On the heels of Draghi’s announcement that Europe may ramp up QE, here’s the bottom line about Draghi’s lunacy and today’s major economic release.
Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: Core durable goods orders in March were up by .2% m/o/m which was 3 tenths worse than expected but mostly offset by February which was revised up by two tenths to a .1% gain. The average Q1 monthly rise was just .16% but y/o/y did pick up a bit to 3.2%. In the chart attached you can see how sluggish capital spending still is (see chart below).
Orders for auto’s/parts fell for a 2nd month and there was the 3rd month in a row of declines for orders for computers/electronics. Machinery orders also dropped but are up 6.4% y/o/y. As for shipments of core goods which goes into the GDP calculation, it rose by .4% m/o/m, 3 tenths more than expected and February was revised up which means Q1 GDP estimates might move up a touch. Metals orders were up sharply y/o/y with the rise in commodity prices but were more mixed m/o/m…
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The Bottom Line
Bottom line, capital spending remains punk and all the excitement and confidence generated by the Trump victory hasn’t yet translated into any notable increase in investment at least thru March. I am hopefully though that this might change for the better because we did see some improvement in capital spending plans looking forward in the April NY and Philly manufacturing indices and the March NFIB small business optimism data. We also likely have businesses that are sitting and waiting on tax reform in terms of size and timing of implementation.
Initial jobless claims rose by 14k to 257k and that was 12k more than expected. Because a 259k print dropped out of the calculation, the 4 week average held at around 242k, near the lowest in decades. Continuing claims, delayed by a week, rose by 10k off its lowest level since 2000. Bottom line, notwithstanding the w/o/w rise in claims, the pace of firing’s remains very modest for reasons stated every week.
Offsetting a potential uptick in Q1 GDP estimates after the durable goods shipments number, wholesale inventories in March fell .1% vs the estimate of up .2% and February was revised lower. Retail inventories were up .4% for a 2nd straight month and particularly, motor vehicle/parts inventories were up by a sharp 7.9% y/o/y and confirms the challenges facing that industry.
The exports of goods fell 1.8% m/o/m in March to the lowest level since November as the export of industrial supplies, auto’s and consumer goods all moderated. This is the advanced look on trade and doesn’t include services. The goods balance did widen about $1b on the export slowdown as imports fell by a smaller amount. The absolute number though was slightly less than expected and February was revised down. Bottom line, this might lift by a touch the Q1 GDP estimates, joining the durable goods data and offset by inventories.
Mario Draghi is covering all his bases. He said the risks are diminishing and he sees “tentative signs of price pressures picking up” but is ready to ramp up QE and cut rates further if this reverses. He currently “sees no reason to deviate from the indicated policy path” right now as he still thinks the “risks to economic outlook is still tilted to the downside.” I expect that to change in June. He still believes in the effectiveness of negative interest rates which I think is lunacy. The euro initially jumped when he talked up the euro region economy but came right back down again on his persistently dovish views. European sovereign yields are down slightly.
***KWN has released the powerful audio interview with Gerald Celente and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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