by Kim | Nov 23, 2020
The weekly macro review for w/c 16 November 2020 – Data from the US this week showed that the rebound in activity continued. A slight uptick in initial claims hinted at some possible impact from the growing level of state and regional restrictions. This will be something to watch in the coming weeks. Continuing claims remained elevated and the fall in regular state ongoing claims was mostly offset by an increase in the uptake of federal pandemic programs.
US retail sales growth slowed in Oct. The breadth of growth across categories was narrower this month. The monthly retail growth was led mostly by the increase in non-store retail sales. Year-to-date retail sales are now only -0.1% below the same period a year ago.
Manufacturing activity continued to recover. Industrial production in Oct increased at a faster pace led by faster growth in manufacturing output. Output and utilization remain below a year ago. The regional manufacturing surveys for Nov indicated that growth remained consistent.
Housing conditions were especially strong in Nov – reaching another new high for the conditions index. This was led by single-family sales (present conditions) and further improvement of conditions in the Midwest and the South. Existing home sales also continued to increase at a fast pace, albeit slower than in the prior month. All regions contributed to growth. Mortgage applications recorded an increase in purchase applications – for the second time out of the last eight weeks.
The rebound in Japan, especially for manufacturing and exports, continued. Industrial output in Sep increased for the fourth month in a row, despite the headline contraction in the manufacturing output PMI. Aiding this recovery has been the steady rebound in export growth over the last few months. Two points of caution from the prelim Nov PMI was the renewed contraction in new export work and the faster decline in output prices.
In Australia, the Reserve Bank minutes reiterated that reducing unemployment was a National priority amid concerns over subdued demand conditions. The full suite of exceptional monetary measures introduced in Nov, including QE for the first time, was aimed at providing further traction for the recovery alongside fiscal measures.
Previously, the RBA has acknowledged that inflation would not be likely to return to the 2-3% range until wage growth started to accelerate. This is not likely to happen until labour market slack is greatly reduced. In Q3, annual wage growth slowed to the slowest pace in the series (short) history. The labour market survey for Oct recorded faster growth in the number of employed persons – one of the stronger monthly rebounds in employment since the pandemic shutdowns. The important takeaway is that while employment increased notably, the supply of labour increased by a larger degree (participation had increased). This means that the total number of unemployed persons continued to increase on a monthly and annual basis. For the moment, employment growth/labour demand is lagging behind the increase in the supply of labour. As domestic restrictions continue to be lifted, employment growth will need to accelerate further to reduce the extremely high level of unemployment and underemployment.
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 23 November 2020 – It will be a short week in the US with the National Thanksgiving Day holiday. Despite the short week, it will still be a heavy data week including the FOMC minutes, and the prelim PMI’s for Nov.
Key data points this week include:
Most of the US data will be released on Wednesday this week including weekly initial claims data, durable goods orders for Oct, the prelim Q3 GDP (2nd release), personal income, expenditures, and prices for Oct, Uni of Michigan consumer sentiment final for Nov, and the FOMC minutes.
US Fed Vice Chair Clarida will give a speech at the IMF Conference on New Policy Frameworks for a “lower for longer” world. The link is provided in the calendar.
The prelim PMI’s for Nov will be released this week. These will provide some insight into the impact on activity from the latest Covid restrictions in Europe and the UK especially. Services will likely remain weaker.
In Australia, construction work done and private sector CAPEX for Q3 will be released this week. Both reports are key inputs into the Q3 GDP release scheduled for the following week.
US Fed purchases of Treasury securities and MBS will be lower this week due to the shorter week. Last week, purchases of US Treasuries totaled approx. $34bn, and this week, purchases will be around $4bn. Purchases of MBS will remain elevated and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases were approx. $36bn and this week’s purchases are expected to total $20bn, even with the shorter week.
US Treasury issuance will be somewhat lighter this week. The US Treasury will settle approx. $309bn in ST Bills and 2yr FRN’s this week, raising approx. $11bn in new money.
The US Treasury will also auction $169bn in 2, 5, and 7-year Notes this week that will settle on 30 Nov. Note that the settlement of 10yr TIPS, Notes, and Bonds on Monday 30 Nov will be heavy at $208bn – raising approx. $130bn in new money. This does not include the regular ST Bills for the week.
This week, approx. $15bn 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 | Nov 16, 2020
The weekly macro review for w/c 9 November 2020 – Headline US consumer sentiment and expectations of future conditions both declined markedly at the start of Nov. This was the result of the election outcome and growing concern over the increase in Covid-19 infections. Current conditions remained little changed. The rebound in sentiment since Apr has been mixed and all three sentiment indexes are still more than 20% below a year ago.
