by Kim | May 31, 2021
It will be a big week of data, central bank speeches, the RBA rates decision, and OPEC.
Markets currently expect US inflation to be transitory and are looking through the higher prints as we cycle over the low points of consumer inflation last year. The latest Apr US PCE data was the last of the lower base readings from 2020 – the 2020 base will start to increase from May. The latest PCE trimmed mean shows that underlying inflation continued to increase from 1.71% in Mar to 1.79% in Apr (annualized) – but remains well below recent peaks of 2.1% in Feb 2020.
The main highlights this week will be:
US non-farm payrolls for May will be the focus – especially after the much weaker than expected Apr result. Expectations are currently for a +650k increase in May (prior actual was +266k increase in payroll jobs in Apr and a substantial downward revision to the Mar result).
US central bank speeches including Chair Powell, Vice Chair Quarles, and Governor Brainard.
US ISM Manufacturing and Services PMI’s for May – while ongoing expansion of demand is expected especially in Services, the prices, delivery lead times, and unfilled orders indexes will also be in focus, providing some insight into any easing of supply chain disruptions and input price pressures.
The RBA meeting on rates. While no change in rates is expected, the RBA is expected to provide commentary on the TFF which is due to wind-up on 30 Jun. Commentary is expected to remain focused on reducing labour market spare capacity before any change in rates. Labour market outcomes are likely to be made worse by another state-wide lockdown in Victoria (second-most populous state) – just as National support programs have ended.
Australia Q1 GDP will be released. Growth in Q1 is expected to have slowed slightly to +2.5% (from +3.1% in Q4 2020).
There will be several other central bank speeches this week: ECB President Lagarde, RBNZ Governor Orr, BoE Governor Bailey, and the Indian central bank will also meet this week.
OPEC will meet this week:
OPEC and its allies are expected to stick with a decision to boost output in July when the group gathers Tuesday, according to a Bloomberg survey last week. https://www.bloomberg.com/news/articles/2021-05-30/oil-edges-higher-with-market-set-to-focus-on-opec-policy-meet
This week, the US Treasury will settle $476bn in ST Bills, Notes, and Bonds, raising approx. $91bn in new money. The net new cash raised for the quarter to date is approx. $119bn (est of +$463bn in Q2). This week, approx. $62bn in ST Bills and Notes & 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
by Kim | May 24, 2021
The focus this week will be on US data, notably the personal income, consumption, and PCE price index data for Apr. There will also be several speeches and testimony by US Fed Vice Chair Quarles and the rates decision by the RBNZ.
The key US data highlights this week are:
Personal income, consumption, and the PCE price index data for Apr. The consumer inflation number will be important – this is the release followed by the FOMC. There was a relatively large acceleration in the annual inflation rate for Mar, which increased to 2.3% from 1.5% in Feb. The Apr 21 result will cycle over the lowest point of the price index for 2020, so base effects should be more notable. This will be the last month of a lower base contributing to the headline inflation number. Annual core inflation is expected to increase from 1.8% in Mar to 3% in Apr.
US durable goods orders will be released for Apr – expecting a +0.7% increase in orders (slower than the 1% increase in Mar).
US new home sales for Apr are expected to increase at a slightly slower pace of 975k (down from 1.021m SAAR basis in Mar) – as material delays continue to impact construction and higher mortgage rates impacted demand somewhat.
There will also be several regional US manufacturing surveys released this week for May. Expecting similar themes of production impacts from supply chain disruptions, higher prices, and rising order backlogs. From the Markit prelim US PMI report last week:
Nonetheless, a further marked deterioration in vendor performance limited operating capacity and reportedly held back output growth. https://www.markiteconomics.com/Public/Home/PressRelease/392edb090fd34a7cb68bf22a1ddb7789
In Australia, the Q1 construction work and private sector CAPEX reports will be released this week, ahead of Q1 GDP next week. Aus employment data for Apr disappointed last week with an overall decline in total employment for the month. The unemployment rate still declined due to a fall in participation.
This week, the US Treasury will settle $305bn in ST Bills, 10yr TIPS, and 2yr FRN’s, with a net paydown of -$5bn. The net new cash raised for the quarter to date is approx. $29bn. The US Treasury will also auction the 2yr, 5yr, and 7yr Notes this week which will settle next week on 1 Jun.
