Quarter-End, a Flood of Reported Data, and an Eagerly Awaited Speech by Biden on His Infrastructure Plans

March 31, 2021

The dollar is trading modestly lower (e.g. -0.1% on the DXY weighted index) on this final day of the first quarter. In overnight equity market action, share prices climbed almost 1% in Australia and New Zealand but have slipped in Asia and, to a lesser degree, in Europe. The S&P 500 and DJIA futures indices show scant net change, while the Nasdaq points to a rise of about 0.5% at the open. The ten-year U.S. Treasury and British gilt yields are two and one basis points higher, and WTI oil is 0.2% softer ahead of the monthly meeting of OPEC+ oil ministers.

President Joe Biden will unveil details of the bold infrastructure bill he hopes to get passed in a speech in Pittsburgh today. Spending on infrastructure is less inflationary than on other projects because it lifts labor productivity.

Consumer price inflation in the euro area accelerated 0.4 percentage points in March to 1.3%, a 14-month high, but core inflation slowed to 0.9% from 1.1% in February and 1.4% in January. Price pressure has been concentrated in the energy component, whose year-on-year change swung from -8.2% last October to +4.3% this month.

British GDP growth last quarter was revised upward by 0.3 percentage points to 1.3%, resulting in on-year negative growth of 7.3% in the quarter and 9.8% for 2020 as a whole. The British current account deficit totaled GBP 26.3 billion in 4Q, which constitutes the largest deficit in seven quarters and equals an uncomfortably large 4.8% of GDP. The Nationwide index of U.K. home price inflation slowed 5.7% in March from 6.4% in February and a recent high of 7.3% in October.

Investor sentiment toward the Swiss economy rose to at least a 13-year high in March with a reading of 66.7 versus 2.3 last October.

German labor statistics beat expectations. The harmonized jobless rate fell 0.1 percentage point from January’s 5-1/2 year high to 4.5%, and the number of unemployed workers dropped 8k, almost triple the street forecast.

Danish GDP increased 0.7% in 4Q, down from a 6.3% jump in 3Q. This left on-year growth at -1.5% in the quarter and -2.7% in 2020.

Japanese industrial production fell 2.1% last month and was 2.6% below the pre-pandemic level of February 2020. Housing starts last month recorded a 3.7% on-year decline versus drops of 3.1% in January and 9% in December. But construction orders (+2.5%) recorded a second consecutive on-year advance. February 2020 had been only one of two months in 2020 when construction orders were higher than their year-earlier level.

The NBS government-authorized manufacturing and non-manufacturing purchasing manager indices China each improved in March. The manufacturing score (a 3-month high of 51.9) followed a 9-month low in February, and the nonmanufacturing measure (56.3) was at a 4-month high and only marginally below last November’s 8-1/2 year high of 56.4.

Measures of March business confidence reported today included a 13-month high in the Netherlands, a three-month low in New Zealand, and a 104-month high in South Korea.

The Central Bank of Chile left its policy interest rate unchanged at 0.50%. A year ago this month, the bank engineered a pair of cuts totaling 125 basis points, and those were the only interest rate changes made in 2020. As at many other central banks, however, Chilean monetary officials have employed a variety of unconventional tools to support credit and liquidity, and these were not changed at the latest policy review, either. Although GDP has expanded faster than anticipated lately, the persistence of various downside risks mandate that policy stimulus not be throttled back for at least several more quarters.

U.S. data releases today will include the ADP estimate of private sector jobs growth, Chicago’s regional purchasing managers survey, and pending home sales. Canada reports monthly GDP and producer prices.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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