A potential Covid-19 vaccine was announced at the start of the week with a possible roll-out date for mid-2021. The situation in the US and other major economies is concerning for the next few months. The number and growth of Covid-19 infections in the US are now more severe than in the two prior peaks this year. A National shutdown is unlikely, but affected states are implementing restrictions locally to manage the outbreak. This is happening against the backdrop of a federal political impasse – at least until Jan 20, 2021. The US Congress is yet to progress on any form of emergency funding or extensions to programs at this stage.
The US weekly initial claims still recorded over 1m new claims made by people for the week ending 7 Nov – across both state and federal programs. The continuing claims data highlights that while uptake of state-based programs is falling, people are moving over to the emergency federal programs. The net result is that total continuing claims for the wk ending 24 Oct was little changed at 21.1m people (down from 21.5m people in the prior week). Of this total, over 13m people are utilizing federal programs that are due to expire at the end of the year.
According to the global PMI’s in Sep and Oct, Germany remained the key to overall growth in EU manufacturing output. In Sep, German output increased after declining in Aug, but output remains well below a year ago. Across the broader Eurozone, industrial production was mostly flat for Sep. While output has improved it remains below a year ago. The tenuous recovery will likely be impacted by another severe wave of Covid-19 infections and subsequent restrictions.
The Chinese Oct trade data for China showed that imports fell by -11% for the month – likely affecting some of the larger export markets. Imports from Germany fell by -15% in Oct (Germany is the third-largest import market for China), after increasing by 16.8% in Sep. Imports from the broader EU region were down by -11.4% in Oct. The Chinese import data also highlighted some weaknesses for Japanese exporters in the short-term.
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 16 November 2020 – Data will be in focus this week ahead of the US Thanksgiving holiday next week. The G20 summit will be held later this week (virtually) and discussion will focus on Covid-19 response and management.
Key data points this week include:
US – housing market data (conditions for Nov, existing home sales, and permits) will be released this week. Mortgage purchase applications have been falling for six out of the last seven weeks, so there may be some stalling of recent improvements. US retail sales for Oct will be released this week. Several regional manufacturing surveys will provide the first view of US manufacturing activity for Nov. We will be looking for any impact on factory activity from rising infection rates, especially export orders.
China Oct data will continue to be released this week – including industrial production and retail trade.
Japan – merchandise trade data for Oct will be released and there will likely be some impact from the notable decline in Chinese imports for the month. The prelim manufacturing PMI for Nov will be released, and we will be looking for a possible impact on activity due to the renewed COVID-19 outbreak among key trading partners.
Australia – the RBA minutes will be released this week, providing some insight into deliberations behind the launch of QE. The important employment and labour market survey for Oct will be released this week.
US Fed purchases of Treasury securities and MBS will be significantly higher this week ahead of the shorter Thanksgiving week next week. Last week, purchases totaled approx. $17bn, and this week, purchases will be around $34bn. The schedule for Thanksgiving week has approx. $4bn in purchases of US Treasuries.
Purchases of MBS remain elevated and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases were approx. $20bn and this week’s purchases are expected to total $36bn. The schedule for Thanksgiving week has approx. $20bn in purchases of MBS. This is all in-line with continued declines in mortgage rates.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $407bn in ST Bills, Notes, and Bonds this week, raising approx. $48bn in new money.
The US Treasury will also auction $39bn in 10yr TIPS and 20yr Bonds this week that will settle on 30 Nov.
This week, approx. $20bn 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 | Nov 9, 2020
The weekly macro review for w/c 2 November 2020 – US data this week continued to indicate improvement in the economy. Jobs growth improved – but there is still a long way before there is a full recovery of the jobs lost in Mar and Apr. The non-farm payrolls continue to rebound – and have now recovered just over 50% of the jobs lost in Mar and Apr. Unemployment continued to fall – aided by a slower recovery in labour market participation. Initial jobless claims continue to slow. Some of the slowdown in state-based programs is being offset by increases in federal support programs.
The US congress will return next week in a lame duck session. There is some evidence that Governors may begin to implement measures to reduce the spread of Covid in their states – especially where cases are placing pressure on hospital capacity. President-elect Biden will announce a task force this week – it is unclear how much impact he can have prior to taking office though. The holiday season will place pressure on infection rates, which are already well above 100k a day now. Any restrictions implemented during this period may not be supported by another round of fiscal support, although there remains some positive signs for some agreement on stimulus support during the lame duck session – and there is still a very high level of cash in the Government Treasury General Account. The FOMC left policy unchanged this month – further support for the economy in the face of restrictions, may be a priority for the FOMC over the next few months.
