Consumer debt delinquencies keep rising

The Daily Shot: 15-May-24
The United States
The United Kingdom
The Eurozone
Europe
Japan
China
Emerging Markets
Commodities
Equities
Global Developments
Food for Thought



 

The United States

1. The PPI report exceeded expectations, with the April gains in core wholesale prices driven by the services sector. However, there was a sharp downward revision for the month of March.
 

This chart shows the contributions to the monthly PPI changes.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Trade services, a measure of business markups, saw the biggest gain in ten months.
 

 
But even excluding trade services, price gains were strong (2 charts).
 

 

 
Here is the year-over-year core PPI excluding trade services.
 

 
The PPI report also suggests that core goods disinflation is ending.
 
Source: Nomura Securities  
 
One of the key contributors to the upside PPI surprise was portfolio management, …
 

 
… which tends to be correlated to stock prices.
 

 
The markets took the PPI report in stride because many contributions to the PCE inflation index were softer, …
 
Source: Nomura Securities  
 
… such as airline fares.
 
Source: Nomura Securities  
 
Source: @economics   Read full article  

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2. The NFIB Small Business Optimism Index edged higher last month, …
 

 
… with fewer firms expecting weaker sales.
 

 
The hiring plans index showed a small increase.
 

 
A higher percentage of firms saw labor costs as the most important problem.
 

 
In a positive sign for inflation, fewer small businesses plan to increase prices.
 

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3. Household debt delinquency rates are gradually rising but remain low by historical standards.
 
Source: Federal Reserve Bank of New York  
 
Mortgages comprise the largest portion of household debt, and mortgage delinquencies have remained relatively low. However, consumer debt (credit cards, auto loans, etc.) delinquencies have been rising. The charts below show transitions into serious delinquency.
 
Credit cards:
 

 
Auto loans:
 

 
Here are the trends by age group.
 
Source: Federal Reserve Bank of New York  
 
Younger generations are more likely to be maxed out on their debt.
 
Source: @economics   Read full article  


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The United Kingdom

1. The UK employment report indicated a softening labor market.
 
The unemployment rate increased.
 

 
The claimant count has been grinding higher.
 

 
The PAYE payrolls number dropped sharply, though this indicator is often subject to substantial revisions.
 

 
The ratio of vacancies to unemployment continues to trend lower.
 
Source: ING  
 
Despite softer labor market indicators, wage growth surprised to the upside.
 

 
And PAYE data signals further strength in wage growth.
 
Source: Pantheon Macroeconomics  

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2. The market continues to price two BoE rate cuts this year.
 


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The Eurozone

1. Germany’s ZEW expectations index continues to rise.
 

 
Source: Reuters   Read full article  

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2. Youth unemployment in the euro area is now below the EU average.
 
Source: Eurostat   Read full article  
 
3. Italy’s fiscal forecasts look troubling.
 
Source: @economics   Read full article  
 
4. The market continues to price an ECB rate cut in June.
 


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Europe

1. Sweden’s CPI report was a bit below forecasts.
 

 
Source: @economics   Read full article  

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2. Flows into European equities accelerated last week.
 
Source: Goldman Sachs; @WallStJesus  


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Japan

1. Bank shares are surging with rising bond yields.
 

 
The yield curve has been steepening.
 

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2. Machine tool orders are down almost 12% from 2023.
 


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China

1. The MSCI China Index formed a golden cross.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. The offshore yuan volatility curve has steepened this year.
 
Source: @MarkCCranfield, @BloombergLive  
 
3. Capital Economics expects China’s disinflation to persist.
 
Source: Capital Economics  


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Emerging Markets

1. Brazil’s services activity remains robust.
 

 
2. Argenina’s CPI has been nearing 300%, …
 

 
… but price gains are slowing.
 

 
Source: AP News   Read full article  

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3. Colombia’s factory output is 11% below last year’s levels.
 

 
Retail sales also slowed.
 

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4. India’s wholesale prices are rising again.
 

 
5. Global equity ETF investors scaled back EM exposure last month.
 
Source: TS Lombard  


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Commodities

1. Copper prices hit a record high, breaking five dollars per pound for the first time.
 

 
The copper curve is in massive backwardation.
 

 
However, China’s copper market appears to be well-supplied.
 

 
Are copper prices signaling stronger manufacturing activity this month?
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Bloomberg’s orange juice price index hit a record high.
 


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Equities

1. The Nasdaq Composite hit a record high.
 

 
2. Small and mid-cap stocks have been outperforming over the past 30 days.
 

 
3. The meme stock rally continued on Tuesday.
 

 
Retail buying has picked up.
 
Source: Vanda Research  
 
But meme options activity remains subdued (2 charts).
 
Source: Vanda Research  
 
Source: @markets   Read full article  

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4. Professional investor sentiment continues to improve.
 
BofA’s fund manager survey:
 
Source: BofA Global Research  
 
S&P Global’s survey:
 
Source: S&P Global PMI  
 
5. What do investors see as the drivers of returns over the next 30 days?
 
Source: S&P Global PMI  
 
6. Here is a look at fund flows by sector over the past four weeks.
 
Source: Deutsche Bank Research  
 
7. Investors have been very bearish on real estate.
 
Source: BofA Global Research  
 
Against a backdrop of poor sentiment, REITs are beginning to outperform.
 

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8. The front end of the implied volatility curve is massively inverted ahead of the CPI report, …
 
Source: Bloomberg
 
… as the market anticipates higher volatility.
 
Source: @carlydwanna, @Business  

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9. Zero-day options activity remains elevated.
 
Source: BofA Global Research  


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Global Developments

1. Investors continue to see inflation as the biggest tail risk.
 
Source: BofA Global Research  
 
2. Many advanced economies are facing housing shortages.
 
Source: The Economist   Read full article  


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Food for Thought

1. K-12 firearm incidents:
 
Source: @axios   Read full article  
 
2. Confidence in national institutions:
 
Source: The Economist   Read full article  
 
3. Accessibility of abortion clinics across US congressional districts by demographics:
 
Source: @axios   Read full article  
 
4. Opinions on Pope Francis:
 
Source: Pew Research Center   Read full article  
 
5. US trends in mental health diagnoses:
 
Source: FAIR Health  
 
6. Russia’s new Asia trade routes:
 
Source: @bpolitics   Read full article  

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