Some inflation friendly economic data coupled with a dovish pivot from the ECB last week have seen a trend toward lower yields re-establish itself in bond markets in recent days. Some push back from the Fed this week against expectations that it could begin cutting policy rates as early as March, has threatened to reverse that downward trend again. Nevertheless, there was equally little pushback to the generic idea that the Fed will shortly pivot toward a looser monetary policy in coming months. And with the incoming data typically reinforcing soft landing narratives (see charts 1 and 2), equity markets have remained resilient. The case for a soft landing for the world economy was also reinforced this week by stronger-than-expected PMI readings in parts of Asia, and, in India in particular (see chart 3). That global semiconductor sales are rebounding has probably helped those economies that are exposed to that sector (chart 4). Still, downside risks abound. This week’s PMI surveys, for example, also revealed that manufacturers’ delivery times are lengthening again in many developed economies, no doubt, in part, because of the instability in the Middle East (chart 5). In a broader sense, policymakers could also face significant challenges in maintaining economic and financial stability in coming month if they continue to pursue quantitative tightening campaigns (see chart 6).
USA| Feb 01 2024U.S. Light Vehicle Sales Fall Sharply in January
- Light truck and passenger car sales weaken significantly.
- Imports' market share declines.
by:Tom Moeller
|in:Economy in Brief
USA| Feb 01 2024U.S. ISM Manufacturing PMI Increases in January
- Index is highest since October 2022.
- Most components improve.
- Price index surges.
by:Tom Moeller
|in:Economy in Brief
- Construction spending +0.9% m/m in Dec., higher than expected; +13.9% y/y, highest since June ’22.
- Residential private construction gains 1.4% m/m, led by a 1.7% rebound in home improvement.
- Nonresidential private construction eases 0.2% m/m, the first monthly decline since June ’23.
- Public sector construction rises 1.3% m/m, led by a 1.4% increase in nonresidential public construction.
USA| Feb 01 2024U.S. Productivity & Unit Labor Cost Growth Slow in Q4
- Productivity slowdown is from three-year high.
- Unit labor costs rise minimally.
- Factory productivity gain lessens unit labor cost growth.
by:Tom Moeller
|in:Economy in Brief
USA| Feb 01 2024U.S. Jobless Claims Rise Moderately in January 27 Week
- Initial unemployment insurance claims up 9,000 after prior week’s 26,000 rise.
- Continuing claims increase 70,000 in their latest week, but prior week revised down somewhat.
- Insured unemployment rate ticks up to 1.3%.
Global| Feb 01 2024Globally MFG PMIs Recover
Globally manufacturing PMI gauges improved in January with only two of the 18 individual reporting countries showing manufacturing worsening. Those two countries were Mexico and Russia. Over three-months compared to six-months, 72.2% of the reporters show the improvements; over six-months compared to 12-months, 55.6% of the reporters show improvements; comparing current values to 12 months ago, half of the reporters show improvements and half show deterioration.
Conditions are getting consistently better over three months, six months, and 12 months in the United States, Mexico, Brazil, Taiwan, and in South Korea. On the other hand, conditions are getting progressively worse over 12 months, six months, and three months in France, Canada, Japan, China, and Turkey.
The improving group features the United States and some of its important trading partners, particularly Mexico, Taiwan, South Korea, and Brazil. Among those worsening sequentially, are France- even though the euro area itself, and Germany the largest economy in the euro area, are not sequentially deteriorating. Canada shows sequential deterioration despite being importantly and closely linked to the U.S. economy through trade even with the U.S. doing sequentially better. Japan trades a great deal with the United States, too, although its largest trading partner is China which is on this list as one of the deteriorating countries and China is having some significant issues. It’s no wonder that these are dragging Japan down. Turkey, of course, is not a surprise on this list because of its ongoing monetary difficulties and structurally high inflation rate.
The queue rankings for the current PMI values back to 2020 now show 7 of 18 countries with PMI standings higher than their medians for this period (That means standings above the 50% mark). Those with standings above the 50% mark include India, Russia, Indonesia, Brazil, Mexico, South Korea, and Malaysia. There are five countries with queue standings below their 25th percentile in the bottom quartile of their range. Those include Japan, China, the U.K., Canada, and France. In this comparison, the euro area barely escapes being categorized as it stands just above its bottom quartile with its 26.5 percentile standing. In contrast, U.S. standing is in its 40.8 percentile.
USA| Jan 31 2024FOMC Holds Fed Funds Rate Steady
- Federal funds rate target range is unchanged at the highest level since March 2001.
- Committee expresses caution regarding next rate move.
- Two percent inflation continues to be Fed’s primary goal.
by:Tom Moeller
|in:Economy in Brief
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