US business activity continued to rebound, but is uneven. Manufacturing recorded stronger growth in Oct, in line with the improved regional reports. The Sep factory orders continue to show weakness in airline and petroleum industries. Motor vehicle orders and shipments are now back above that of a year ago. Other industries continued to rebound. Services growth was consistent this month, but there was no acceleration in activity after the stronger result in Sep. There was some caution regarding hiring.
Activity in Europe and the UK is about to be impacted by further social restrictions to curb the spread of Covid. Eurozone manufacturing was stronger in Oct due mostly to activity in Germany. Services output across the Eurozone fell back into contraction – the first sign of weakness re-emerging.
In the UK there was a notable slowdown in services growth, while manufacturing growth remained consistent. The BoE stepped up asset purchases by an additional £150bn. The BoE remains cautious about the uncertainty of the Brexit trade deal as well as the impact of the reimposition of social restrictions.
Australia is now coming out on the other side of restrictions. The PMI’s noted large improvements in business sentiment as case counts decline, as trading and travel restrictions are lifted, and as state border restrictions begin to lift. The PMI’s indicated moderate improvement in activity, especially in services. But both manufacturing and services reports noted declines in employment. The RBA used this opportunity to “gain more traction” with monetary stimulus by easing further this month. A large suite of easing measures was introduced this week, including QE, and the reduction of the OCR down to +0.1%.
Aus mortgage finance data confirmed that housing remains well supported. Retail sales are recovering with a strong Q3 result (in real terms) – even the weakness in Vic was offset by stronger growth in other states. But the retail sectors contributing to the growth are generally not discretionary in nature. Food grocery has been strong. Household Goods was also strong – led by some shift to work-from-home requirements. Retail sales have been boosted by the strong fiscal and monetary stimulus, rent and mortgage payment moratoriums, early tax-free access to retirement savings, and improvements in employment. Some of the fiscal measures have started to unwind now.
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 9 November 2020 – A relatively quiet week ahead. The US presidential election results will continue to be finalized and it will be a relatively light data week. The most pressing issue will be what action will be taken by the US to curb the sharp increase in Covid infections.
It is Veterans Day in the US on Wed 11 Nov.
Key data points this week include:
US – the prelim consumer sentiment for Nov to date, CPI and PPI for Oct.
China Oct data will continue to be released this week – including trade (last weekend), CPI and PPI data.
Australia consumer confidence data for Nov will be an important indicator for spending leading into the end of the year.
US Fed purchases of Treasury securities will be lighter this week due to the Veterans Day holiday. Last week, purchases were around $20.6bn and this week, purchases will be slightly lower at $16.625bn. Purchases of MBS remain elevated. Last week purchases totaled $32bn and this week purchases are expected to total $19.6bn. The target for MBS purchases is around $40bn a month.
US Treasury issuance will be lighter this week and with a net paydown. The US Treasury will settle approx. $285bn in ST Bills this week, with a net paydown of -$18bn.
The US Treasury will also auction $122bn in Notes and Bonds this week which will settle next week.
The US Treasury released the estimated funding requirements for Q4 just prior to the election. The estimated net new money raised for Q4 was reduced from $1.2tr to $617bn for the quarter. The Q1 2021 estimate was also released and the net new money raised was estimated at $1.12tr – indicating that stimulus was not likely until the new year.
This week, approx. $16bn 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 | Nov 2, 2020
The US Presidential election, central bank policy decisions, and a heavy data week will feature against a backdrop of new peaks in Covid-19 infections in the US, Europe and the UK. Further restrictions have been announced for European countries, and another month-long shutdown has been announced for England.
The US Presidential election will be held on Tuesday 3 Nov. A ‘blue wave’ result is not assured as there is the risk of a surprise Trump win, a contested election, and/or a divided government. The wider use of mail-in ballots will increase the likelihood that there will not be an official winner announced on the night. The process is likely to extend beyond Tuesday night and if the result is contested, this process will likely be prolonged further. A divided result either way could see some disruption for markets due to lowered expectations for stimulus and increased ambiguity over the policy process for the next four years.
The US Fed FOMC will hand down its policy decision on Thursday and there is no expectation for a change in stance at this stage. The economy is rebounding, albeit unevenly, but infections continue to rise to new peaks, possibly dampening progress. Last week the Fed adjusted its Main Street Lending program – reducing the minimum loan size to $100k and reducing fees to encourage smaller businesses to use the facility. https://www.federalreserve.gov/newsevents/pressreleases/monetary20201030a.htm
The RBA will meet on Tuesday and market expectations of a rate cut to 0% has held steady at 84% for the last week (source: https://www2.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker ). From the minutes of the last RBA meeting, the Board noted that it expected more traction from further easing with states coming out of lockdown. It is also possible that further changes to the Term Funding Facility will be announced (expanded) – placing possible further downward pressure on mortgage rates in Australia.
