Lots of Other Data to Digest While Waiting for U.S. April Jobs Report

May 7, 2021

The dollar, down a mere 0.1% overnight, and the 10-year Treasury yield — unchanged at 1.57% — have been  marking time ahead of the U.S. Labor Department’s monthly jobs report, which is expected to reveal a 0.1-0.2 percentage point drop in unemployment, another large jump in employment of close to 900k, but tepid wage pressure.

U.S. stock futures have extended yesterday’s big rise somewhat. Other equity markets closed up 1.7% in Taiwan and 0.6% in South Korea but down 0.7% in China and Indonesia and little changed in Japan. European stock exchanges are broadly higher, led by the German Dax (+1.3% so far). European sovereign debt yields have climbed.

Commodity prices are little changed ahead of the U.S. data.

Meantime, there have been other interesting data revelations.

Despite a 0.4% dip in capital goods output, German industrial production rebounded 2.5% in March after sizable back-to-back monthly declines in January and February. Overall production was 5.1% greater than in the same month a year earlier.

The German current account surplus widened to EUR 30.2 billion in March from EUR 24.8 billion a year earlier, and the first-quarter surplus of EUR 66.4 billion was 6.6% wider than in 1Q 2020. Due to greater merchandise import strength than anticipated, the seasonally adjusted trade surplus dropped to EUR 14.3 billion in March after averaging EUR 20 billion in January and February.

French industrial production climbed 0.8% in March and was 1.7% larger than a year earlier.

On-year Spanish industrial production growth (+12.4%) turned positive in March after 14 declines in a row.

Czech industrial production climbed 3.2% on month and by a record 14.9% on year in March.

Italian retail sales edged 0.1% lower on month but posted the largest year-on-year advance (22.9%) since late 1984.

China’s trade surplus roughly tripled to $42.85 billion in April from $13.8 billion in March. Chinese foreign exchange reserves leaped $28 billion in April, ending a string of four straight declines.

Japan’s composite and service sector purchasing manager indices printed at 19- and 15-month highs of 51.0 and 49.5. Both final estimates exceeded their preliminary ones.

Labor cash earnings in Japan were 0.2% greater than a year earlier in March, ending a 10-month string of on-year declines.

The AIG-compiled Australian service-sector and construction purchasing manager indices printed in Aapril at a 34-month high of 61.0 and a 2-month low of 59.1, respectively.

Great Britain’s construction PMI, which reached a 78-month high of 61.7 in March, edged down just 0.1 point to 61.6 in April.

Taiwan’s trade surplus jumped to $6.18 billion in April from $3.66 billion in March and $2.44 billion in April 2020. Exports soared 38.7% on year.

A big debate continues to wage around the world over whether central bankers are right to view the recent sharp rebound in prices just temporary. The Reserve Bank of Australia’s quarterly Monetary Policy Statement, released today, has some insightful excerpts on the matter.

These shifts in demand, as well as disruptions to production from the pandemic, have resulted in some bottlenecks and cost pressures through supply chains, both globally and in Australia. Some of these are taking time to resolve and firms are reportedly becoming more willing to pass on cost pressures to their output prices. Historical experience suggests that if supply problems are resolved reasonably promptly, pricing pressures will remain transitory; it remains to be seen if this will be the case in the current situation. An offsetting influence on inflation outcomes is the subdued demand conditions in many services industries. More broadly, the current significant spare capacity in the labour market in many economies is likely to take a while to be absorbed. This is likely to weigh on underlying inflation pressures globally.

The Board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest.

Canadian monthly labor statistics, like their U.S. counterparts, are being released today.

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

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