1)Purchase applications to buy a home continued higher according to the MBA. They rose 8.6% w/o/w and are now up 8.7% y/o/y with mortgage rates still sitting around record lows. Refi’s were unchanged w/o/w but still up 176% y/o/y.
2)New home sales in April totaled 623k, well better than the estimate of 480k and actually up from 619k in March but down from 717k in February. It was homes priced below the $300k level that held up which helped to lower the median price to the lowest since July 2019. Those priced above $500k slipped for a 2nd month. Smoothing out the last few months has the 3 month average at 653k vs the 12 month average of 690k and the 2019 average of 685k.
3)Personal income in April spiked by 10.5% m/o/m mostly because of government cash handouts.
4)Core April durable goods orders fell by 5.8% m/o/m which wasn’t as bad as the estimate of down 10%. That estimate for April was a shot in the dark.
5)The consumer confidence index in Japan in May did tick up to 24 from 21.6 and which compares with 30.9 in March and 38.3 in February.
6)Singapore reported a 13% y/o/y increase in industrial production, well better than the estimate of down 1%. The key driver was a 101% spike in biomedical manufacturing which offset weakness in manufacturing and transport engineering. Electronics manufacturing surprisingly saw a slight gain, likely due to the openings in China, Taiwan and South Korea.
7)We’ll see if this gets passed by all member states but the EU plans on borrowing 750b euros and then will parcel out 500b of it in grants with the balance in loans.
8)The May German IFO business confidence index rose to 79.5 from 74.2 and that was 1 pt better than expected with the entire gain being in the expectations component. The IFO said “The gradual easing of the lockdown offers a glimmer of hope.”
9)The French business confidence index improved off a very depressed level that was a 40+ yr low. It rose to 59 from 53. Most of the gain came from the services sector as more things reopen, although this component at 51 is still half the level of February. The manufacturing component rose 2 pts and retail and employment also rose slightly.
10)Core CPI in May in the Eurozone was steady with a .9% y/o/y rise, the same pace as April and actually one tenth more than expected. Only because of the decline in energy prices did the headline gain become only .1% as expected. Services inflation was higher by 1.3% y/o/y vs 1.2% in April and 1.3% in March.
11)The UK CBI retail sales index for May was very weak at -50 but that was up 5 pts from April and 15 pts better than feared. More evidence on my inflation theme, the CBI said “Our special COVID-19 questions suggest that supply disruptions have worsened since April, with a greater share of retailers now reporting shortages of some goods (58%), increased cost pressures (64%), shipping delays (44%) and capacity constraints (60%).”
1)China wasted no time in passing the new national security law for Hong Kong as another nail in the coffin of Hong Kong’s independence is now in place.
2)Initial jobless claims totaled 2.123mm, a touch above the estimate of 2.10mm but down from 2.44mm last week. It’s the 8th week in a row of moderation but all self inflicted. Continuing claims, delayed by a week relative to initial claims, moderated but to a still alarming 21mm from 24.9mm in the week prior.
3)The Chicago manufacturing index in May fell to 32.3 from 35.4 while the estimate was 40. That’s the weakest since March 1982. New orders fell to the least since July 1980 and backlogs are the lowest since March 2009. Employment did rise after April’s fall. “However, anecdotal evidence was mixed with some firms stating they had to lay off staff or reduce salaries, while others were trying to find new hires.” To my inflation theme, “Prices at the factory gate increased at its highest level since March 2020. Companies noted higher prices for essential goods and transportation.”
4)The final May UoM consumer confidence index fell to 72.3 from the 1st print of 73.7. The estimate was for a slight uptick to 74 and compares with 71.8 in April, 89.1 in March and 101 in February. Current Conditions rose 8 pts after dropping by 29.4 pts in April and by 11.1 pts in March. Expectations though weakened further, down another 4.2 pts to 65.9. It was 92.1 in February. That’s the lowest since October 2013. One year inflation expectations now stand at 3.2% vs 3% in the first May print and up from 2.1% in April. Spending intentions rebounded from the April decline. UoM said “The CARES relief checks and higher unemployment payments have helped to stem economic hardship, but those programs have not acted to stimulate discretionary spending due to uncertainty about the future course of the pandemic. It should not be surprising that a growing number of consumers expected the economy to improve from its recent standstill, or that the majority still thought conditions would remain unfavorable in the year ahead.”
5)The Conference Board’s Consumer Confidence index for May rose a touch to 86.6 from 85.7 and that was about the estimate of 87. The Present Situation slipped 2 pts while Expectations rose by 2.6 pts m/o/m with the latter certainly holding up better than the former. One year inflation expectations jumped to 6.2% from 5.4% in April and 4.5% in March. The Conference Board summed up by saying “While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential 2nd wave are likely to keep a cloud of uncertainty hanging over consumers’ heads.” With respect to that inflation number, “inflation expectations continue to climb, which could lead to a sense of diminished purchasing power and curtail spending.”
6)Pending home sales in April fell 21.8% m/o/m, worse than the estimate of down 17.3%. Versus last year, contract signings were down by 35%. The 48% decline m/o/m in the Northeast led the way with sales down 15-20% in the other 3 regions. The NAR said “While coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory.”
7)Personal spending in April fell a sharp 13.6% because everyone only spent on necessities. Combining this with the income figure brought the savings rate to 33%.
8)Old news but Q1 GDP contracted by 5% in the new revision from the first print of -4.8%. Q2 estimates are for a contraction of 34% but with a 15% bounce back in Q3 which still leaves us well in the hole.
9)The Fed’s balance sheet rose another $60b w/o/w to just below $7.1 Trillion.
10)The Tokyo CPI for May rose .5% y/o/y ex fresh food and energy, well more than the estimate of up .1%. Food prices are not just rising in the US, they rose 2% y/o/y in May in Tokyo and fresh food jumped by 4.5% y/o/y after a 6.1% y/o/y spike in April.
11)Japan’s unemployment rate rose only .1% to 2.6% in April but on the surface that’s misleading as 4.2mm went on furlough. If included, the unemployment rate would have been around 11%. Also, 1mm lost jobs but there was only a 60k increase in unemployed (those still looking). The reason for the little change in the unemployment rate was because the labor force shrunk by almost the 1mm lost jobs.
12)Japanese retail sales in April fell 9.6% m/o/m, more than the estimate of down 6.9%.
13)The Eurozone Economic Confidence index for May rose slightly to 67.5 from 64.9 but that was 3 pts below the estimate. This printed 103.4 in February. Manufacturing remained deeply negative but 5 pts less so from April while services deteriorated further. Consumer confidence rose but off a very weak figure. Retail was up a hair while construction weakened again.