
Positives
1) Headline CPI for April rose .3% m/o/m while the core rate was higher by .1%, both were one tenth less than expected. The y/o/y core rate though due to rounding was up 2.1% as expected and up from 2% in March. The headline rate was higher by 2% y/o/y vs 1.9% last month. Services inflation of 2.8% ex energy offset the decline in core goods pricing, again.
2) The April producer price index rose .2% m/o/m while the core rate was higher by .1%. Both were one tenth below expectations. If we take out food, energy and trade though, prices were up .4% m/o/m, twice the forecast. From last year, headline PPI was up 2.2% and the core rate was higher by 2.4%, both unchanged with March. Also taking out trade saw a y/o/y price gain of 2.2% vs 2% in March. Transportation cost increases are slowing. Also, inflation in the pipeline is moderating.
3) According to the MBA, the average 30 yr mortgage rate fell 1 bp to 4.41%, a 4 week low and that helped to lift purchase applications by 4.2% w/o/w after two weeks of declines and the y/o/y gain was 5.1% after no change seen last week. Refi’s though barely moved, higher by less than 1% after sharp declines in the previous 4 weeks but they are still up 13% y/o/y.
4) After falling to a revised 7.14mm in February, the number of job openings in March rebounded to 7.49mm which while off its recent highs, is still very high historically. The biggest demand for jobs came from transportation, warehousing and utilities, construction and real estate and rental/leasing.
5) The March US trade deficit was as expected at $50b, up slightly from $49.3b in February. Exports rose 1% m/o/m to the highest since last May helped mostly by a resumption of soybean exports to China.
6) Japanese household spending in March rose 2.1% y/o/y, above the estimate of up 1.6%.
7) Japan’s April manufacturing PMI was revised to 50.2 from 49.5 initially and follows two months in a rose below 50. Markit said “New orders and output both declined in April, but to lesser extents, while business confidence continued to climb from its near record low in February.” Services though was revised down by .2 pts to 51.8, a 3 month low.
8) China’s monthly loan data for April came in less than expected (and thus a slowdown in the pace of leveraging). Aggregate financing totaled 1.36T yuan, about 300b below the forecast of which 1.02t were bank loans vs the estimate of 1.2T. Versus the same month last year bank loans are down by 13.5% while total loan growth is lower by 23% y/o/y. This said, the leveraging up this year has been pretty amazing as aggregate loan growth is up 25% year to date y/o/y. Money supply growth of 8.5% was as expected.
9) In China the 2.5% CPI rise was as expected with another big boost in food prices due to the swine fever that has goosed pork prices. Prices ex food and energy though have been very stable, rising by 1.7% y/o/y. PPI came in a bit hotter than expected, up .9% y/o/y.
10) China’s private sector focused Caixin services PMI for April was up a hair to 54.5 from 54.4. That was a touch above the estimate of 54.2. Notwithstanding this slight improvement, Caixin said “Business confidence remained relatively subdued across China in April amid concerns over the strength of the global economy. At services companies, sentiment edged down to its lowest in 5 months.”
11) The PMI for Hong Kong in April rose to 48.4 from 48. While up, it’s the 13th straight month below 50. Markit said “Firms continued to express concerns over trade wars, greater competition, rising costs and a slowdown in the global economy. The survey is broadly indicative of the economy expanding at an annual rate of 1.5-2%.”
12) Singapore’s April PMI did improved to 53.3 from 51.8 and that’s the best since November. In hopefully in a sign of a rebound elsewhere, Markit said “Growth momentum in Singapore’s economy continued to build at the start of the second quarter, with new orders and output rising at faster rates, helping to drive job creation and lift sentiment towards the year ahead outlook. There was also signs that export conditions were becoming more supportive, with reports of greater appetite for goods and services from other Southwest Asian markets.”
13) The Reserve Bank of Australia didn’t fall for the peer pressure of a rate cut from its current record low rate of 1.5% because what good would it have done anyway. With inflation last printed up 1.3% y/o/y and the RBA historically not believing in the effectiveness of negative real rates, I wasn’t surprised.
14) In the UK, its industrial production number rose by .7% m/o/m, 6 tenths more than expected with manufacturing providing the upside but mostly due to stockpiling. As for the UK economy, it grew by 1.8% y/o/y in Q1 as forecasted and is the best since Q3 2017 but inventory building ahead of the potential March 29th Brexit deadline was a help. Household spending was a pleasant surprise as wage growth was good in the quarter and inflation topped out.
15) In Germany in March its industrial production rose by .5% vs the estimate of down .5%, partially offset by a 3 tenths downward revision to February. Construction was the bright spot but soft elsewhere. The Economic Ministry said “The business climate in the manufacturing sector became dimmer. Therefore a subdued industrial situation in the coming months is still to be expected.”
