No Fooling: Today’s Economic Data Show Improvement but Covid Cases on the Rise Too

April 1, 2021

On this opening day of April, the dollar is unchanged against the yen, sterling and New Zealand dollar. The greenback has dipped 0.1% versus the euro and fallen 0.8% against the Turkish lira and 0.5% vis-a-vis the Mexican peso, but the dollar also has risen 0.3% against the Chinese yuan and Canadian dollar, 0.2% versus the Aussie and Canadian currencies and 0.1% relative to the Swiss franc. Against the weighted DXY index, the dollar has lost less than 0.1%.

Stock markets in Asia started the second quarter on an upward note, advancing 2.0% in Hong Kong, 1.1% in Indonesia, 0.9% in South Korea and Taiwan, and 0.7% in Japan and China. The Australian stock market climbed 0.6%. Small gains of 0.5%, 0.3%, and 0.2% have been secured in the U.K., Germany and France, and tech companies lead a moderate improvement in U.S. equity futures.

Ten-year sovereign debt yields slipped three basis points in the U.S. and U.K. and two bps in Germany but increased two bps in Japan. With oil ministers in OPEC+ scheduled to discuss production today, the price of West Texas Intermediate oil has ticked 0.1% higher but lies below the $60 per barrel threshold. Gold remains soft in the mid $1700 range.

The Bank of Japan’s quarterly Tankan survey of corporate conditions and expectations attests to a better-than-expected improvement last quarter. The diffusion indices for large manufacturers and large non-manufacturers respectively increased by 15 and 4 points to +5 and -1. Among all 9,473 companies participating in the latest survey, the diffusion index — a measure of the percent of respondents seeing improvement minus the percent experiencing deterioration – printed at minus 8 versus -15 in December, -28 last September and -31 in mid-2020. Anticipated sales and earnings growth in the fiscal year that begins today are at 2.4% and 8.6% versus declines of 8.2% and 30.3% last fiscal year. The forecast among all large firms for business investment swings from -3.8% last fiscal year to +3.0% this fiscal year. The fiscal 2021 estimates ought to improve as the year unfolds.

Today also saw publication of a slew of manufacturing purchasing manager surveys for the month of March. Euroland’s PMI was revised up 0.1 point to a record high of 62.5. Among members of the euro area, the German and Dutch PMIs topped the leader board with record historical highs well into the 60s range. Austria also scored above 60 at 63.4, and the Italian and French results of 59.8 and 59.3 were the best in 252 and 246 months. Spain’s 56.9 score constitutes a 171-month high, while the Greek PMI of 51.8 trailed far behind but nonetheless represents the strongest improvement in conditions since February 2020. It should be noted that Euroland PMI reports also showed a further advance in inflationary pressure that is expected to prove temporary and stems in large part for mounting supply-side delays in procuring inputs.

The British manufacturing PMI was revised up 0.8 points to a 121-month high of 58.7.

The Swiss PMI of 66.3 was at a 172-month high, and the Swedish PMI was also above 60 and, at 63.7, at its highest level since December.

From Eastern Europe, the Czech PMI of 58.0 was 1.5 points above February’s result and the best score in 37 months. Poland’s 54.3 score was the highest in 38 months, but Hungary’s PMI bucked the general trend by dropping 0.3 points to a sub-50 and 6-month low of 48.7. Russia’s PMI also slipped 0.3 points but remained above the 50 threshold between improvement and deterioration, and at 51.1 was at a 2-month low.

Turning to the PMIs from the Pacific Rim, the Chinese Caixin-compiled manufacturing index dropped 0.3 points to an 11-month low of 50.6. However, the Japanese PMI score was revised up 0.7 points to a 29-month high of 52.7. Taiwan’s reading of 60.8 indicated the fastest rate of improvement in 11 years. Malaysia’s 8-month high of 49.9 is consistent with a stagnating trend. The Vietnamese PMI rose 2.0 points to a 27-month high of 53.6, and South Korea’s reading of 55.3 matched February’s 13-month high. Thailand’s index rebounded 1.6 points to a 2-month high of 48.8. The Australian CBA-compiled PMI edged 0.1 point lower to a 3-month low of 56.8, while the AIG-compiled Australian manufacturing PMI of 59.9 was at a 3-year high.

Turkey’s purchasing managers index printed at a 2-month high of 52.6, and The Absa-compiled South African PMI score of 57.4 represents a 5-month high. A 5.6 point drop in Brazil’s PMI reading to a 9-month low of 52.8 mainly reflected new restrictions to a address a fresh wave of Covid infections there.

Swiss retail sales have fallen in each of this year’s first two months. In February, the decline was 5.2% on month and 6.3% on year. On a brighter note, Switzerland experienced its slowest rate of consumer price deflation in March (-0.2%) since the pre-pandemic month of February 2020.

A 1.2% increase in German retail sales in February after large declines in the prior two months was smaller than analysts were expecting and left sales volume still 9.0% below their pre-pandemic level.

Indonesian CPI inflation eased to a 7-month low of 1.37% in March.

Australia’s trade surplus of A$ 7.53 billion in February followed a record black-ink result in January such that the A$ 17.15 surplus in January-February was more than double its year-earlier size. Australian retail sales in February was revised inward to a drop of 0.8% from an initially estimated decline of 1.1%.

Over the past 24 hours, 676k new cases of Covid-19 infection have been found globally, including 69k in the United States. U.S. deaths from the disease totaled 1,138 on Wednesday, up from 948 on Tuesday and 685 on Monday. A sixth of the American population have now been vaccinated.

Just in: New U.S. jobless insurance claims rose more than anticipated last week to a 2-week high of 719k, but the 4-week moving average (also 719k) continued to recede, and so did the total of all continuing claims. Still to come: the U.S. manufacturing PMI survey and construction spending.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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