Other highlights were Treasury Secretary Yellen’s revelatory comment that policy rates might have to move higher in response to strong growth. She quickly backtracked that this was not guidance being given to the Fed.
The BoE did a “fake taper” of decreasing QE purchases without adjusting the target amount. However, they did adjust upwards their outlook of how much of the £200bn savings would be swiftly put back into the economy from 5% to 10%. The ECB meeting, if possible, was more predictable than usual.
Inflation swaps moved higher over the week and eagerly await CPI and PPI data next week.
Equities rallied. Again.
Employment numbers reflected the Covid outbreak printing -207.1k (-150.0k exp., 303.1k prev.), the unemployment rate ticked up to 8.1% (8.0% exp., 7.5% prev.) and hourly wages were also weaker. The unambiguity of the weakness was compounded by a drop in the participation rate to 64.9% (65.2% exp., 65.2% prev.). The manufacturing PMI was expansionary, but less so than expected.
Job indicators (ADP, Challenger, Jobless Claims) all indicated a strong jobs market. The all-important nonfarm payroll number disagreed, vehemently, printing +266k (1000k exp., 916k prev.) and a 2month revision of -78k. Private and manufacturing payrolls were weaker, and the unemployment rate ticked higher 6.1% (5.8% exp., 6.0% prev.) as did the participation rate to 61.7% (61.6% exp., 61.5% prev.) The ISM survey produced a host of weaker numbers with only the prices paid component ticking higher.
Mar retail sales +2.7% MoM (1.6% exp., 3.0% prev.) and +12.0% YoY (9.4% exp., -2.9% prev.) French Mar manufacturing production +0.4% MoM (1.3% exp., -4.6% prev.) and +15.7% YoY (16.9% exp., -7.1% prev.) German Mar retail sales were punchy at +7.7% MoM (3.0% exp., 1.2% prev.) and +11.0% YoY (-0.2% exp., -9.0% prev.) industrial production +2.5% MoM (2.2% exp., -1.6% prev.) and +5.1% YoY (5.7% exp., -6.4% prev.). Italian PMIs were weaker, reflecting Covid restrictions, as was retail sales -0.1% MoM (-0.6% exp., 6.6% prev.) with the annual figure lifted by base effects to +22.9% YoY (-5.7% prev.)
Norges Bank left policy unchanged but continued to offer guidance that policy rates will be moved higher. A full hike is priced into the bank’s rate path by December 2021 and the Governor indicated that a move at either the September or December meeting was equally likely. Mar industrial production +0.9% MoM (-1.2% prev.) and +0.6% YoY (1.5% prev.)
Swedish data painted the picture of a surge in activity. The PMIs were unambiguously strong across all measures. Mar industry production +5.7% YoY (2.4% prev.), orders picked up to 10.0% YoY (5.3% prev.) and household consumption printed +5.0% YoY (-1.9% prev.)
Bank of England Bank kept policy unchanged, but slightly reduced its pace of bond purchases. A baby step to taper? Possibly for the market, but not for the central bank as they view stock and not flow as the primary policy tool.
The RBA left policy unchanged, with the thresholds for hiking of “sustainable inflation” which is within the 2-3% band. Recently the Governor communicated that a 3% unemployment rate was a necessary requirement to achieve these goals and unlikely to be met until 2024 at the earliest. The July meeting is now the date for a decision on both QE3 and YCC extension.
The RBA’s quarterly SoMP upgraded Q4-21 unemployment to +5% (6% prev.) but with limited effect to the path of policy or inflation.
1Q unemployment rate was stronger at +4.7% (4.9% exp., 4.9% prev.) and participation picked up to 70.4% (70.3% exp., 70.2% prev.). House prices continued their surge at +18.4% (16.1% prev.) and 2Yr inflation expectation ticked up slightly to +2.05% (1.89% prev.)