The weekly macro review for w/c 1 April 2019 – The rebound in the official China NBS Manufacturing PMI for Mar set a positive tone for the week. The underlying drivers of expansion suggest that improvements in production and new orders signal that measures to stimulate may be starting to impact activity. Of note was the Caixin Manufacturing PMI which reported a ‘significant’ improvement in manufacturing employment.
In the US, a slower pace of manufacturing activity over the last four months was confirmed by the latest ISM. The business inventories report highlighted the growing build-up in inventories through the distributive trade channels – especially merchant wholesalers. Also of note was the more downbeat reports on services growth via both the Markit and ISM PMI’s.
The Feb retail sales indicated consumer spending remained subdued. This was partly confirmed by the continued slower growth in consumer credit, especially in the last 3-months to Feb. The rebound in motor vehicle sales in Mar (the more recent of the reports) suggests a more positive outlook for spending – in line with the improvements in consumer sentiment.
Non-farm payrolls rebounded in Mar. The household survey shows that over the last year, total employment has grown faster than what both population and participation have added to the labour force. As a result, the number of total unemployed persons continue to decline. Of note though is that participation growth has stalled, and employment growth has slowed.
Data from Europe and Asia continues to indicate weakness in manufacturing across key economies. The decline in new factory orders in Germany accelerated in Feb – led mostly by falls in foreign new orders but domestic orders also declined. Headline German industrial production grew in Feb but production in manufacturing continued to decline across most industry categories. Japanese manufacturing activity continued to contract, while services growth remained steady at more moderate levels.
The RBA kept rates on hold. Signalling from the latest statement suggests that RBA may no longer be ‘on-hold’ at future meetings. Stronger growth in retail sales may allay fears that continued falls in house prices are impacting spending. The govt budget featured a forecast return to surplus in the ‘19-20 financial year and spending measures included some stimulus in the form of tax cuts and cash payments for some households. A date for the election is yet to be called but is expected by late May.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 8 April 2019 – Data out on China this week will be a key focus as we look for signs of continued improvement in activity, especially in international trade. New loans and money supply data will also provide an indication of the degree of stimulus still being provided.
Central bankers will be back in focus this week. US FOMC minutes will be released and there are several speeches throughout the week including Chairman Powell. Other speeches of note include Vice-Chair Clarida as a part of the Fed’s review of monetary policy strategy, tools, and communication practices and Vice-Chair Quarles participating in a round table on reforming major interest rate benchmarks.
The ECB meets this week. While rates will likely remain on hold, signalling will be important regarding ECB view on the continued weaker manufacturing growth in key economies.
US data of note this week will be CPI & PPI. The broader view of factory orders for Feb will provide some further insight into manufacturing trend growth. We’ll also get out first view of Apr consumer sentiment numbers.
Aus data of note will be lending for housing.
It’s down to the wire again for Brexit. PM May continues to negotiate a compromise with the Labour Party to pass the withdrawal agreement in Parliament. If such a compromise is reached (and passed), it is to be presented and approved at the EU summit on 10 Apr. If either no compromise is reached across parties or the EU rejects the proposal, then it’s possible that a longer delay to Brexit will be agreed upon.
Awaiting further announcements on the progress of US-China trade negotiations.
US Treasury supply will lighter this week. The US Treasury will settle approx. $163bn in ST bills. With a CMB also maturing this week, there will be a net paydown of $37bn.
More detail (including a calendar of events) is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
