The Weekly Macro Review and Outlook for w/c 5 April 2021
The weekly macro review for w/c 29 March 2021 – Mar is shaping up to be a solid end to Q1 for the US. Growth in nonfarm payrolls was stronger than expected. Growth in payrolls was recorded across both private and public sectors as the rollout of vaccinations begins to support the reopening of the most affected sectors.
The household employment survey also confirmed an improvement in employment growth and the ongoing decline in the number of unemployed persons. The data remains sobering though – total unemployment, the employment-to-population ratio, and participation rates highlight that spare labour market capacity remains a problem. The more robust pace of employment and payroll growth in Mar needs to be maintained.
Growth in manufacturing activity in Mar, via the ISM report, was more widespread. This was part rebound from severe weather in Feb (see the Dallas fed manufacturing survey) and likely part rebound in demand (vaccinations and stimulus supporting reopening). Firms were positive in the outlook for conditions ahead in Q2 and Q3 but were cautious about the impact of supply chain disruptions and widespread input price increases.
The first view of US consumer spending in Mar was strong as round three of direct payments makes its way through the economy. The pace of motor vehicle sales accelerated in Mar and was almost on par with the post-GFC high reached in 2017.
Mortgage applications continued to stall this week. The rise in mortgage rates slowed this week after several weeks of increases.
News from Europe was downbeat regarding the vaccine rollout. Manufacturing activity had rebounded somewhat in Mar, led partly by stronger growth in Germany. France is to implement further shutdowns as the virus continues to spread.
In Japan, the manufacturing PMI indicated some possible improvement in activity in Mar compared to Feb. Hard data from the Feb industrial production report highlighted that production and shipment growth has stalled (roughly since Oct 2020) while the overall inventory of finished goods continues to decline. Shortages of inputs (e.g. semiconductors) are likely impacting production levels. This is most evident in the production, shipment, and inventory levels of passenger cars in Japan – production and shipments fell in Feb, along with the inventory of finished goods.
There are more data releases covered in the review document. Use the links on the contents page to navigate to different country sections. Download the review here;
The macro outlook for w/c 5 April 2021 – It will be a lighter data week across the board. The focus generally will remain on the more positive pace of growth/recovery/rebound in the US and what it means for inflation and low rates. Early in the week, markets will digest the stronger-than-expected non-farm payrolls report as well as the announcement of the proposed $2.25tr infrastructure program.
This week, the minutes of the previous FOMC meeting will be released. The Fed announced clear guidance on the path to any potential rates ‘lift-off’ – and the minutes are not likely to deviate from that.
US Fed Chair Powell will speak this Wed at the IMF Spring meetings (5-11 Apr).
Data of focus in the US will be the ISM Services PMI for Mar. This will provide some insight into the pace of expansion among services firms. Data should reflect continued improvement as the reopening of services activity is supported by the roll-out of vaccinations. US PPI for Mar and Feb JOLTS will also be released this week.
China’s CPI and PPI for Mar will be released this week.
Finally, the RBA will meet on rates this Tue.
The US Fed will purchase $26.65bn in US Treasury securities (last week $24.62bn). The Fed will also purchase at least $28.61bn in MBS ($23.35bn last week).
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $266bn in ST Bills this week, with a net paydown of -$19bn.
This week, approx. $21bn in ST Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
