Deterioration continues to run at pace, with some rebound in domestic demand failing to offset continuing weakness on the export side. The release points to a further deterioration in exports in the coming months, although the decline in industrial production is running more closely, suggesting that a further downward adjustment/slump is not needed there.
Another disappointing report and while the yoy rate is still expanding (more robustly once ex-ing out the more volatile items) it seems clear that the 2017/18 mini-boom has exhausted itself. As far as shipments go, growth still looks better, but we’re still seeing inventories rising.
Price data basically confirms what we knew, inflation is back in a moderating phase with dip in core highlighting that. Income a little below expectations but the underlying wage story remains constructive, so nothing to be concerned about. Although in terms of Fed priorities the pick-up in wage growth is not enough to offset broader demand concerns.
Final US GDP numbers for Q4 revised down a little bit but not that much of a change in year-on-year terms, with growth overall running a shade below 3% which isn’t bad. Government was weak but investment still looks strong and inventory build also helped headline. In fact, investment looks too strong given how corporate profits have performed. Ditto for employment vs. profits.
Eurozone February money supply & credit chart pack.
While there looks to have been an improvement in March it’s generally led by a better services performance. Looking at industry the trajectory remains weak with the ‘IFO clock’ remaining in downswing territory amid a further mild deterioration in expectations. This continues to suggest ongoing manufacturing weakness, confirming the deterioration seen in the manufacturing PMI.
Excess reserves have been falling at a far quicker pace than the overall contraction in Fed balance sheet (Fig1). This is perhaps a cleaner way of showing the same thing, using just Treasury securities which share more similar qualities in terms of value as capital (Fig2).
Dollar remains in a corrective phase overall, but the longer-term bull trend still looks good, meaning an eventual push through 98.00 on DXY. On the rate side core bonds are in ranges for the moment, reflecting the adjustment central banks have made with regards to monetary policy guidance.
Manufacturing weakness persists, with strong energy output insufficient to offset broader downshift. Looking at Fed survey orders data we’re not yet at a point to bounce. So production side likely to remain an overall drag on economic activity over the remainder of the first quarter.
China February IP, retail sales & fixed investment chart pack
US January durable & capital goods orders and shipments & February PPI chart pack
US February consumer prices chart pack
UK January monthly GDP, industrial production, services output, construction & trade balance chart pack
Macro Data – China February money supply & credit chart pack
US February non-farm payrolls report & wages chart pack
German January factory orders, February Germany vehicle production chart pack
China February trade chart pack
US Q4 productivity & labour costs chart pack
Australia Q4 GDP chart pack
US Q4 GDP & weekly jobless claims chart pack