Job postings are drifting lower

The Daily Shot: 26-Aug-22
Administrative Update
The United States
Canada
The United Kingdom
The Eurozone
Europe
Japan
Asia – Pacific
China
Emerging Markets
Energy
Equities
Credit
Global Developments
Food for Thought



 

Administrative Update

 
The Daily Shot will not be published on Friday, September 2nd and Monday, September 5th.


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The United States

1. The Q2 GDP growth was revised higher, …
 

 
… with a boost from better than initially reported consumer spending.
 

 
Housing was a drag on growth (and will be again in Q3).
 

 
Despite a small decline, the GDP report does not signal a recession (yet). Private demand has slowed sharply, but the “final sales to private domestic purchasers” indicator (the “core” GDP) was up slightly.
 

 
Moreover, the GDI continued to grow, …
 

 
… sharply outpacing the GDP measure (2 charts).
 

 
Source: @RiccardoTrezzi  

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2. Below are some additional updates on economic growth.
 
There is no recession signal yet in corporate profits.
 
Source: Evercore ISI Research  
 
The Atlanta Fed’s GDPNow model estimate continues to show stable consumer spending growth this quarter.
 
Source: @TheTerminal, Bloomberg Finance L.P., h/t BCA Research  
 
The FIBER leading index points to further deterioration in economic growth.
 
Source: Quill Intelligence  
 
Here is a look at US recessions since 1857.
 
Source: USAFacts   Read full article  

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3. Next, we have some updates on the labor market.
 
Initial jobless claims are still above pre-COVID levels, but not by much. The labor market is still tight.
 

 

 
This chart shows the continuing claims.
 

 
Here is the percentage of workers not getting raises.
 
Source: TS Lombard  
 
Job postings on Indeed are drifting lower. The Fed will want to see this indicator move closer to pre-COVID levels.
 

 
Layoffs at startups remain elevated.
 
Source: @roger_lee  
 
Pandemic-era payrolls data have been very noisy.
 
Source: IIF  

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4. The Kansas City Fed regional manufacturing index fell sharply this month, with production moving into contraction territory.
 

 
Demand is falling.
 

 
This chart shows new orders across the regional Fed reports we got this month.
 
Source: @MichaelKantro  
 
The Kansas City Fed report showed factories rapidly reducing employee hours.
 

 
Price pressures are moderating.
 

 
CapEx expectations improved.
 

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5. Now, let’s take a look at housing.
 
Mortgage rates climbed this week with Treasury yields.
 

 
The Commonwealth Demand/Supply Ratio points to a sharp deceleration in home price appreciation.
 
Source: Peter Essele, Commonwealth  
 
Sellers are going on strike.
 
Source: Redfin  
 
Housing demand is down but not out.
 
Source: Redfin  

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6. Consumer confidence appears to have stabilized.
 
Source: BofA Global Research  


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Canada

1. The CFIB small/medium-size business indicator edged higher this month.
 

 
Housing-related components have softened (2 charts).
 

 

 
Manufacturing is also weaker.
 

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2. Net share buybacks have been surging.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  


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The United Kingdom

1. The CBI retail sales index unexpectedly jumped this month, driven by grocery purchases.
 

 
Source: Reuters   Read full article  
 
2. Rising inventories point to some moderation in goods CPI.
 
Source: Pantheon Macroeconomics  
 
3. Inflation-linked bonds will be costly for the government.
 
Source: Simon White, Bloomberg Markets Live Blog  


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The Eurozone

1. Germany’s Ifo expectations index was a touch better than expected, but business sentiment remains depressed, …
 

 
… pointing to a GDP contraction.
 
Source: Capital Economics  
 
The combination of Ifo and PMI indicators signals a recession in Germany.
 
Source: Pantheon Macroeconomics  
 
Here is the Ifo sector breakdown.
 
Source: ifo Institute¬†  

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2. Inflation expectations signal more ECB rate hikes ahead.
 
Source: Nordea Markets  
 
Here is the market-implied rate hike trajectory.
 

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3. Tighter liquidity conditions point to further deterioration in the Eurozone’s business activity.
 
Source: @steve_donze  
 
Leading indicators do as well.
 
Source: Deutsche Bank Research  

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4. Hedge funds are betting against Italian debt ahead of the elections.
 
Source: @financialtimes   Read full article  
 
5. Euro-area growth was dampened by deleveraging over the past decade.
 
Source: MRB Partners  


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Europe

1. Economists sharply downgraded their 2023 growth forecasts for Sweden.
 

 
2. European nations are rapidly building their natural gas inventories, …
 
Source: @AndreasSteno  
 
… by cutting demand (and praying for a warm winter).
 
Source: Bridgewater Associates   Read full article  

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3. Here is the expected duration of working life in the EU.
 
