by Kim | Mar 29, 2021
The weekly macro review of w/c 22 March 2021 – The Chicago Fed National Activity Index report provided a good summation of economic activity in Feb – US economic growth fell to below average in Feb.
Production, income, and consumption recorded notable declines in Feb. Housing indicators also eased as interest rates increased and inventory remained tight.
Declines in production in Feb were recorded across several reports. The industrial production report (out last week) recorded declines in manufacturing and mining output– especially for motor vehicles. The report highlighted that “severe weather” had impacted production in Feb. An anecdote from the Kansas City Fed manufacturing report for Mar highlighted that delays from this event may still be an issue impacting supply chains. Other anecdotes and data highlight that supply chain disruptions in parts of the country may be severe.
Durable goods orders and shipments also declined in Feb. It is unlikely that the decline in orders was the result of severe weather.
Personal income, expenditure, and saving growth were skewed in Feb by the effect of stimulus and relief checks issued in Jan. Income in Feb shows a significant decline compared to Jan. But the payments made in Jan have helped to fill the gap left by the fall in wages and salaries. Total personal disposable income is +5% ahead of a year ago while wages and salaries are flat to a year ago.
Of most concern was that wages and salaries growth in Feb was flat. But more recent weekly initial claims data is now indicting some potential improvement in employment. Initial unemployment claims across both state and federal programs had fallen to below one million people this week for the first time during the pandemic.
US PCE price growth accelerated in Feb, but remains well below the 2% average level. Growth in prices reflects the unique nature of this crisis – higher prices for (mostly non-discretionary) goods, especially food and used autos, and weaker price growth across most services. Core PCE price growth remains subdued, and little changed at +1.4%. Base effects, especially for energy prices, will be significant over the next few months.
Will Mar be better? Consumer sentiment improved notably in the second half of Mar – aided by another round of (and receipt of) stimulus payments and extension to benefits. This will likely underpin another strong month in consumption expenditure. “Expected conditions” has improved the most but consumers still expect slower income growth in the future.
So far, the regional manufacturing surveys have recorded a rebound after the Feb decline in manufacturing activity. Supply chain delays, input cost increases, and inventory depletion reached extreme levels in Mar. Supply chain delays and input shortages were reported as limiting production output in Mar in the Markit manufacturing PMI. This coupled with higher input costs and only a limited ability to pass on those costs could cause some cash flow and profitability issues. So far, growth in employment and the average workweek have remained consistent.
The global PMI’s were mixed. There was little change to low growth momentum in Japan in Mar. Growth accelerated in the UK – across both services and manufacturing in anticipation of easing restrictions. Growth across the Eurozone shifted from contraction to growth in Mar. Acceleration in manufacturing output growth helped to offset ongoing subdued services activity. Growth in Australia also accelerated – led by faster growth in services output. The outlook weakened as the main JobKeeper program came to an end in Mar.
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 29 March 2021 – A short week with Good Friday and Easter celebrations this week (and next). The focus will be on several Fed speeches, a speech by US President Biden, and key data reports.
US President Biden will give a speech on Wednesday outlining the “Build Back Better” expenditure program covering investment in infrastructure and technology, as well as potential tax code changes.
The US non-farm payrolls will be one of the key data highlights this week. Non-farm payroll data for Mar will still be released this Friday 2 April (Good Friday holiday). There are some market expectations are for a large increase in payrolls in Mar given the improvement/slow-down in initial claims over the last few weeks – led by progress on vaccinations.
US manufacturing data for Mar will also be a focus for the week with the ISM and final Markit PMI reports for Mar. The decline in manufacturing output in Feb was highlighted in the ‘hard data’ – industrial production and durable goods reports – apparently due to severe weather in the South and Midwest. The decline in output was not noted in the Feb ISM report – highlighting the difference in what each report measures. The Mar regional manufacturing surveys show some rebound in activity among firms – with a focus on continued lengthening of delivery lead times and widespread impact from higher input prices.
