More Evidence of Economic Recovery, Reviving Inflation, and Persistent Covid

April 16, 2021

Friday finds the dollar a touch softer, with overnight dips of 0.3% against the Swiss franc and kiwi, 0.15% relative to the U.S. currency’s weighted index, and 0.1% vis-a-vis the euro. The dollar also has firmed 0.6% against the Turkish lira, 0.2% versus the loonie and 0.1% against the yen and Australian dollar.

The 10-year Treasury yield’s retreat from last month’s high of 1.78% was extended further to 1.56%. The quarterly refunding auctions of 3, 10, and 30-year Treasuries were well subscribed. Yields on 10-year British gilts and German bunds rose overnight by two and one basis points.

The price of gold advanced 0.6% and is close to a 2-month  high, while WTI oil is trading flat.

Following Thursday’s advance in the U.S. stock market, share prices in Asia and Europe are mostly higher. Notable gains include 0.9% so far in Germany, 0.8% in China and 0.6% in Hong Kong.

First-quarter GDP headlines a slew of Chinese indicators reported today.

  • Real GDP was 18.3% higher than in the Covid-depressed first quarter of 2020. That’s the largest on-year increase in at least 25 years and compares with a 6.8% on-year drop in the year through 1Q 2020. The quarterly 0.6% increase of GDP was only about half as much as analysts were expecting, but 4Q 2020 GDP got revised upward to a a quarterly 3.2% advance from 2.6% reported previously. China was one of the few big economies to post positive growth (2.3%) in 2020 as a whole and is off to a good start in 2021.
  • Chinese retail sales in March were 34.2% greater than a year earlier, a significantly greater rise than forecast and resulting in a 33.9% on-year advance in the first quarter.
  • Fixed asset investment was 25.6% greater last quarter than a year earlier.
  • House prices rose 0.5% on month in March, most in 7 months, and 4.6% on year, the most in a half year.
  • But on-year growth in Chinese industrial production of 14.1% was down from 35.1% in January-February combined. The on-year rise in March was somewhat less than analyst forecasts, but a first-quarter on-year increase of 24.5% compares favorably with the 2.8% average advance in full 2020.
  • Capacity utilization settled back to 77.2% last quarter from 78.0% in 4Q 2020. The was still above 74.5% on average in 2020 and last year’s first-quarter 67.3% low.

Euroland consumer price inflation has been confirmed as unchanged from the preliminary report of a 0.9% monthly rise in March associated with a 12-month 1.3% pace, which was the highest since January 2020. However, core CPI inflation in the euro area slowed to 0.9% from 1.1% in February, 1.4% in January and 1.0% in March 2020.

Euroland’s trade surplus in February narrowed to an 8-month seasonally adjusted low of EUR 18.4 billion from EUR 28.7 billion in January and EUR 27.1 billion in December. Exports fell 2.5% on month, whereas imports went up 3.3%. The unadjusted EUR 28.7 billion surplus in January-February combined was 15% wider than a year earlier, however.

New car sales in the European Union last month soared 87.3% above the year-earlier level, breaking a streak of year-on-year declines.

The combined PPI/import price index in Switzerland went up 0.6% last month, and its 0.2% dip from March 2020 was the smallest year-on-year decline in two years.

New Zealand’s manufacturing purchasing managers index printed at a record high of 63.6 in March versus readings of 54.2 in February and a sub-50 score of 48.3 in the final month of 2020.

There’s been another mass shooting in the United States, this time in Indianapolis. The Chauvin trial jury in Minneapolis will hear closing arguments on Monday.

U.S. housing starts and the U. Michigan consumer confidence index will be reported later today.

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

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