Positives
1)Initial jobless claims fell to 376k from 385k, but just above the estimate of 370k. The 4 week average fell to 403k from 428k. PUA fell by 2k w/o/w to 71k. Also positively, continuing claims fell by 258k after rising by 146k as hopefully some of those job openings are getting filled. Delayed by two weeks, those still receiving emergency claims fell by 70k and continuing PUA was down by 13k.
2)The number of job openings in April jumped to 9.29mm from 8.29mm in March. We’ve never seen this much availability after the previous record in March. For perspective, in Friday’s BLS payroll report there is a 15.9mm pool of available workers as of May of which 9.3mm workers that are considered ‘unemployed.’ Notwithstanding a 1mm m/o/m increase in job openings, hiring’s only totaled 69k. That said, the number of quitters spiked by 384k causing the quit rate to jump to 2.7%, the highest since at least 2001 when records on this were first kept.
3)The initial June UoM consumer confidence index rose to 86.4 from 82.9 and that was above the estimate of 84.2 and compares with 88.3 in April. The increase was mostly led by a 5 pt increase in Expectations. The Current Conditions component rose 1.2 pts m/o/m. After a rise to 4.6% from 3.4% in May, matching the highest since 2008, one year inflation expectations dropped to 4%, only the 2nd highest print over the past 10 years. The long term 5-10 yr inflation expectation outlook fell to 2.8% from 3% and vs 2.7% in April. Expectations of lower gasoline prices were main factor. Employment expectations rose 1 pt m/o/m to the most on record after the 6 pt rise in May, 12 pt jump in April and 15 pt spike in March. Income expectations though fell 3 pts but off the highest level since March 2020.
4)The May Cass Freight shipments index rose at a record 35.3% y/o/y rate thanks in part to easy comps “but the acceleration was ahead of expectations against a similar comp to April” according to Cass Freight. They also said “Auto production recovered a bit in May, with motor vehicle volumes on the railroads up about 4% m/o/m in May, although semiconductors remain a major challenge.” With respect to freight rates, they slowed to a 10.8% y/o/y gain vs 13.7% in April BUT “the significant m/o/m drop was not likely due to market conditions…Rather, our sense is the modal mix within the index was the cause of the slowdown.”
5)The April US trade deficit moderated to $68.9b as expected from the record $75b seen in March. Exports were up 1.1% m/o/m while imports fell by 1.4%.
6)China released its May loan data where aggregate financing was similar to that seen in April. Total loans rose 1.92T yuan vs 1.85T in April of which 1.5T were bank loans. The estimate was 2T. Money supply growth as measured by M2 rose 8.3% y/o/y, up two tenths from the prior month and two tenths more than expected and compares with the 5 yr average of 9.3% and off the slowest pace since July 2019.
7)The UK economy in April rose 2.3% m/o/m about as expected as the economy further reopened with the very successful vaccination campaign.
8)The April German trade data was about as expected when we include the March revisions.
9)Consumer prices were up by 1.3% y/o/y in May in China vs .9% in April but that was 3 tenths less than expected. They actually fell m/o/m for a 3rd month as pork prices fell sharply, offsetting higher food prices elsewhere.
10)Taiwan exports rose 38.6% y/o/y in May, above the estimate of 30.5% and imports were higher by 41% vs the forecast of 30.5%.
11)The Bank of Korea is setting up the markets for a few rate hikes. The Bank of Russia hiked by 50 bps, both in response to higher inflation and the desire for normalization.
12)The Bank of Japan said they did not buy one share of an ETF in May.
13)Mexican President AMLO lost his super majority in Congress.
14)MSG announced that it is back with the 1st packed house concert on June 20th with the Foo Fighters. This always gives me the chills, //www.youtube.com/watch?v=Y1bM3rpaFKI
Negatives
1)Headline CPI in May rose by .6% headline and .7% core vs the estimate for up .5% for both. These follow .8% and .9% increases respectively in April. Versus last year, headline CPI is now up 5% and the core rate by 3.8%. To rid ourselves of the easy comp/base effect discussion, May headline CPI was up 5.1% versus May 2019. In other words, about 2.5% per year. The core rate is up by the same amount vs May 2019. Services inflation ex energy rose .4% m/o/m after a .5% rise in April and a .4% increase in March. Core goods prices spiked by 1.8% m/o/m after a 2% increase in April. They are now up 6.5% y/o/y.
2)The Cleveland Fed’s trimmed CPI rose .4% m/o/m for a 2nd straight month, the highest since the 2008 oil driven spike and was up by 2.6% y/o/y.
3)Real weekly earnings in May fell 2.8% y/o/y after a 3.7% drop in April.
4)Notwithstanding a 4 week low in rates, purchases were little changed on the week, up .3% after a 3.1% drop last week. They are down 24% y/o/y. Refi’s dropped for the 3rd straight week, by 5.1% and are lower by 27% y/o/y.
5)Inflation is having a direct negative impact on spending decisions according to the UoM consumer confidence data. Those that said it’s a good time to buy a house fell 16 pts and have plunged by 53 pts in the past 3 months to the lowest since 1982 when mortgage rates were dramatically higher. Those that said it’s a good time to sell a home rose another 2 pts and is up 23 pts over the past 3 months. Those that said it’s a good time to buy an auto fell 11 pts to the lowest since 1982 during that recession. The only increase was in those that said it’s a good time to buy a major household item rose 5 pts but only after falling by 15 last month. Also on inflation according to the UoM, “More vulnerable households, those aged 65 or older and those with incomes in the bottom third, complained more often that inflation had already reduced their living standards, and those same households also anticipated a higher inflation rate in the year ahead.”
6)The May NFIB small business optimism index was little changed at 99.6 vs 99.8 in April. Those planning Higher Selling Prices rose another 4 pts to 40%, the most since April 1981. It was 25% in February and 17% in January. With respect to the tight labor market and what that will mean? “Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices.” Plans to Hire grew and positions not able to fill rose to a record high. The stagflationary situation we are seeing where higher costs and labor shortages are slowing growth was reflected in the number of those that Expect a Better Economy. It fell a sharp 11 pts to -26%, the weakest print since January 2013.
7)The Fed’s balance sheet rose another $16.6b to $7.95 Trillion, just because.
8)China said its producer price index for May rose 9% y/o/y, up from 6.8% in April and above the estimate of up 8.5%. A statistics bureau economist said 1/3 of the rise was due to easy comps.
9)Chinese exports were up by 28% y/o/y vs the estimate of up 32%. To the US they grew by 21% y/o/y and to the EU by 13%. Imports grew by 51% vs the forecast of up 53.5%. China continues to have a voracious appetite for soybeans as imports grew by 29% m/o/m (and up by 12.8% y/o/y). They slowed their imports of iron ore from April by 9% but are up big this year and slightly with copper, also up a lot year to date. Oil and natural gas needs rose m/o/m.
10)There was some slippage in the economic expectations of German investors in the German economy in June as the ZEW index fell to 79.8 from 84.4. BUT, there was a sharp increase in the current conditions component which rose to -9.1 from -40.1. The estimate was -28. The ZEW said “The economic recovery is progressing. Although the ZEW Indicator of Economic Sentiment has experienced a drop in June, it remains at a very high level. The decline in expectations is probably largely due to the considerably better assessment of the economic situation, which is now back at pre-crisis levels.”
11)Germany said its factory orders figure for April fell by .2% m/o/m vs the estimate of up .5% but this was completely offset by a 9 tenths upward revision to March. IP was less than expected.
12)It looks like Peruvian voters elected someone who has the same economic beliefs as Hugo Chavez.
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.