The BoE also meets this week – the two key issues will be the Brexit trade agreement (no ratified agreement) and a new month-long lockdown for England. An announcement is expected on the status of the Brexit trade negotiation on Wednesday or Thursday this week – as more intensive negotiations continue in Brussels.
Key data points this week include:
US – Non-farm payrolls and ISM manufacturing and services PMI’s for Oct will be the key data focus.
The final global PMI’s for Oct will be released. Europe PMI’s for Oct are only starting to reflect the impact of restrictions on trade, especially for services.
US Fed purchases of Treasury securities will increase this week. Last week, purchases were lower at around $8bn and this week, purchases will increase to the $20bn benchmark. Purchases of MBS remain elevated. Last week purchases totaled $28bn and this week purchases are expected to reach $32bn, well above the $20bn benchmark.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $529bn in ST Bills, Notes, and Bonds this week, raising approx. $76bn in new money.
With progress on stimulus stalled until after the election result, the current pace of new money raised is running below the $1.2tr estimate for the quarter (38% of the quarter and 11% of the estimated net cash to be raised for the quarter). The US Treasury cash balance remains elevated at $1.65tr (Wed 28 Oct level).
This week, approx. $28bn 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 | Oct 26, 2020
The weekly macro review for w/c 19 October 2020 – Global prelim PMIs for Oct indicated mostly consistent momentum in manufacturing growth for the month. The exception was the UK. The Composite UK report was quite downbeat with growth slowing notably but remaining positive. The UK manufacturing result reflected a combination of firms building stock ahead of the final Brexit deadline and firms streamlining inventory to reduce costs. Eurozone manufacturing was lifted by the German manufacturing sector. Japan’s manufacturing output index indicated a decline, but industrial manufacturing production is forecast to be positive for Sep – and export performance in Sep continued to improve. Weaker improvement in Japanese imports suggests some ongoing domestic weakness.
Growth in services PMI’s was mixed. There was a sharper contraction in Europe and a continued contraction in Japan. Growth was notably slower in the UK. Momentum in the US and Aus services activity was only slightly faster – linked to the easing of restrictions.
In the US, services output was higher, as restrictions were lifted, but there was some easing in the growth of orders and employment. Manufacturing growth maintained steady progress. Regional US manufacturing surveys for Oct have indicated continued improvement in manufacturing conditions.
There is some cautious optimism around slowing US initial jobless claims – especially now that California data has been updated. Continuing claims were lower too but falls in state and some fed programs were offset by increases in other fed programs. This could reflect a transition between programs as benefits expire for some people. How rising infections impact consumption behaviour will be important over the next few weeks.
US housing market data for Sep remained very strong. The Northeast has been a key driver of improved housing market conditions, existing home sales, new permits and new housing starts. All regions recorded stronger existing home sales in Sep. There is some caution ahead though from the mortgage application data. While refi activity has continued to grow as mortgage rates have continued to fall, purchase applications have declined now for the last four weeks. The purchase index is a leading 4-6 week indicator of home sales.
There were two interesting points from the minutes of the RBA Oct meeting. The first is the likelihood of further policy easing for Nov and the second is the change in forward guidance on inflation and full employment. The Board noted that it wants to see more than just progress toward full employment. There will likely be less emphasis on forecast inflation and more emphasis on actual inflation outcomes. It was also noted that inflation outcomes are not likely to be achieved until there is a tight labour market.
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 26 October 2020 – This will be another big week across the macro spectrum. We are now in the final week leading into the US Presidential election next Tuesday, Brexit talks are intensifying, Covid-19 cases are reaching new highs around the world, US Q3 earnings and growth data will feature, and there are several central bank interest rate decisions due this week.
We are now into the final week leading up to the US Presidential election. Stimulus discussions continue to simmer. The prelim US Q3 GDP will be reported this week – with likely a strong upturn in growth compared to the significant contraction in Q2.
US Q3 earnings this week will feature: Amazon, Apple, Google, Microsoft, Facebook, Twitter, Pinterest, AMD, Fastly, Shopify, Starbucks, Boeing, GE, Caterpillar, 3M, Pfizer, Moderna, Gilead Science, Visa, Mastercard, Exxon Mobil, Chevron, and Ford.