Source: Eurostat   Read full article  


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Japan

1. The August Tokyo CPI, which comes out well ahead of the national figures, surprised to the upside.
 

 
2. COVID cases in Japan are surging.
 
Source: Our World in Data  
 
3. Japan’s total energy consumption has been declining over the past decade.
 
Source: @WSJ   Read full article  


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Asia – Pacific

1. South Korea’s demographics continue to deteriorate.
 
Source: @samkimasia, @business   Read full article  
 
2. New Zealand’s home prices are taking a hit.
 
Source: @ANZ_Research  
 
Separately, the nation’s retail sales unexpectedly declined last quarter.
 

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3. Australia’s households are heavily indebted.
 
Source: @acemaxx, @economics   Read full article  


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China

1. Developers’ onshore debt extensions have been rapidly accumulating, according to Gavekal Research. Next year’s maturity wall looks ugly.
 
Source: Gavekal Research   Read full article  
 
Domestic bond issuance has been shut off for private-sector developers.
 
Source: @WSJ   Read full article  
 
Offshore debt markets are mostly shut off for the nation’s developers.
 
Source: @financialtimes   Read full article  

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2. Here is China’s total debt as a share of GDP.
 
Source: BofA Global Research  
 
3. Hong Kong’s exports have been slowing.
 


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Emerging Markets

1. Let’s begin with Mexico.
 
Economic activity has been underperforming due to weak investment.
 
Source: Numera Analytics  
 
The yield curve is heavily inverted now.
 

 
The peso has outperformed other EM currencies.
 
Source: PGM Global  

——————–

 
2. Brazil’s consumer sentiment is rebounding.
 

 
3. Chile’s CPI will moderate as liquidity tightens.
 
Source: Variant Perception  
 
4. Turkey’s manufacturing confidence is deteriorating.
 

 
5. EM corporate earnings could decline as liquidity tightens.
 
Source: BCA Research  


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Energy

1. US frackers are expected to make $200 billion this year.
 
Source: @jessefelder, Bloomberg   Read full article  
 
2. Has US crude oil production peaked for now?
 
Source: Capital Economics  
 
By the way, shale wells have a much shorter lifespan than conventional wells.
 
Source: Longview Economics  

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3. Next, we have some updates on Russia’s crude oil output.
 
Exports:
 
Source: Longview Economics  
 
Tanker traffic:
 
Source: IIF  
 
Production forecast:
 
Source: BCA Research  
 
The Urals/Brent spread:
 
Source: Neste  

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4. Solar power costs have been declining as installed capacity grew.
 
Source: @WSJ   Read full article  
 
This chart shows US utility-scale solar capacity additions.
 
Source: S&P Global Market Intelligence  


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Equities

1. Corporate margins hit a multi-decade high last quarter.
 
Source: Bloomberg   Read full article  
 
2. PMI indicators continue to signal deterioration in corporate profits.
 
Source: @pav_chartbook, @prometheusmacro  
 
3. Retail investors’ average portfolio is still ahead of the S&P 500 since the start of the pandemic, but the outperformance is dwindling.
 
Source: Vanda Research  
 
4. Companies that benefit from higher inflation have been outperforming this week.
 

 
5. Sector return dispersion is at the highest level since the dot-com era.
 
Source: SPDR Americas Research, @mattbartolini  
 
6. This chart shows the sector composition of equity markets in advanced economies.
 
Source: MRB Partners  
 
7. Hedge funds’ favorite long picks have significantly underperformed their short picks over the past 12 months.
 


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Credit

1. Institutional fund managers have greatly reduced their credit exposure this year.
 
Source: Evercore ISI Research  
 
2. Leveraged loan price dispersion has widened dramatically in recent months.
 
Source: Bloomberg Law   Read full article  
 
3. Student debt ABS share has been shrinking.
 
Source: Morgan Stanley Research  


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Global Developments

1. The US dollar appears to be overbought.
 
Source: BCA Research  
 
2. Rate differentials will have a lower impact on currencies as economic growth slumps.
 
Source: Oxford Economics  
 
3. Next, we have part-time employment in advanced economies.
 
Source: Capital Economics  
 
4. Secondhand luxury watch prices continue to trend down.
 
Source: WatchCharts  


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Food for Thought

1. Stay-at-home stocks:
 
Source: @axios   Read full article  
 
2. Changes in US goods exports by destination in the first half of 2022:
 
Source: Wells Fargo Securities  
 
3. Saudi Aramco’s net profit:
 
Source: @chartrdaily  
 
4. Teen social media platform preferences:
 
Source: Pew Research Center   Read full article  
 
5. US congressional trips to Taiwan:
 
Source: Bloomberg   Read full article  
 
6. Student debt demographics:
 
Source: @PplPolicyProj   Read full article  
 
7. Student loan forgiveness benefits share:
 
Source: BofA Global Research  
 
8. What are you most likely to do when going on a first date?
 
Source: @CivicScience  

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Have a great weekend!


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