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Germany April Ifo business climate index 96.8 vs 97.8 expected

  
Analysis, Economy

Latest data released by Ifo – 26 April 2021

  • Prior 96.6
  • Expectations 99.5 vs 101.2 expected
  • Prior 100.4; revised to 100.3
  • Current assessment 94.1 vs 94.4 expected
  • Prior 93.0; revised to 93.1

Slight delay in the release by the source. The readings miss on estimates but the headline and current assessment show some mild improvement relative to March. That said, expectations see a drop and that may be tied to prolonged tighter restrictions.

As much as vaccine optimism is still part of the bigger picture, the prevailing virus situation does little to ease comfort as measures to curb the virus spread looks set to continue through to the latter stages of Q2 at the very least.

Goldman Sachs on comparative global economic growth rates: US to peak in Q2

  
Analysis, Economy

Research via Goldman Sachs, in summary:

US GDP growth likely to peak in Q2 (citing maximum impact of fiscal stimulus and economic reopening then tailing)
  • expect that core PCE inflation will temporarily surge above the Federal Reserve 2% target
  • US growth to come in at 10.5% in Q2
  • 7% GDP growth forecast for H2 thereafter
Non-US global growth will peak in 3Q 2021
  • peak growth rates in Europe, Japan, and EM ex. China, among other economies
For the UK, GS see 7.8% growth for 2021, sees “UK economy is rebounding sharply from the Covid crisis”
—
In the olden days, comparative growth rates would have implications for monetary policy. Faster growing economies would tend to have higher interest rates, which would have implications for FX rates. Where we are right now is every central bank across DM doing the limbo dance … lower for longer is the mantra so the implications for FX are lesser.

US economy forecast to grow at its fastest in nearly 40 years

  
Analysis, Economy

Via a Reuters survey of analysts (April 16-20 poll of over 100 economists):

The U.S. economy predicted to grow on average 6.2% this year
  • if so this would be the fastest annual expansion since 1984
  • about 15% of 105 economists predicted the economy would grow 7% or more
Nearly 70% of economists (39 of 56) in response to an additional question said the biggest risk to the economy was a resurgence in coronavirus cases over the next three months.
Comments from BMO:
  • “We raised our growth forecast due to additional fiscal stimulus and the speedy vaccination program”
  • ” “The upshot is that the U.S. economy is smoking. But another wave of cases would put our forecast at risk. For now, we assume it won’t lead to another round of aggressive restrictions.” 
TD are wary of expecting such growth to continue next year:
  •  “As we will get later in the year and certainly in 2022, the boost from not just reopening but also fiscal stimulus will be fading to the point when the stimulus turns into a fiscal drag” 
  •  “So there are a lot of reasons to not simply extrapolate the strong numbers we are seeing now and we expect the net result at the end to be less than a complete recovery in the labor market.” 
—
The consensus view seems to be ‘transitory’ rapid growth (and inflatio

Japan March exports surge +16.1% y/y (vs. expected +11.4% and -4.1% in February)

  
Analysis, Economy

Japan trade balance for March Y 663.7bn, a solid beat thanks to the great export performance

  • expected Y 493.2bn, prior Y 215.9bn

Trade balance adjusted Y 297.8bn

  • expected Y 212.9bn, prior Y -38.7bn

Exports a bigly  +16.1% y/y

  • expected 11.4% y/y, prior -4.5%
  • and +4.3% m/m s.a.

Imports +5.7% y/y, also a solid beat and indicative of a further increase in conumption

  • expected 4.7% y/y, prior 11.8%

Exports to China +37.2% y/y

  • to the US +4.9% y/y
  • to Asia +22.4% y/y
Do take these with at least grain of salt, part of the explanation for these results will be the base effect of comparison to March of 2020 and the initial pandemic hit.

China March Industrial production +14.1% y/y (expected +18%) + retails sales & investment data

  
Analysis, Economy

China ‘activity’ data for March 2021

Industrial Production +14.1% y/y  MISS

  • expected 18.0%

Industrial Production YTD to March +24.5% y/y MISS

  • expected 26.5%, prior was 35.1%

Fixed Assets (excluding rural) YTD +25.6% y/y MISS

  • expected 26.0%, prior was 35.0%

Retail Sales +34.2% y/y BEAT

  • expected 28.0%

Retail Sales YTD +33.9% y/y BEAT

  • expected 31.7%, prior was 33.8%

Retail sales with the beat is indicative of a recovery in domestic consumption. Good news for China which, as is so often the case, has been leaning on exports and the property market to keep the fire in the economy.

 more to come

Trade balance data for March is due from China today

  
Analysis, Economy

There is no firmly scheduled time for the data release, around 0200GMT is a good guess.

Some moderation in the size of the surplus is expected. Improving imports (expected) will be taken as a sign of firming domestic demand in China.

China trade balance:

 

  • expected CNY 327.8bn, prior was CNY 516.8bn

 

Exports y/y:

 

  • expected +28.6%, prior was +10.9%

 

Imports y/y:

 

  • expected +17.6%, prior was -0.2%

 

USD terms

China trade balance:

 

  • expected $52.0bn, prior was $78.2bn

 

Exports:

 

  • expected +38.0%, prior +18.1%

 

Imports:

 

  • expected +24.4%, prior was +6.5%

Yellen won’t name China currency manipulator – report

  
Analysis, Economy

Report on Yellen

The FX semi-annual assessment on FX is due on Thursday. The report says Yellen could scale back criteria for manipulator, which could help Switzerland get off the list.
In any case, the whole manipulation label is a joke. Trump promised to do it on Day 1 and never did and now it sounds like Yellen is pretty much done with the whole charade. You can see how little CHF cared about manipulation talk and they openly manipulated for years.

Fed’s Powell says does not want to return to bad old days of inflation

  
Analysis, Economy

Further headlines are crossing from Federal Reserve Chair Powell interview on US TV show 60 Minutes

 

Further now, Headlines via Reuters:

 

  • reopening too quickly a ‘principal risk’ to recovery
  • Fed will support economy until recovery is complete
  • in assessing progress wants to see labor force participation moving back up
  • Fed does not want inflation to go materially above 2% and return to the ‘bad, old inflation days’
  • does want inflation ‘moderately’ above 2% for some time
  • does not appear the case now that large federal deficits cause inflation
  • some parts of the country more than fully recovered, but real disparities exist
  • lower wage workers who lost jobs should be able to return to them ‘much faster now’
  • for many people, the covid recession is over but for millions of others it is not and ‘we’re going to keep those people in mind’
  • economic recovery has been ‘better, consistently better than I’d expected’, helped by support from congress and the Fed
  • with vaccinations ‘you’re seeing the resumption of what appears to be a very strong expansion’

 

 

  • asked if he feared the US a year ago was looking at a great depression scenario, says ‘I never really thought that was a likely outcome’
  • would have been ‘shocked’ if told this time last year that more than 550,000 Americans would die of covid
  • some asset prices are elevated by some historical metrics
  • fed can’t predict asset bubbles, more focused on resiliency of system if shocks occur
  • believes financial system has wherewithal to stand significant shock to markets
  • ‘very low’ chance of a repeat of the 2008 financial crisis
  • ‘most parts of the financial system made it through quite a stress test’ in last year’s economy collapse
  • monitoring situation with Archegos ‘very carefully,’ does not seem to raise issues around stability of the financial system or the institutions involved
  • is concerning that a single client could cause such large losses, suggest ‘significant shortfall’ in understanding of risks
  • fed working hard studying digital currency, but no decision yet
  • possible digital currency could be a benefit, but involves ‘subtle, complex’ set of questions

 

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