16) In the Eurozone, the April services PMI was revised slightly higher to 52.8 from 52.5 initially. It is though down from 53.3 in March and flat with February. Markit said there was better growth in Germany, “and a return to expansion in France” but “noticeably slower gains in activity were seen in Italy and Spain.” As for the outlook, “business confidence amongst service providers remained in positive territory during April, and remained broadly in line with levels seen in the preceding two months.”
17) There is confidence in the Eurozone that things will get better from here according to the Sentix Sentiment index. The May read jumped to 5.3 from -.3 and that’s the best since November last year. Sentix said the German component “stabilized noticeably.”
18) While we’ve seen a nice pick up in the pace of IPO’s, I’m going to use the biggest one of them all, Uber, to say this. While I don’t believe they will make money until they raise prices notably and therefore clouds trying to figure out valuations and the future of the stock price, we should use today’s IPO of this life changing company as a celebration of the amazing dynamism, genius, hard work, job creating, and wealth producing beauty of capitalism, especially American style.
Negatives
1) One week ago we entered the weekend with expectations that all that was left with a trade deal with China was doting I’s and crossing T’s. That of course is no longer the case until it is again, if it is again. Another batch of higher taxes now await.
2) Initial jobless claims totaled 228k, 8k more than expected and little changed with last week’s print of 230k. This does mark the 3rd week in a row of higher than expected figures. The 4 week average has now crept up to 220k from 213k and that’s the highest since mid March. We’ve gotten back the sharp drop in late March/early April. Continuing claims, delayed by a week, rose for a 2nd straight week, by 13k.
3) Seen in the quarterly Senior Loan Officer survey from the Fed there was softening demand for credit. With respect to commercial real estate loans, “Banks reportedly tightened standards across all three major CRE loan categories” and loan demand for all three “weakened during the same period.” Demand for commercial and industrial loans fell across the board while lending standards were mixed. As for the consumer, “Banks reported weaker demand for almost all categories of residential real estate loans and for credit card loans, while demand for auto loans was basically unchanged.”
4) On the bid to cover metric, Wednesday’s 10 yr note auction was the worst in 10 years.
5) In the ISM semi annual manufacturing survey, respondents said revenues will be up 4% in 2019 vs the December 2018 forecast of 5.7%. In the services section, revenue growth for this year is expected to be 3.1% vs the 3.7% that was estimated in December 2018.
6) In April China reported an unexpected drop in exports of 2.7% y/o/y vs the estimated rise of 3%. In terms of market impact it was partially offset by a rise in imports of 4% which was well better than the forecasted decline of 2.1% as many Chinese imports end up making its way into finished products that then get exported.
7) Sales of auto vehicles in April in China fell 16.6% y/o/y according to the China Passenger Car Association. That compares with a drop of 12% y/o/y in March and 18.5% fall in February.
8) Base pay in March in Japan fell .9% y/o/y and it’s the 3rd month in a row of y/o/y declines. A tight labor market is just not helping.
9) Japan’s consumer confidence index for April fell a touch, by only .1 pt to 40.4 but that’s the lowest print since February 2016. Taking this a step further, it was about 40 when the entire Abenomics experiment first began in late 2012.
10) Taiwan said its exports fell 3.3% y/o/y in April, slightly worse than the estimate of down 3.1% and it marks 6 straight months of y/o/y declines. Imports though did improve with a 2.6% y/o/y gain, above the forecast of a gain of 1%.
11) India’s services PMI fell 1 pt to the lowest since May 2018.
12) France said its March industrial production figure fell more than expected and February was revised down. The manufacturing component in particular fell by 1% m/o/m.
13) Spanish industrial production in March fell by 1.2% m/o/m instead of rising by .3% as expected.
14) Italian industrial production in March dropped by .9% m/o/m, one tenth more than estimated.
15) Markit’s Eurozone construction PMI for April was little changed at 52.1 from 52.2 in March as this signals “a moderate rise in total construction activity” as “the quickest expansion was seen in Germany, followed by Italy and France respectively.”
16) IHS Markit revised its 2019 growth estimate for the global semiconductor market to a drop of 7.4% y/o/y in revenue. They said “After the chip industry attained a heady revenue expansion of 15% in 2018, many semiconductor suppliers in early 2019 remained optimistic that they could achieve modest growth this year. However, the chipmakers’ confidence quickly transformed into apprehension as they witnessed the depth and ferocity of the current downturn. The latest data indicates the semiconductor business now is destined for its worst year in a decade.” Their reason, “The precipitous nature of the downturn is due to increasingly soft demand, combined with a rapid rise in inventory levels in the first quarter.”