Taken together, the first two #US manufacturing surveys for March give three messages:
1. activity is expected to deteriorate as these survey levels are associated with a GDP contraction of 0.7% y/y
2. short-term inflationary pressures are at their lowest since July 2020
3. the transmission of monetary policy, after the banks, reaches non-financial companies: investment spending intentions are more than one standard deviation below the average
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1/5 After 10 months of decline and for the 3rd month in a row, our #US housing activity indicator has stopped deteriorating with 11 out of 15 indicators up, among which building permits
2/5 Housing was the 1st demand component to turn around in March 2021 and should, as in past cycles, be the first to recover
There are three main reasons for the first signs of recovery in the housing market:
3/5
1) The decline in house prices, which is expected to continue given the historical lag of prices on housing activity. This correction makes homes more affordable as is evident in the decline in the ratio of house prices to disposable income by over 10%
1/5 #China’s activity data for January and February combined confirm the recovery following the reopening of their economy and this recovery is strong starting with retail sales in volume which have increased by more than 6% since December, but still remains 13% below trend
2/5 √ The other very good news comes from the rebound in the real estate market with a strong recovery in both supply and demand for residential space… which is still nearly 30% below its trend though
3/5 √ The rebound in residential demand is in line with i) daily real estate transaction data from 16 major cities ii) a 130bps drop in mortgage rates and iii) much better household confidence
1/ √ US January core CPI inflation came in slightly higher than expectations (+0.5 m/m) with a continued normalisation of goods prices (1.0% y/y) and a continued rise in services prices (7.3%)
2/ √ in terms of momentum, the story is largely unchanged with a contraction in the price of goods (-1.2% 3m/3m ann.) and a continued stickiness on the price of services (+6.9%)
3/ √ The downward resistance is still due to the rise in rents, which accounts for more than 55% of the core CPI services and whose momentum rose slightly further (9.0% 3m/3m ann.). The one-year lag in rents over house prices points to a peak in Q2
1/5 √ US January CPI inflation came in largely in line with expectations (headline +0.5 and core +0.4 m/m) with a continued normalisation of goods prices (1.3% y/y) and a continued rise in services prices (7.2%)
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2/5 √ In terms of momentum, the story is largely unchanged with a contraction in the price of goods (-1.6% 3m/3m ann.) and a continued stickiness on the price of services (+6.9%)
3/5 √ The downward resistance is still due to the rise in rents, which accounts for more than 55% of the core CPI services and whose momentum seems to be stabilising at a high level (8.9% 3m/3m ann.). The one-year lag in rents over house prices points to a peak in Q2
1/7 #China activity indicators for Nov came in much weaker than expected on Covid-linked restrictions and protests
. Too early for easing property measures to have an impact: floor space started remained at 13-year lows and residential demand is back to new cyclical lows
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2/7 . Overall construction activity was unchanged at cyclical lows and 24% below pre-pandemic trend while bottoming out on a y/y basis (-9.3% y/y vs -14.2% in Aug)
3/7 √ #China home prices fell for an 8th consecutive month, down 2.3% y/y, with 23 of cities having rising prices (up from 15% in Oct)
1/5 √ #US inflation was lower than expected thanks to a reversal in energy prices: down 1.6% over the month and declining to 13% y/y from 17.6% with much further to go
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2/5 √ #US core inflation came in also lower than expected thanks to a marked fall in the price of core goods (-0.5% m/m) while the rise in the price of core services remained unchanged at 6.8% y/y
3/5 √ Core services inflation remains essentially a story about rents (40% of core CPI), up 7.3% y/y and on a continuous rise from 2% in March 2021 while inflation on other core items is down to 5.2% from a peak at 8.6% in Feb this year