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Macro Matters

Macro Category

Independent Strategy Blog: Macro Matters

Bleak payrolls report.  While the median survey was always going to be a short in the dark, the -701k decline in jobs was significantly more troubling than the mkts -100k guess.  That’s the worst number since March 2009, a period of losses that saw five consecutive payrolls figures below the -700k mark starting from November 2008.  Looking at the past fortnights jobless claims figures the April number and revisions to this release will paint an even bleaker picture of the labour market.  In the household survey nearly 2.987mn jobs were recorded lost.

ADP reported fewer than expected job losses for March, with a modest -24k drop (mkt -150k), which compares to the 3.3mn jump in initial jobless claims last week.  Partly this is due to the survey dates (it tallies responses up to the 12th of the month).  So we will see catch up next month.  Prior month was revised down to 179k from 183k.

The rapid and devastating effect of Covid-19 on the labour market is unprecedented based on this week’s jobless claims.  Initial claims in week ending came in at 3,283k which looks like a data error rather than an actual real data point.  But real it is, and further increases look likely in the coming weeks as the economic stop continues to push people out of employment.

US household income growth looked pretty solid with a 0.6% m/m gain during January, which tends seasonally, to be a weaker month.  That lifts the y/y rate back to a shade under 4.0%, although the near-term trend remains one of moderation.  On the spending side the increase surprised on the downside at +0.2% m/m and that pulled y/y growth back to 4.5%

Global

25th February, 2020 » Corporate earnings health check

In recent years equity markets have been driven more by central bank largesse than by corporate profit performance. With bond yields close to record lows — in both real and nominal terms — investors have charged into higher-yielding risk assets with gusto. Still it behoves us to keep an eye on the underlying earnings picture.

China looks to have the Coronavirus (COVID-19) under control. The rate of daily infections has been on a clear downward trend since the start of the month, suggesting the initial measures to quarantine areas were largely effective. As knowledge and understanding improves, it seems highly unlikely this is a temporary lull, even if economic disruptions surrounding the outbreak become more prolonged.

Germany

14th February, 2020 » , AKK KO

Well, that didn’t take long. After last week’s debacle in Thuringia (see our report Thuringian tremors 7 February 2020) CDU leader Annegret Kramp-Karrenbauer (AKK) found her authority fatally undermined and announced that she would soon step down to allow a new leader to be elected in the summer.  This leader, she said, should also become the party’s chancellor candidate for the next federal election, scheduled for autumn 2021.

US

13th February, 2020 » US January CPI

CPI recorded a modest rise in January, headline up to 2.5% yoy from 2.3%, a shade above mkt estimates.  Core flat at 2.3% yoy which was a touch above consensus too, but really not much more than rounding.  Overall the inflation picture still looks fairly settled.

Tracking the strong ADP release on Wednesday, the January non-farm payrolls report also comfortably beat expectations.  Weather has helped a bit last couple of months, with seasonal disruptions lower than normal, but that doesn’t detract from the underlying strength of the labour market.

The expected bounce in German factory orders remains elusive with a further sharp (-2.1% m/m) decline recorded in December.  That leaves the y/y rate at a scary -8.6%, a new low and overall orders now 12.6% from their peak using the seasonally adjusted volume numbers.

US

30th January, 2020 » Cock-a-hoop

Donald Trump is on a roll. He presides over the longest cyclical upswing on record. On his watch, unemployment is…

The improvement in the surveys continues to provide a realistic guide to Chia’s improving fortunes with the December real activity data corroborating this picture.  The strong recovery in industrial production is most noticeable, with y/y rate jumping to 6.9%, the highest since March

China December money supply ticked up, reflecting easier financial conditions.  We also saw solid growth in total social financing, which came in ahead of expectations.  The authorities have been keen to avoid an overt debt splurge, trying to generate more targeted easing, particularly focusing on transmission to SMEs in the private sector.  These numbers suggest this has been a partial success...

UK

15th January, 2020 » UK December Inflation

Disinflation resumed in December with consumer prices surprising to the downside.  Headline and core both registered a 1.3% y/y gain, a decline from 1.5% and 1.7% respectively in November.  In constant tax terms the decline was a little faster.  On the producer price side there is scant evidence of any inflationary pressure.  Although headline output prices edged up, core output prices - which are more closely correlated with CPI - ticked a little lower.

UK economy continued to slow in November.  According to the monthly GDP estimate the economy shrank by -0.3% m/m.  Although the smoothed 3/3m rate still showed a +0.1% rise, this was the slowest pace since fears of a hard Brexit dominated thinking back in the summer and on a y/y basis the +0.6% recorded was the weakest since back in the days of the Eurozone debt crisis (June 2012 to be exact).

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