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
by Kim | Apr 19, 2021
A quiet week on the data front with the prelim PMI’s for Apr and US housing data for Mar the key highlights for the week.
There will be less activity on the central bank front this week too. The main events are the ECB rates and policy meeting on Thur and the release of the RBA minutes of the Apr meeting.
The US FOMC meets next week (27-28 Apr), so there will be no Fed speakers ahead of that meeting. The FOMC is not expected to change policy settings at this stage. But there is some anticipation around how the messaging might start to evolve over the next few meetings – especially given how the data is progressing. While spending data came in stronger last week, this was still on the back of significant stimulus. But, so far, the labour market has started to record more notable improvements, especially the non-farm payrolls result for Mar. The initial claims across both state and federal programs are now down to 744k (last week, NSA), and continuing claims are also trending lower (still elevated at over 16m people though).
The important data releases for the week;
The initial read on Apr private sector growth momentum with the prelim PMI’s for major economies.
The US existing home and new home sales data for Mar. Existing home sales for Mar are expected to come in a little lower at 6.18m (SAAR) compared to 6.22m for Feb. New home sales are expected to jump to 885k (SAAR) in Mar compared to 775k in Feb.
Australia prelim retail sales for Mar.
Finally, the National CPI for Japan (Mar) will also be released this week.
QE purchases this week: The US Federal Reserve will purchase approx. $21bn in US Treasury securities this week (last week approx. $18bn) and approx. $31bn in MBS (last week approx. $27bn).
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $300bn in ST Bills this week, with a net paydown of -$43bn for the week.
The US Treasury will also auction the 5yr TIPS and 20year Bond this week and both will settle next week.
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 | Apr 12, 2021
The inflation debate is likely to continue this week with the release of important US data and Fed speeches. The impact of the data flow on key Treasury auctions will be closely monitored.
US CPI for Mar will be reported this week. Data are likely to remain noisy as year-on-year comparisons start to cycle over the onset of the pandemic in 2020. The expectation is for annual growth in the headline CPI to increase from +1.7% in Feb to +2.5% in Mar. Annual growth in core CPI is expected to increase from +1.3% in Feb to +1.5% in Mar.
US retail sales for Mar will be released this week and are likely to reflect the impact of the third round of stimulus. Expecting substantial month-on-month growth of +5.5% in Mar.
US industrial production for Mar will also be released this week. Manufacturing output in Feb was impacted by severe weather shutting down some regional activity for several days. The Mar regional surveys reflect some rebound from that. We will also get the first view of Apr manufacturing momentum with several regional surveys out this week.
The University of Michigan will report the prelim consumer sentiment survey for Apr. So far, despite significant stimulus and the rollout of vaccines, US consumer sentiment has yet to retrace to pre-pandemic levels.
US Treasury auctions will be in focus – especially the 30yr Bond auction on Tuesday after the CPI print. The 3yr and 10yr Notes will be auctioned on Monday.
On top of the data flow, there will be several Fed speeches. Headline speeches include US Fed Chair Powell and Vice-Chair Clarida. Both speeches are scheduled for Wednesday after the CPI print – expect the Fed to maintain its position of tolerating higher inflation prints (“average 2% for some time”).
The Reserve Bank of NZ will meet on rates this week.
The remaining Mar data for China will be out this week – trade, retail sales, and industrial production. GDP for Q1 will also be released.
Finally, the Australian employment and labour market survey for Mar will be released this week. This is not yet likely to reflect the impact from the end of the Government JobKeeper support program at the end of Mar.
The new schedule of Fed purchases of US Treasuries and MBS will be released on Tuesday.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $386bn in ST Bills, Notes, and Bonds this week, raising approx. $40bn in new money for the week.
This week, approx. $36bn in ST Bills, Notes and Bonds, and TIPS 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 | Apr 5, 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
