to overall expectations. The number of those filing for PUA fell to 95k from 104k. Delayed by 2 weeks, those continuing to be on PUA fell by 678k after rising by 420k in the week prior. Continuing emergency benefits fell by 150k after rising by 317k in the week before.
3)The May NAHB home builder index was 83 as expected, unchanged with April and 83 is the average year to date. The index in 2020 bottomed at 30 in April and topped at 90 in November. Present conditions held at 88 m/o/m while the future outlook rose 1 pt after falling by 3 last month. Prospective Buyers Traffic fell 1 pt after rising by 2 pts in April. From the perspective of the demand side, “first time and first generation home buyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability” says the NAHB. On the supply side, “In recent months, aggregate residential construction material costs were up 12% y/o/y, and our surveys suggest those costs are rising further. Some builders are slowing sales to manage their own supply chains, which means growing affordability challenges for a market in critical need of more inventory.” The NAHB’s message to buyers, they “should expect rising prices throughout 2021 as the cost of materials, land and labor continue to rise.”
4)The NY manufacturing index for May fell 2 pts m/o/m to 24.3, but just above the estimate of 23.9. Price Pressures intensified further with Prices Paid rising another 8.8 pts to 83.5, 23.5 pts above the 6 month average. That is a record high in the 20 yr history of this question. Prices received also rose to a record at 37.1. The only respite here was that the 6 month outlook for prices receded slightly. As for the overall 6 month manufacturing outlook, it fell 3.2 pts m/o/m to 36.6 and that is about the 6 month average. Capital spending plans were mixed.
5)In the face of the sharp sell off in US Treasuries in March after the big decline in February, foreigners picked up their buying big time led by China. Foreign buying of notes/bonds totaled a net $118.9b BUT that only mostly replaces the net selling of $135.3b in the 3 prior months. For all the speculation of Japan taking advantage of a yield opportunity and low FX hedging costs, they only bought a net $3.6b of notes and bonds after selling a total of $10b over the 3 prior months. And, they were large sellers of T-bills (or at least let them mature and didn’t choose to roll). China came in with net purchases of notes and bonds of $41.6b in March, about double the net sales in December thru February.
6)The May Eurozone manufacturing and services index rose 3.1 pts to 56.9 and that was better than the forecast of 55.1 with the gain all led by services which rose 4.6 pts to 55.1 “as the easing of Covid related restrictions facilitated a revival of demand.” Manufacturing was little changed but at a still high 62.8. German manufacturing in particular is getting hit by continued supply issues as it fell to a 3 month low. As for Eurozone inflation, “Average input prices rose at the sharpest rate since March 2011, led by the largest rise in factory input costs recorded since survey data were first available 24 years ago. Service sector costs also grew at an increased rate, registering the sharpest rise since November 2018. Average prices charged for goods and services meanwhile rose at the fastest pace since comparable data were first available in 2002, fueled by a survey record increase in factory gate prices. Prices charged for services rose modestly by comparison, though showed the biggest increase for just over two years.”
7)The UK saw its May composite PMI rose to 62 from 60.7 as expected. Manufacturing jumped by 5.2 pts to 66.1 while services rose by .8 pts to 61.8. Markit said “The UK is enjoying an unprecedented growth spurt as the economy reopens. Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near record growth as the opening up of the economy allows more businesses to trade. Business confidence has meanwhile hit an all time high as concerns about the impact of the pandemic continue to fade.” Here though is the inflation commentary, “A direct consequence of demand running ahead of supply was a steep rise in prices, hinting strongly that CPI has much further to rise after lifting to 1.5% in April…Strong demand for manufacturing inputs, higher transport bills and a spike in commodity prices resulted in the fastest increase in overall purchasing costs since this index began in January 1992.”
8)The May UK CBI industrial orders index increased to +17 from -8 and well better than the estimate of zero. But, inflation comes along with this. CBI said “Manufacturing activity rebounded this month, with strong improvements seen across total order books and output volumes. But firms are still feeling the chill as supply shortages fuel cost pressures, reflected in expectations for strong output price inflation in the coming quarter.”
9)The UK said that the number of employed in the 3 months ended March rose by 84k, above the estimate of 50k while the unemployment rate fell by one tenth to 4.8%. Wage growth ex bonus’ rose by 4.6% y/o/y as expected. The more timely April jobless claims data saw a drop of 15.1k after a 19.4k decline in March revised from -10k.
10)UK retail sales in April ex gasoline jumped 9% m/o/m, more than double the estimate of up 4.4%.
11)UK consumer confidence in May rose 6 pts m/o/m to -9, 3 pts above expectations and the best since February 2020.
12)China’s April IP and property investment data was about as expected.
13)Japan said its April CPI number fell .2% y/o/y ex food and energy with lower cellphone prices again the anchor on it. They fell by 27% y/o/y, the biggest decline since data back to 2000. This alone took 50 bps off core CPI.
14)Japan said its April trade data was better than expected with exports higher by 38% y/o/y (yes, easy comps) and imports by 12.8% vs the estimates of 30.8% and 9% respectively. With exports, they jumped by 45% y/o/y to the US, by 34% to China and 40% to the EU with auto’s helping to lead the way as dealers are desperate for inventory and semi equipment craved by the Chinese.