Other data of note this week:
Japan – BoJ summary of opinions report, retail sales for Feb and the prelim industrial production for Feb. The prelim PMIs show little change in the momentum of growth across manufacturing and services in Mar.
The prelim Eurozone CPI for Mar will be released.
A few Aussie data points including housing finance and retail sales data for Feb. This week, the Aus JobKeeper employment support program for businesses comes to an end and the rental eviction moratorium also comes to an end for some of the larger states (NSW, VIC, and WA).
The US Fed will purchase $24.625bn in US Treasury securities (last week $24.25bn). The Fed will also purchase at least $23.35bn in MBS ($26.16bn last week).
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $486bn in ST Bills, Notes, 10yr TIPS, and 20yr Bonds this week, raising approx. $129bn in new money.
This week, approx. $58bn 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 | Mar 22, 2021
The focus this week is on US economic data, Fed speeches including US Fed Chair Powell testimony, and US Treasury auctions.
This will be an extremely busy week of Fed speeches with speeches scheduled for most days. US Fed Chair Powell will also provide testimony to the US Senate and House of Representatives on the CARES Act. The FOMC decision was clear last week that the Fed does not see an issue with the current rise in longer-term rates as long as market conditions remain orderly and there is no ‘persistent’ tightening of financial conditions. Speeches will be monitored closely but will no doubt align with the decision last week. The focus will be on the results of the 2yr, 5yr, and 7yr Treasury auctions this week – these have been particularly impacted in the recent sell-off.
The key data releases this week include the first view of manufacturing and services growth across the major economies for Mar with the prelim Markit PMI’s.
US data: the Feb personal consumption, income, and the PCE price index for Feb, University of Michigan consumer sentiment (final) for Mar, initial claims, durable goods orders for Feb, regional manufacturing surveys for Mar, and existing and new home sales.
The US Fed will purchase $24.25bn in US Treasury securities (last week $11.9bn). The Fed will also purchase at least $20.9bn in MBS ($27.2bn last week) – with the new MBS schedule to be released on Thur this week.
US Treasury issuance will remain heavier this week. The US Treasury will settle approx. $326bn in ST Bills and 2yr FRN this week, with a -$5bn paydown.
This week, most will be watching the Treasury Note auctions. The US Treasury will auction the 2yr, 5yr, and 7yr Notes, 10yr TIPS, and the 20yr Bond. These will all settle next week, raising approx. $148bn in new money.
This week, approx. $11bn 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 | Mar 15, 2021
This week is about central banks and more specifically, the FOMC meeting on Wednesday. We are looking for the Fed response to the rise in yields.
The run-up in yields over the last few weeks has been met with varying responses. The RBA moved deftly to get the 3yr yield back down and made clear forward guidance. In the US, on the back of further significant relief spending, solid data, and vaccination roll-out, US yields have been rising. There has been little push-back by Fed officials regarding the increase over recent weeks.
While low short-term rates have been targeted by central banks, the focus may arguably shift to the rise in the 10yr yield – a rise in which places pressure on the pace of the recovery.
The FOMC will also need to address the looming deadline to reinstate or extend the exemption of, the Supplementary Leverage Ratio (SLR) for banks by 31 Mar.
Other central bank meetings this week include the BoJ and the BoE. The latest RBA meeting minutes will be released this week. There will also be several EM central bank meetings this week (Turkey, Brazil, Russia, Indonesia) – and rising US yields place pressure on these economies.
Other important data releases this week include US retail sales for Feb, US industrial production for Feb, and the Australian labour market survey for Feb.
The US Fed will purchase at least $11.9bn in US Treasury securities (last week $19.4bn). The Fed will also purchase at least $27.2bn in MBS ($28.8bn last week).
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $361bn in ST Bills, Notes, and Bonds this week, raising approx. $55bn in new money.
The US Treasury will auction the 10yr TIPS and 20yr Bond this week ($37bn) which will settle on 31 Mar.
This week, approx. $23bn 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 | Mar 8, 2021
The focus this week will be on the ECB interest rate decision, key data releases, and approval of the US stimulus and relief bill.
