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Macro Matters
Another solid non-farm payrolls report, with 1.763mn jobs added in July, taking the 3-month gain to 9.27mn. That means the US has now recovered roughly 40% of the jobs shed during the turmoil of March and April. The report cements confidence that the labour market continues to repair, mirroring the conclusions of yesterday’s weekly jobless claims, if not the lower than expected ADP print we got on Wednesday.
Chart pack and analysis attached.
Chart pack and analysis attached.
Chart pack and analysis attached.
While credit extension matched consensus estimates in June the overall picture is still strong. New loans growth is running at +13.2% y/y, well in excess of the current rate of nominal GDP growth, while the total social financing figures hit CNY3.42trn, underpinned by rising local government bond financing, which lurks in the “other” category. Year-to-date total social financing is now at 80% of the full-year 2019 numbers,
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The recovery of the US labour market continues. ADP reported 2.369mn jobs were added in June. This was accompanied by a sharp upward revision to May’s report (initially reported as a loss of -2.760mn job and now revised to a gain of +3.065mn. That might bring it closer to the May non-farm payrolls report (+2.509mn) but is nonetheless a rather astounding revision, which perhaps encapsulates the problem of accurately measuring the Covid shock.
Chart pack and analysis attached.
Chart pack and analysis attached.
Chart pack and analysis attached.
Chinese credit expansion continues at pace, total social financing hitting CHY3.19trn in May up from CNY1.71trn a year earlier. The jump has been predominately driven by the ‘other’ section which is largely local government bond financing, which suggests the authorities have reverted to traditional investment driven support to support the Covid-economy.
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The disruption from the Coronavirus continues to impact the data with the employment numbers for May showing a significant deviation from expectations and the near 2mn loss reported in the May ADP report. Indeed, based on the preliminary numbers the economy added 2.51mn jobs over the month, which compares to the 20.69mn jobs lost in April. Methodological problems are again in evidence ...
Chart pack and analysis attached.
Chart pack and analysis attached.
Chart pack and analysis attached.
Chart pack and analysis attached.
While some of the Chinese activity indicators might have perked up, there is no hiding from the disinflationary pressure stalking China’s economy. April CPI dropped back to 3.3% yoy (4.3% in March) while PPI sunk to -3.1% from -1.5% in the previous month. And the problem would be even worse were it not for persistent food price pressures as the impact of the earlier swine flue epidemic continues to pressure meat prices. Indeed, CPI ex-food is now running at just 0.6%.
There is little sign of a slowdown in credit growth in China as the authorities continue to try and drive cash into the disrupted economy. Total social financing came in at a robust CNY3.09trn while overall new loan growth hit CNY1.701trn. This marks a significant pick up in credit creation, with household debt up nearly 2% pts of GDP since the end of last year while NFC bank debt has jumped from 95% to 102% of GDP.
