The Macro Outlook for w/c 10 May 2021

by Kim | May 10, 2021

*Updated 11 May 2021 with US Treasury issuance for the week. The focus this week will be on US inflation, consumer spending, and industrial output. US Fed Governors will also be active with several speeches throughout the week.

Last week, the key US payrolls report disappointed. While non-farm payroll growth was substantially lower than expected, the household survey did include a lift in the participation rate for Apr. This was positive, highlighting workers returning to the labour market. The US manufacturing and services ISM’s indicated that growth remained strong in Apr. The prices indexes across both reports revealed that firms continued to experience rising input prices. The growing proportion of firms experiencing higher input prices suggests that rising prices have been persistent month to month (rather than just as a ‘one-off’).

This week, the focus will be on the US CPI and PPI reports for Apr. There will be a base effect in the headline numbers. Annual CPI growth is expected to be +3.6% (versus +2.6% in Mar). The annual PPI growth is expected to be +5.9% (compared to +4.2% in Mar). Other countries to report CPI this week include Germany and China.

US retail sales will also be released this week. The expectations are for +0.2% growth in Apr (after a +9.7% growth in Mar). It is possible that spending remained higher in Apr – last week motor vehicle sales for Apr hit 19m (SAAR). This was the highest level of sales since before the GFC.

US industrial production will also be released this week – which includes industrial capacity utilization estimates. Production is expected to have expanded by +1.1% in Apr (compared to +1.4% in Mar).

Also out for the US: University of Michigan Consumer Sentiment (prelim) for May and JOLTS for Mar. While initial claims continue to fall, the level of continuing claims remains stubbornly high (the total number of people across State and Fed programs is still 16.2m people at 17 Apr).

The minutes of the ECB policy meeting will be released this week.

The focus in Australia will be on the Federal Government Budget for 2021/22.  The budget is expected to reverse the pre-pandemic stance on “budget repair” and austerity. The Wage Price Index for Q1 will also be a key report this week.

Details of QE purchase operations are incomplete as the new schedule will be released later in the week.  

This week, the US Treasury will auction $266bn in ST Bills with a net paydown of $39bn. The net paydown for the quarter to date is now -$4bn. The US Treasury will auction the 3yr Note, 10yr Note, and 30yr Bond this week (raising approx. $78bn in new money, to settle next week). Approx. $84bn in ST Bills, Notes, and Bonds 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

The Macro Outlook for w/c 3 May 2021

by Kim | May 3, 2021

Data this week should continue to demonstrate a stronger pace of recovery in the US – due in part to the substantial stimulus support and the vaccine rollout. The key data highlights are US Non-Farm Payrolls and the US ISM PMI’s. Global Markit PMI’s will also be in focus – especially as other major economies progress on vaccine rollouts. There are also several central bank decisions (RBA and BoE) this week.

Last week, the FOMC kept policy settings unchanged, continuing to signal no change in policy until substantial further progress is made on the recovery. The US labour market is the core focus of the FOMC. Non-Farm Payrolls will be released this week for Apr and the expectations are for another significant increase of 986k payrolls (+916k in Mar). A reduction in the unemployment rate is also expected in the household survey. One other important indicator will be the participation rate. Participation has only partially recovered. Given stimulus and progress on vaccinations, increases in participation will be a positive indicator of a reduction in labour market slack (especially if the unemployment rate also decreases).

The US ISM surveys will be released this week, along with the global Markit PMI’s. More attention will focus on the performance of the services sector (re-opening progress), and prices paid versus the prices received indexes within the surveys.

Other data out for the US: the ADP employment report is released on Wed ahead of the Fri Non-Farm Payrolls, Factory Orders, Consumer Credit, and Motor Vehicle Sales (Apr).

There will also be a speech by US Fed Chair Powell on Monday.

There will be several central bank decisions this week – the RBA and the BoE.

In Australia, housing finance, building approvals, and the RBA Quarterly Policy Statement will be released this week. The Aus Federal Budget will be released next Tue 11 May and further policy details will be released in the lead up to the budget night. The budget is expected to reverse the pre-pandemic stance on “budget repair” and austerity.

QE purchases this week: The US Federal Reserve will purchase approx. $17.8bn in US Treasury securities this week (last week approx. $18.2bn). The US Fed will also purchase approx. $31.5bn in MBS this week (last week $29.6bn).

US Treasury issuance will be lighter this week. The US Treasury will settle approx. $266bn in ST Bills this week, with a $39bn paydown.

This week, approx. $22bn in ST Bills mature on the Fed balance sheet and will be rolled over.

The latest Q2 and Q3 US Treasury financing requirements will be announced this week on 5 May.

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