Base effects will start to become an important theme – especially for CPI. Data releases are starting to cycle over some of the periods of severe contraction in activity from a year ago (i.e., Chinese trade data for Feb). This will distort year-on-year % comparisons.
The latest US stimulus and relief bill ($1.9tr) was approved by Senate Democrats over the weekend. Spending and benefit extensions are likely to be enacted before 14 Mar benefits expire.
It will be a quiet week for the US Federal Reserve ahead of next week’s FOMC meeting. This week, the focus will be on the ECB rates decision.
Key data highlights in the US this week include the University of Michigan prelim consumer sentiment for Mar and the CPI and PPI for Feb.
Other highlights include Chinese trade data, Eurozone Q4 GDP, and Japanese Q4 GDP.
The new schedule for QE purchases will be released later this week – so data is incomplete for the week at this stage. The US Fed will purchase at least $6.6bn in US Treasury securities (last week $20.8bn). The Fed will also purchase at least $24bn in MBS ($31.7bn last week).
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $230bn in ST Bills with a paydown (Bills) of approx. $55bn.
There will be a focus on US Treasury auctions of the 3yr and 10yr Note and the 30yr Bond this week. All will settle next week, raising approx. $99bn in new money.
This week, approx. $16.3bn in 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 | Mar 1, 2021
The focus this week will be on US non-farm payrolls, final global PMI’s for Feb, the RBA rates decision, and several speeches by US Fed Chair Powell and US Fed Governor Brainard.
The main data releases in the US include non-farm payrolls and the ISM reports on manufacturing and services for Feb. Tracking initial claims trends continue to be in focus.
Notable US Fed speeches this week include speeches by US Fed Chair Powell and US Fed Governor Brainard.
The RBA will meet this week. With the recent move in rates, the RBA has increased 3-year bond purchases already this week and we expect more commentary on QE and YCC in the decision. Other key releases in Australia this week include housing finance for Jan, Q4 GDP, and retail sales for Jan.
The US Fed plans to purchase $20.77bn in US Treasury securities (last week $22.4bn). The Fed will also purchase $31.66bn in MBS ($32.4bn last week). The target for the monthly increase in Fed holdings of MBS is at least $40bn/mth.
US Treasury issuance will be heavier this week. While there will be a paydown in Bills, the US Treasury will settle approx. $440bn in Bills, Notes, and Bonds raising approx. $84bn in new money.
This week, approx. $19.3bn in 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 | Feb 22, 2021
The focus this week will be on US data, Fed speeches, and the passage of the next US stimulus bill through the House of Representatives.
The main data releases in the US include personal income, expenditure, and prices for Jan, the final read on consumer sentiment for Feb, the second estimate of Q4 US GDP, and a further read on manufacturing conditions throughout the US. Tracking initial claims trends continue to be in focus – and new claims remain stubbornly high.
There will be several notable Fed speeches this week including US Fed Chair Powell providing semi-annual testimony to the House of Representatives and the Senate, Vice Chair Quarles, Vice Chair Clarida, and Governor Brainard on the Fed’s maximum employment mandate.
The latest proposed US stimulus and relief bill is expected to start its passage through the US House of Representatives. Some key measures include a $1400 one-off payment (for those on <$75k year) and the extension of targeted unemployment benefits through to August.
There will also be several important Aus data releases this week including the Q4 wage price index and Q4 private sector Capex results.
The US Fed plans to purchase $22.37bn in US Treasury securities (last week/short week $17.8bn). The Fed will also purchase $32.45bn in MBS ($24.1bn last week). The target for the monthly increase in Fed holdings of MBS is at least $40bn/mth.
US Treasury issuance will be lighter this week and the US Treasury has also ceased issuance of the 15, 17, and 22 wk CMBs – resulting in a larger paydown. The US Treasury will settle approx. $269bn in ST Bills, 30yr TIPS, and 2yr FRN’s this week. As a result, the paydown will be -$60.9bn. The US Treasury will also auction $210bn in Notes and Bonds this week which will settle next week.
This week, approx. $21.8bn in 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
