The weekly macro review for w/c 6 July 2020 – Last week we reviewed the manufacturing recovery in the US in Jun. This week we look at services/non-manufacturing activity. The easing of lock-down and trading restrictions resulted in some improvement in private sector services activity for the US in Jun.
The more detailed ISM non-manufacturing PMI showed that activity improved in Jun and ‘only’ three industries reported further overall declines in the month: Mining; Other Services; and Management of Companies & Support Services. Importantly the increase in new orders was stronger – a positive sign for short-term output growth. But order backlogs and employment indicate that spare capacity is still an issue. Eleven industries continued to report net declines in employment in Jun; Management of Companies & Support Services; Educational Services; Mining; Professional, Scientific & Technical Services; Other Services; Retail Trade; Health Care & Social Assistance; Public Administration; Wholesale Trade; Utilities; and Finance & Insurance.
The Markit services PMI for the US showed that activity overall continued to decline in Jun, but at a slower pace than in May. There was more of a general stabilization of activity across key business indicators. There was little in this report to suggest that, on net, there had been a sharp resumption in services business growth in Jun.
JOLTS data was mixed. The total hires and separations for the month were much stronger – with growth in hires reaching an all-time high. On a monthly basis, hires were larger than separations in May by +2.3m people. But the implied loss of employment in Mar and Apr (combined) was 15.4m jobs. So, while May was a positive result, there is still a long way to go before the labour market overcomes those losses. The level of job openings increased marginally. The level of quits remain depressed – indicating less inclination to change jobs during high levels of unemployment.
Initial unemployment claims and continuing claims remain elevated but have at least continued to slow in the last few weeks. There has, instead, been an increase in Pandemic Unemployment Assistance initial and continuing claims.
German factory orders improved in May – a good sign for production in the short-term. Industrial production also rebounded in May – but with mixed performance across industry sectors. Levels of production remain well below the same time a year ago.
In Australia, lending for housing declined at an accelerated pace in May, likely reflecting the impact from the National shutdown in Apr. All sectors of housing finance declined in May. The slow-down in credit growth will most likely impact the growth of house prices over the coming months.
Job ads in Australia improved in Jun after a long period of weakness and are still 45% below the same month a year ago.
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 outlook for w/c 13 July 2020 – A big week of data and central bank meetings.
US highlights this week will be:
Regional readings of manufacturing for Jul – important to see how activity is tracking after the Jun rebound.
Initial and continuing claims will remain in focus – especially the Pandemic Unemployment Assistance claims which have been rising quickly over the last few weeks.
The prelim consumer sentiment for Jul will be released, providing some important insight into the impact of rising infections across the South and the West (especially) on consumer sentiment and spending intentions.
Retail sales and CPI for Jun.
Industrial production for Jun which will provide more detail around the Jun PMI’s and factory orders data.
In Australia, the labour market survey for Jun will be released.
China Q2 GDP will be released this week, along with the remaining Jun data including retail sales, industrial production, and fixed asset investment.
Rates decisions by the BoJ and the ECB.
Purchases of Treasury and Mortgage securities are incomplete for the week – the full schedule for operations will be released on 13 Jul. Last week, the NY Fed purchased approx. $21.8bn in Treasury Securities (prior week $7.8bn, prior week before that $19.6bn) and approx. $22.8bn in MBS (prior week $18.1bn and prior week before that $22.8bn).
This week, the US Treasury will settle approx. $438bn in ST bills, Notes and Bonds raising approx. $31bn in new money.
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
