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Macro Weekly

Macro week 26 by Harald Magnus Andreassen

Last week

  • Several US states are reporting a sharp increase in new Covid-19 cases. Globally, the inflow of new cases is record high, driven primarily by Lat Am and India. The Chinese is buying more US crops, to fulfil their US trade deal commitments.
  • The Federal Reserve decided to buy a portfolio of corporates bonds in addition to ETFs. Why use the bazooka now?? Core retail sales rose sharply in May, and is almost back to the February level. Housing starts rose less than expected, and are still 30% below the pre corona trend. Manufacturing production also grew less than expected, and remains 17% below the February level. The first June manufacturing surveys (NY & Phil Fed) surprise big time at the upside. Companies are reporting growth in June, but the recovery started in May and it ‘must’ have continued in June! 
  • The EU leaders initiated the formal debate on the Pandemic Recovery Fund, the first real common fiscal policy measure in the Union’s almost 70 years history.
  • In UK, retail sales recovered sharply in May, even before most shops were opened in the 2. week in June. Unemployment is increasing, even if the government pays for a large proportion of the employment. Wage inflation is collapsing, as elsewhere.
  • Sweden house prices rose sharply in May, and the national price levels is almost back to the February level. In Stockholm, prices are still down 5% - and prices are down in other cities too. 
  • Norges Bank revised its growth forecasts upwards an lifted the long end of the interest rate path, signalling the first hike in late 2022 and two more in 2023 – six weeks after the (so far) last cut to zero, and a ‘promise’ of an unchanged rate through 2023. Mainland exports fell sharply in May, and will probably remain weak in June too.

 

This week: PMIs, US orders. Norwegian retail sales.

  • PMI: The PMIs recovered in May but far less than they 'should' have. They remained far below the 50 line while we are confident that most places production, both in manufacturing & services rose to May from April. If activity increases, these diffusion indices should have been above the 50 line, at least of changes in activity is not too unevenly distributed between the companies. However, the PMI/ISMs have usually not been able to detect the first lift in activity after at recession/downturns, we guess because respondents do not just evaluate the last month vs. the previous but rather the actual change ‘recent months’. BTW these in surveys respondents are not asked about their sentiment or expectations but just, did actual activity (orders, production, employment etc) increase or decrease last month. Most PMI should increase to above 50 in June. If they don’t, they are just ‘wrong’ J. Both NY and Phil Fed surveys surprised at the upside in June, signalling PMI/ISM well above 50! 
  • US: Total duable orders fell sharply in April and are expected up in May. If just Boeing stop reporting negative orders (cancellations), a huge lift! Private comsumption should increase substantially in May, as signalled by retail & auto sales. Service consumption is still lagging. Personal income will fall sharply, less checks from D. Trump in May - and the savings rate will collapse, from record +30% figure in April. 
  • EMU: The German Ifo and other national business EMU survey should recover substantially in June. Consumer confidence is expected further up in June - but to remail well below avg.
  • Norway: Retail sales surprised on the upside in April, as households transferred foreign spending and spending on services to (some) retail sectors. Given strong card transactions data we expect a further increase in June. The LFS (AKU) survey has not yet almost seen no corona impact barring a steep decline in hour worked. Some broader weakeness to be expected in the March-May (April) survey.

 

 

Macro week 26 report: Macro Weekly SB1 Markets 20 - 26.pdf

 

Previous reports: 

Macro week 25 report: Macro Weekly SB1 Markets 20 - 25.pdf
Macro week 24 report: Macro Weekly SB1 Markets 20 - 24.pdf
Macro week 23 report: Macro Weekly SB1 Markets 20 - 23.pdf
Macro week 22 report: Macro Weekly SB1 Markets 20-22.pdf
Macro week 21 report: Macro Weekly SB1 Markets 20 - 21.pdf
Macro week 20 report: Macro Weekly SB1 Markets 20 - 20.pdf
Macro week 19 report: Macro Weekly SB1 Markets 20 - 19.pdf
Macro week 18 report: Macro Weekly SB1 Markets 20 - 18.pdf
Macro week 17 report: Macro Weekly SB1 Markets 20 - 17.pdf
Macro week 16 report: Macro Weekly SB1 Markets 20 - 16.pdf
Macro week 15 report: Macro Weekly SB1 Markets 20 - 15.pdf
Macro week 14 report: Macro Weekly SB1 Markets 20 - 14.pdf
Macro week 13 report: Macro Weekly SB1 Markets 20 - 13.pdf
Macro week 12 report: Macro Weekly SB1 Markets 20 - 12.pdf
Macro week 11 report: Macro Weekly SB1 Markets 20 - 11.pdf
Macro week 10 report: Macro Weekly SB1 Markets 20 - 10.pdf
Macro week 9 report: Macro Weekly SB1 Markets 20 - 09.pdf
Macro week 8 report: Macro Weekly SB1 Markets 20 - 08.pdf
Macro week 7 report: Macro Weekly SB1 Markets 20 - 07.pdf
Macro week 6 report: Macro Weekly SB1 Markets 20 - 06.pdf
Macro week 5 report: Macro Weekly SB1 Markets 20 - 05.pdf
Macro week 4 report: Macro Weekly SB1 Markets 20 - 04.pdf
Macro week 3 report: Macro Weekly SB1 Markets 20 - 03.pdf
Macro week 2 report: Macro Weekly SB1 Markets 20 - 02.pdf