Layoffs are Tempered
The labor market remains well-behaved despite last week’s report featuring a frightening spike in layoffs. [Yesterday’s] print brought us back to trend levels, with initial unemployment claims dropping to 222,000 for the week ended May 11 from 232,000 the week before. The figure arrived near estimates of 220,000. Continuing unemployment claims for the week ended May 4, meanwhile, rose to 1.794 million from 1.781 million the week before, landing above the forecasted 1.780 million.
Four-week trends remained anchored, with the moving average for initial claims shifting from 215,250 in last week’s report to 217,750 as of this morning. Continuing claims modestly went the other way, with the week to week four-week moving averages moving south from 1.780 million to 1.779 million.
Walmart Posts Sales Growth, Raises Earnings Outlook In the U.S., more people shopped at Walmart and bought more products, but the average amount spent per visit was flat compared with the same quarter last year.
U.S. comparable sales, or those from digital channels and stores operating at least 12 months, rose 3.8% in the quarter ended April 26. That was slower growth than last year, when comparatively higher prices sent sales soaring. (…)
At Walmart, sales growth slowed slightly in April, said Rainey, as the Easter holiday fell earlier in March this year and weather hurt sales. So far, May sales are in line with the most recent quarter overall, he said. (…)
Walmart said full-year net sales are likely to come in at the high end or slightly above its previously expected range of a 3% to 4% increase. Operating income will also likely hit the high end or slightly above its previously expected range of a 4% to 6% increase, the company said Thursday.
- Traffic was up 3.8% while the average basket was flat. Since CPI-Goods averaged +0.4% in the quarter, the average ticket declined 0.4% in real terms. This compares with real retail sales having increased 2.6% YoY through April per Wells Fargo data.
- Lower-income households increased their spending by 2% in April, while high earners saw a slower spending increase, according to new credit and debit card data from Bank of America Institute.
TD, RBC Data Point to Slowing Household Spending in Canada
Toronto-Dominion Bank and Royal Bank of Canada use their proprietary credit and debit card data to estimate retail sales growth in Canada. TD’s data, released Tuesday, show March sales jumping 0.8% before dropping 0.9% in April. RBC’s figures arrive at roughly the same conclusion for the two-month period, via a different path: the bank says spending by its customers dropped in March, then rebounded last month.
After combining March and April growth rates, TD’s figures point to a 0.1% decrease in sales over the two-month period, while RBC’s show a 0.2% decline, according to Bloomberg calculations. (…)
Retail spending per person has been falling for almost two years, but a big wave of newcomers helped keep overall sales growing until recently. (…)
China Is Finally Getting Serious About a Housing Rescue Beijing has announced a plan to clear the backlog of unsold and unfinished homes, but questions remain over the scale and financing of the package.
The centerpiece of measures outlined Friday is Beijing’s embrace of a policy already being tested in some cities in China—getting city and local authorities to buy up unsold or unfinished homes and convert them into affordable housing for low- and middle-income families.
Friday’s package also included scrapping minimum interest rates on mortgages and reducing required down payments for would-be home buyers.
By stepping in as a buyer of last resort for millions of properties, the government is seeking to bail out failed developments, mop up housing inventory and persuade spooked buyers to re-enter the market.
Still, the scale of the program—and where cities and cash-strapped local governments will get the funding to pay for it—isn’t clear. Economists estimate clearing the enormous backlog of empty or unfinished homes dotting China’s vast geography will cost hundreds of billions of dollars. Only the central government in Beijing or the People’s Bank of China would have the necessary resources to finance a nationwide expansion of the home buying plan, they say. (…)
- The People’s Bank of China effectively scrapped the nationwide minimum mortgage interest rate while cutting the minimum down-payment ratio to 15% for first-time buyers and 25% for second homes, according to a statement on Friday. The previous ratios stood at 20% and 30%, respectively. (…) “This is the most relaxed downpayment policy ever in China,” said Yan Yuejin, research director at E-house China Research and Development Institute. “It signals the central government is really prioritizing home-buying demand.” (Bloomberg)
- PBOC Earmarks [300B yuan] $42 Billion for State Buying of Unsold Homes short of analyst estimates of at least 1 trillion yuan needed for the purchase.
China latest data:
- Industrial production growth rose 6.7% YoY in April from +4.5% in March. That is +0.7% MoM in April vs -0.6% in March.
- Fixed asset investment growth slowed to +3.6% YoY in April from +4.7% in March.
- Nominal retail sales growth fell to +2.3% YoY in April from +3.1% in March, distorted by the different timing of the Labor Day holiday between this and last year (1-5 May 2024 vs. 29 April – 3 May 2023).
- Property sales slumped 22.9% YoY in volume (floor space) terms and by 30.6% in value terms in April vs -18.3% and -25.9% respectively in March.
- After seasonal adjustments, weighted average house prices in the primary market declined by 8.5% mom annualized in April (vs. -5.6% in March, despite ongoing easing policies. The number of cities that experienced sequentially higher property prices fell in the primary market while remained flat in the secondary market in April. Year-on-year change in weighted average new home prices fell to -3.0% in April from -2.0% in March. We emphasize the 70-city data are for primary market transactions (new home sales) only; secondary market data by NBS and some third-party platforms suggest price declines of 5%-20% over the past year. (GS)
ING
BlackRock’s Rieder Says Cut, Not Hike, Would Tame US Inflation Goods disinflation is pushing activity into services: Rieder
BlackRock Inc.’s Rick Rieder has some advice that bucks conventional wisdom: The best way for the Federal Reserve to temper inflation will be to lower rates, not hold them higher.
That’s because well-heeled Americans are earning more than they have in years from fixed-income investments, given that benchmark rates remain on hold at their highest level in a generation, according to Rieder, BlackRock’s chief investment officer of global fixed income.
“I’m not certain that raising interest rates actually brings down inflation,” Rieder told Bloomberg’s David Westin for an upcoming episode of Wall Street Week airing Friday. “In fact, I would lay out an argument that actually if you cut interest rates, you bring down inflation.”
Middle- to higher-income Americans “are getting a big benefit from these interest rates,” he said. “We’re moving to a service-oriented economy, more money is being spent on services, but actually what’s happening — because goods prices have come down so much — it’s allowing for disposable income to go into services.”
Rieder pointed to sticky inflation across service sectors, like auto and health insurance, as evidence. “They’re unresponsive to interest rates and people are spending — older people, middle- to high-income are spending — and are keeping that service-level inflation at high levels.”
“The price of a pair of tennis shoes is what it was 20 years ago. If you go to a tennis match, it’s double what it used to be,” he added. (…)
Interesting, but it does not verify just yet. There is no clear acceleration in demand for services while goods consumption remains solid.
FYI
Source: The Economist Read full article