15)South Korea said exports in the 1st 20 days of May rose 53.4% y/o/y led by cars, chips, mobile products and oil products while imports were higher by 36%.
1)Delayed by a week, continuing claims rose to 3.75mm, 130k more than expected and up from 3.64mm in the week prior.
2)The May Philly manufacturing index fell almost 20 pt m/o/m to 31.5 but from an extreme level of 50.2. That was 10 pts less than expected in this volatile series. Prices paid rose to the highest since 1980 and those received back to 1981. The 6 month outlook slipped 14 pts m/o/m to 52.7, a 3 month low and I believe there is no question that growth is slowing because supply can’t keep up with demand. Six month expectations for delivery time, prices paid and those received did all moderate. Capital spending plans were little changed.
3)The MBA said the average 30 yr mortgage rate rose 4 bps to 3.15% after falling by 7 bps last week. Purchase apps fell by 4.1% w/o/w and rose just 2.5% y/o/y. At an index level of 265.3, that is a hair above the lowest level since May 2020. Refi’s did rise 4% w/o/w but fell by 1.8% y/o/y on tough comps.
4)Housing starts in April totaled 1.57mm, well below the estimate of 1.7mm and down from 1.74mm in March. The important single family component saw a drop in starts of 168k m/o/m to 1.09mm. That’s the lowest since August 2020 if we take out the weather induced drop in February, particularly in Texas. Multi family starts were little changed at 482k vs 478k last month. Permits moderated too on the single family side by 45k m/o/m to just above the lowest level since October. Multi family permits were solid though, rising to 611k from 561k, the 2nd highest since 2015.
5)Existing home sales in April totaled 5.85mm, below the estimate of 6.07mm and down from 6.01mm in March. Three of the four regions saw declines with the Midwest rising slightly. There was an uptick in the number of homes for sale but they remain still very low. Combine this with the sales drop and months’ supply rose to 2.4 from 2.1 but that is still well below the historical average around 6 months. The median home price continued its acceleration, rising by 19.1% m/o/m and skewed by mix. The aggressive price gains is why 1st time buyers can’t lift off the low 30’s level and in April totaled 31%. All cash buyers are now 25% of purchases vs 15% one year ago while investors are now 17% vs 10% one year ago. The NAR said this on the situation, “First time buyers in particular are having trouble securing that first time home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace.” Overall, the NAR said “Home sales were down again in April from the prior month, as housing supply continues to fall short of demand.”
6)Foreign ownership of US marketable Treasuries is at 33% vs 42% in January 2020 and 50% in January 2015.
7)The Federal Reserve’s balance sheet rose another $92b on the week to a new record high of $7.92 Trillion.
8)Retail sales in China in April rose 17.7% y/o/y vs the estimate of up 25%.
9)Australia, a proxy for Chinese growth and the direction of commodity prices, said employment unexpectedly fell by 30.6k in April instead of rising by 20k as expected. It was though all related to a decline in part time work as full time employment rose by 33.8k. This is a reversal of what was seen in March. The unemployment rate though did fall by 2 tenths m/o/m to 5.5, the lowest since March 2020 when it was 5.3%.
10)Australia’s manufacturing and services index fell to 58.1 from 58.9 but the two internals were mixed as the former rose slightly while the latter slipped.
11)Japan’s composite index fell back below 50 at 48.1 from 51 mostly due to the almost 4 pt drop in services to 45.7. Manufacturing was down 1.1 pts m/o/m to 52.5. We know the reason for the services fall, “Survey members widely attributed the deterioration in business conditions to a resurgence in Covid cases and the reimposition of state of emergency measures.” That said, “Japanese private sector companies were optimistic that business conditions would improve in the year ahead, albeit to a lesser extent than that seen in April. Positive sentiment stemmed from the expectation that the currently sluggish vaccine rollout would gather pace and aid in the submission of the pandemic, in turn triggering a recovery in demand in both domestic and external markets.”
12)Japan’s April PPI jumped .7% m/o/m, two tenths more than expected after a 1% rise in March, revised up by 2 tenths. The increase was led by higher commodity prices.
13)Singapore saw an 8.8% m/o/m non oil drop in exports in April, well worse than the estimate of down 2.8%. Versus last year exports were up by 6%. A big factor was a sharp drop in pharma exports y/o/y after a March jump. Electronic products saw another gain y/o/y but the pace moderated as they also deal with a shortage of semi’s. Exports to the US and EU declined but was mostly offset by strength to other parts of Asia.
14)Germany said its PPI in April rose .8% m/o/m after a .9% increase in March, .7% rise in February, 1.4% jump in January and .8% lift in December.
15)The UK reported its April inflation stats and while the CPI #s were as expected, PPI grew by more. Taking out the influence of easy comps, headline CPI rose .6% m/o/m, double the pace of March. PPI input prices jumped by 1.2% m/o/m after a 1.9% jump in March (revised from 1.3%). Output charges rose by .4% m/o/m as estimated but off a higher base as March was revised up by 3 tenths to an .8% gain.