This week, approx. $15bn in ST Bills will mature on the Fed balance sheet and will be rolled over. Next Mon 31 May will be the US Memorial Day Holiday.
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
by Kim | May 17, 2021
The focus this week will be on the FOMC minutes, US housing data, and the global prelim PMI’s for May.
The upside surprise for US CPI in Apr dominated the news last week. Other data was generally in line with expectations, although PPI growth also came in higher. US retail sales “disappointed” with a 0% change after a 10% increase in the prior month. Of interest was the University of Michigan consumer sentiment result – consumer sentiment fell unexpectedly by 6pts (despite record stimulus, etc.). The fall was the result of higher inflation expectations and expectations for real income growth the weakest in five years. Despite negative mentions of buying conditions (for homes, vehicles, durables), the expectation is for spending to still advance – supported by rising employment/re-opening, stimulus, and savings. The rationale is interesting:
This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages. At present, these rationales remain relatively uncommon, and the power of corrective economic policies is now relatively potent.
Policy commitments to establish full employment while allowing inflation to meaningfully rise have never been attempted with the additional micro goals of equity and fairness across population subgroups. http://www.sca.isr.umich.edu/
This week in the US, the FOMC minutes will be released. There will also be several Federal Reserve Governors speaking during the week, including US Fed Vice Chair Clarida. Housing data will be in focus with permits (exp 1.77m SAAR), starts (exp 1.71m), and existing home sales (exp 6.09m) for Apr.
The prelim global PMI’s for May will also be released later in the week for the US, Europe, Japan, UK, and Australia. Input price pressures and supply chain disruptions will be of interest.
In Australia, the RBA will also release the latest minutes. Also out this week will be the Q1 wage price index (exp +0.5%), and the labour market survey for Apr (employment growth exp +15k). The Apr labour market survey will be the first since the end of a major business support program – the JobKeeper subsidy.
This week, the US Treasury will settle $426bn in ST Bills, Notes, and Bonds, raising approx. $37bn in new money. The net new cash raised for the quarter to date is approx. $34bn.
This week, approx. $24bn 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
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
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
by Kim | Apr 26, 2021
This will be a big week with more central bank meetings (FOMC and BoJ) and key data releases.
The US FOMC will meet this week with the policy decision due on Wed. No change is expected to the current policy settings. There is some anticipation around how the messaging might start to evolve over the next few meetings – especially concerning a possible timetable for tapering QE purchases. US data – especially upside or downside surprises, will be important to track over the next few months. For the moment, US data is coming in stronger on the back of significant stimulus in Q1 and likely positive impact from the vaccine rollout supporting reopening.
US data of note this week is the prelim release of Q1 GDP – expected to be +6.5% annualized (up from +4.3% in Q4). The Personal Income, Consumption, and PCE Price Index data for Mar will be released on Fri. This is expected to reflect the rollout of the Mar stimulus payments on income growth, higher expenditure, and higher core PCE price growth (expecting +1.8% in Mar versus +1.4% in Feb). Other data of note will be the University of Michigan Consumer Sentiment data for the end of Apr and several regional manufacturing surveys.
The BoJ will also meet this week. No change to policy is expected. The BoJ will release updated economic forecasts.
The prelim Eurozone Q1 GDP data will be released this week. The ECB kept policy unchanged last week – citing near-term downside risks for the economy, especially as many countries are still dealing with outbreaks. The prelim Eurozone CPI for Apr will also be released (expecting +1.6% versus +1.3% in Mar).
In Australia, CPI for Q1 will be released and annual CPI is expected to be +1.4% in Q1 versus +0.9% in Q4 – there may be some base effect.
QE purchases this week: The US Federal Reserve will purchase approx. $18bn in US Treasury securities this week (last week approx. $21bn). The new schedule of MBS purchases will be released on Wed this week.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $519bn in ST Bills, Notes (2yr, 5yr, and 7yr), Bonds, TIPS, and FRN’s this week, raising approx. $97bn in new money.
This week, approx. $65bn in ST Bills, Notes, Bonds, and FRN’s 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
