Positives
1) Knowing that the only way the USMCA will pass Congress, the US will get rid of the steel and aluminum tariffs with Canada and Mexico. Also, the administration postponed for six months auto tariffs on the EU and Japan.
2) Initial jobless claims totaled 212k, 8k less than expected and down from 228k last week. The 4 week average is now 225k from 220k but that’s because a 193k print dropped out. That average is the most in 3 months but still very low. Continuing claims, delayed by a week, fell by 28k after an increase of a total of 34k in the two prior weeks.
3) The Philly manufacturing May index rose to 16.6 from 8.5 and that was better than the estimate of 9.0. It’s also the best since January. The internals however were much more mixed. Some key outlook components were soft versus current condition ones that were better.
4) The May NY manufacturing index surprised to the upside, rising to 17.8 from 10.1 and that was well better than the estimate of 8.0. It’s also at the best level since November. The internals here were better than the Philly index.
5) The NFIB small business optimism index for April and thus taken before what’s transpired in May, did rise to 103.5 from 101.8 last month. The NFIB said “The ‘real’ economy is doing very well versus what we see in financial market volatility. Many jobs were created, and GDP produced with no substantive inflation pressure. The pace of economic growth has accelerated, and consumers and small businesses are an important part of the improvement in sales.”
6) The NAHB May builder sentiment survey improved to 66 from 63 and that was 2 pts above the forecast. The NAHB said “Builders are busy catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply. However, affordability challenges persist and remain a big impediment to stronger sales.”
7) Housing starts in April totaled 1.235mm, 26k more than expected and March was revised up by 29k. Single family starts rebounded after a sharp decline in February and barely a rebound in March. Starts here were 854k which puts it back above its 6 month average of 839k but slightly below the 12 month average of 860k. Multi family starts rose to a 5 month high at 381k. Multi family permits rose above 500k at 514k, the most since March 2018.
8) Import prices in April fell .6% m/o/m ex petro vs the estimate of up .2%.
9) The UoM May consumer confidence index jumped to 102.4 from 97.2 in April and that was well better than the expected print of no change. This is the highest since January 2004. All of the confidence gain was in the Expectations component which jumped 8.6 pts. Current conditions were basically unchanged at 112.4 from 112.3. One year inflation expectations rose to 2.8% from 2.5% in April and that’s the most since October 2018. The rise in gasoline prices is finally shifting expectations. After falling 11 pts last month, the Net Income component bounced by 6 pts. At 28, it still is the 2nd highest level since last fall so wage gains are still pretty good. There was no change for the 3rd month in expectations for employment. Notwithstanding the jump in confidence driven by expectations, spending intentions were mostly softer.
10) Australia reported a job increase of 28.4k but all due to an increase in part time. The headline number was higher than the forecast of 15k. The unemployment rate though did tick up by one tenth to 5.2%.
11) In China all 70 cities surveyed in April saw price increases from the same month last year for new homes. For existing ones, 68 of 70 saw gains from 67 in March.
12) The Q1 French unemployment rate fell one tenth to 8.4%, down from the peak of 10.2% back in 2015 but still well above the pre recession low of 6.8%.
Negatives
1) The visibility to an eventual trade deal satisfactory to both sides seems ever more cloudy.
2) US retail sales in April saw a .2% m/o/m drop in sales ex autos and gasoline, below the estimate of a gain of .3%, only partially offset by a 2 tenths upward revision to March. If we also take out building materials, sales were flat m/o/m vs the estimate of up .3%. This core measure was revised up by one tenth for March. With respect to building materials sales in this category fell 1.9% m/o/m. Core retail sales (ex auto’s, gasoline and building materials) are up just 2.9% y/o/y.
3) In April, the Cass freight shipments index fell 3.4% y/o/y. This is the now the 5th straight month with y/o/y declines. They said “We are concerned about the severe declines in international airfreight volumes (especially in Asia) and the recent swoon in railroad volumes in auto and building materials. We see the weakness in spot market pricing for transportation services, especially in trucking. As volumes of chemical shipments have lost momentum in recent weeks, despite the rally in the price of WTI crude, our concerns of the global slowdown spreading to the US, and the trade dispute reaching a ‘point of no return’ from an economic perspective, grow.”
4) With a 1 bp w/o/w decline in the average 30 yr mortgage rate to 4.4% which is the lowest since late March, weekly mortgage applications were little changed from last week but still higher from last year. Purchase applications fell by .6% w/o/w but are up 6.7% y/o/y. Refi’s were down by .5% w/o/w but higher by almost 17% y/o/y.
5) US industrial production in April fell by .5% m/o/m vs the estimate of no change driven by weakness in manufacturing. Production of vehicles/parts and machinery were particularly soft. Capacity utilization fell to 77.9% from 78.5% and that was well below the estimate of 78.7% and the lowest since February 2018.
6) There was a decline of 34k in single family construction permits in April, the precursor for starts, to 782k. That’s the lowest amount since November 2016.
7) Foreigners resumed their selling of US Treasuries in March. The net total of selling in notes and bonds was $12.5b and marks the 4th month in the past 5 of a decline in holdings. China sold $20.5b of notes and bonds while Japan sold $11b, our two largest holders.
8) Total Europe car registrations in April fell .4% y/o/y which is the 8th straight month of y/o/y declines.
9) There was an upward revision to core April CPI for the Eurozone to up 1.3% y/o/y from 1.2% initially and up from .8% in March. That matches the most since October 2015. The headline rate was left unchanged at 1.7%.
10) The German economy grew by .7% y/o/y in Q1 as expected. This follows a .6% rise in Q4 and which is the slowest two quarter performance since 2013.
11) Investor expectations of the German economy soured in May as the ZEW index fell to -2.1 from +3.1 and that was below the estimate of +5. ZEW said “The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports – a key factor for the growth of the gross domestic product.” The Current Situation component however did improve to +8.2 from 5.5 but this follows 7 months in a row of m/o/m declines from a level of 76 last September.
12)Eurozone industrial production in March fell .3% m/o/m as forecasted. That’s the 6th monthly decline in the past 7.
13)Clarity on a smooth Brexit seems no closer.
14) For the 3 months ended March, the month where the initial Brexit deadline was overhanging everything, the UK created 99k jobs, below the estimate of 140k and down from 179k in the previous period. The unemployment rate though did tick down by one tenth to 3.8%, the lowest since the 1970’s. Wage growth ex bonus’ rose 3.3% y/o/y as expected but down one tenth from the prior month. Expect a further slowing in UK job growth as the more timely April jobless claims figure rose 24.7k and it’s the 7th month in the past 8 above 20k.
15) Chinese retail sales rose 7.2% y/o/y in April, below the 8.7% rise in March and less than the 8.6% predicted. That’s the slowest pace of gain since 2003. Clothing sales in particular fell for the first time since 2009. Industrial production growth slowed to just 5.4% y/o/y, 110 bps below estimates and from 8.5% in March with a particular drop in auto production. Fixed asset investment ytd y/o/y rose 6.1% from 6.3% in March and less than the 6.4% forecast.
16) Singapore’s April non oil exports fell 10% y/o/y, about twice the estimate of a drop of 4.6%.
17) Indonesia’s exports in April fell 13.1% y/o/y, more than the expectations of a 7.1% decline.
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.