Brexit talks resumed late last week and have intensified into this week in an effort to reach an agreement. The 31 Oct has been identified as a target date to review progress on negotiations, allowing enough time for a deal to be ratified ahead of the 31 Dec transition deadline.
There are several central bank meetings this week: The ECB, BoJ, and BoC. It will be quiet on the US Fed front ahead of the FOMC meeting next week 4-5 Nov.
Key data points this week include:
US – prelim Q3 GDP will be a key focus this week with the expectations for a strong growth figure, the final half of Oct consumer sentiment reading, personal consumption, income and prices for Sep, and the advance durable goods report for Sep.
Chinese Oct PMI’s will be released over next weekend.
Europe prelim Q3 growth data will also be released along with prelim CPI growth for Oct.
Aus Q3 CPI will be released and will provide a key input into the RBA deliberations and meeting next Tues.
The new schedule of US Fed purchases of Treasury securities and MBS will be released mid-week.
US Treasury issuance will be little changed this week. The US Treasury will settle approx. $302bn in ST Bills and 5yr TIPS this week, raising approx. $5bn in new money. The US Treasury will also auction $210bn in Notes, Bonds, and FRN’s this week, which will settle next week.
This week, approx. $16bn 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 | Oct 20, 2020
The weekly macro review for w/c 12 October 2020 – The current US initial and continuing jobless claims are still missing up-to-date California figures. This is likely to updated in the following week. As of the 26 Sep, continuing claims across all programs still totaled more than 25m people.
US retail sales growth in Sep was stronger. The general theme reflected the ongoing shift in consumer behaviour from lockdowns and restricted activity (mainly home-based consumption) to more on-the-go consumption.
US consumer prices increased at a slightly faster pace in Sep. Underlying CPI growth was little changed. Some acceleration in core goods prices (used cars mainly) offset some slower growth in core services, including shelter.
Despite more positive Sep figures, sentiment at the start of Oct reflected increased concern for current weakening conditions. But there was an improvement in expectations for future conditions.
“Slowing employment growth, the resurgence in covid-19 infections, and the absence of additional federal relief payments prompted consumers to become more concerned about the current economic conditions.“
US industrial production was weaker in Sep, especially for manufacturing and utilities output. The two regional manufacturing surveys for Oct were quite strong though – suggesting some firming of activity.
Employment in Australia declined in Sep – led by a decline in full-time employment. This only partially offset the stronger employment growth from the prior month. Total unemployed persons increased. The increase in total unemployed persons would have been larger if not for the decline in participation. The underutilisation rate increased slightly to 18.3%. Aside from the four months between Apr and Jul 2020, the underutilization rate in Sep is the still the highest in the series history – highlighting the weakness and slack the remains in the labour market.
Chinese trade data reflected more moderate export growth in Sep. Import growth though was stronger for the month – this included a larger increase in imports from the US for the month.
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 19 October 2020 – Key highlights for the week ahead include the final US Presidential debate in the lead up to the US Presidential election, the EU-UK Brexit trade negotiations at an inflection point, central bank speeches, and the prelim Oct PMI’s.
There are now only two weeks until the US Presidential election. The focus this week will be the final Presidential debate (last week’s debate was cancelled) and the ongoing posturing around a stimulus bill.
Given the lack of progress on the trade deal negotiations, the UK-EU posturing ramped up in earnest leading into the EC summit last week. The EC summit had been a key milestone for deal outline, and this has now been missed. Talks are currently at a standstill and its not clear whether there will be face to face meetings this week.
There are several central bank speeches this week. The US Fed Chairman Powell, Vice Chair Clairda, Vice Chair Quarles and Governor Brainard will speak early in the week. Also speaking this week will be ECB President Lagarde and RBA’s Kent and Debelle.
Late this week, the Markit prelim PMI’s will provide a further update to the economic rebound as of Oct. We note the increase in trading restrictions throughout Europe and the UK, as virus cases start to rise again. The re-imposition of restrictions is likely to impact services activity in the coming months.
Other key data points this week include:
US – Housing will feature this week with permits, starts, existing home sales, and the housing conditions index. There will be a further read on regional manufacturing activity for Oct (last weeks’ regional results were positive for Oct).
China industrial production, retail sales, and fixed asset investment for Sep and Q3 GDP.
The RBA will release the minutes of the Oct meeting – looking for hints of further easing bias.
The US Fed will further increase purchases of MBS this week with $26bn in purchases planned for the week. Purchase of Treasuries will remain constant at $19.5bn.
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $285bn in ST Bills this week with a net paydown of -$17bn.
This week, approx. $20bn 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
