The Federal Reserve’s Beige Book was a long way from its usual dryness, with the Philadelphia district mentioning severe supply constraints hampering potential growth and describing demand as “on fire”. US economic activity was highlighted as “accelerating to a moderate pace” employment expectations were generally strong. Activity was boosted partly by the vaccination program, with most districts reporting a more positive outlook / less uncertain than the previous report and the New York district experienced a strong pace of growth and broad-based gains for the first time during the pandemic. The sting in the tail… was little evidence of wide-spread pass-through of input-cost increases into consumer prices – reiterated in this week’s data on longer-term inflation expectations.
With Canadian Covid cases increasing the Trudeau government signalled that it would look to increase spending, via this year’s favourite conduit, an infrastructure plan. In this case a target of C$100bln has been mooted.
Feb manufacturing sales disappointed at -1.6% MoM (-1.0% exp., 3.1% prev.) and home sales were +5.2% MoM (6.6% prev.)
Mar core CPI ticked a little higher to +0.3% MoM (0.2% exp., 0.1% prev.) and +1.6% YoY (1.5% exp., 1.3% prev.) but it was Thursday’s data that lead to most of the head scratching with a very strong core retail sales of +8.2% MoM (6.4% exp., -3.3% prev.) and a stronger manufacturing survey. The rates markets reacted in the exactly the opposite way that would be expected with a sharp 18bp rally in the 5y5y rate.
The University of Michigan Survey showed 1yr Inflation expectations at a 9 year high of 3.7% (3.3% exp., 3.1% prev.), however 5-10yr expectations moved in the opposite direction 2.7% (2.8% prev.) Also, there was an uptick in current conditions and a drop in sentiment and expectations.
Feb Retail Sales were strong +3.0% MoM (1.7% exp., -5.9% prev.) and -2.9% YoY (-5.3% exp., -6.4% prev.) and Feb Industrial Production was -1.0% MoM (-1.3% exp., 0.8% prev.) and -1.6% YoY (-1.4% exp., 0.1% prev.) German Apr ZEW Survey expectations were lower with the current situation less negative. French Industrial Sentiment ticked higher 105 (101 exp., 99 prev.) Italian Feb industrial production was weaker +0.2% MoM (0.6% exp., 1.0% prev.) with the -0.6% YoY (-2.1% exp., -2.4% prev.)
Norwegian 1Q house price index QoQ 3.4% (2.7% prev.)
Swedish Mar core CPI ticked higher to +0.3% MoM (0.2% exp., 0.2% prev.) resulting in 1.4% YoY (1.3% exp., 1.2% prev.)
The main story was the potential for the Olympics to be called off, with its resulting economic implications. Mar PPI printed higher +0.8% MoM (0.4% exp., 0.4% prev.) and YoY +1.0% YoY (0.5% exp., -0.7% prev.) Feb core machine orders disappointed at -8.5% MoM (2.5% exp., -4.5% prev.) and -7.1% YoY (2.4% exp., 1.5% prev.)
Feb industrial production was strong +1.0% MoM (0.5% exp., -1.5% prev.) and -3.5% YoY (-4.5% exp., -4.9% prev.) with manufacturing and construction registering upticks too. Only services disappointed at +0.2% MoM (0.6% exp., -3.5% prev.)
Australia Mar employment data was strong at +70.7k (35.0k exp., 88.7k prev.) with the breakdown showing the strongest pick up in part time, as expected in a services recovery. The strength was emphasised by the Mar participation rate increase to +66.3% (66.1% exp., 66.1% prev.) and a drop in the unemployment rate to 5.6% (5.7% exp., 5.8% prev.) Consumer inflation expectation also moderated to 3.2% (4.1% prev.)
New Zealand The RBNZ met and left policy rates unchanged, changing the emphasis of their statement such that the market focused on the possibility of lower rates. Those looking to the kiwi economy for a heads up on how other will fare post the re-engagement of the consumer had to consider both the Governor‘s acknowledgment that economic activity had slowed over the summer and Mar REINZ house sales data printing +31.2% YoY (14.6% prev.)