U.S. Leading Economic Indicators Post Another Firm Increase
The Conference Board’s Composite Index of Leading Economic Indicators increased 0.4% last month, the same as during March which was revised from 0.3%. The y/y change strengthened to 6.4% from 4.1% during all of last year. (…)
All but two of the component series contributed positively to the change in the leading index last month. (…)
The Index of Coincident Economic Indicators increased 0.3% (2.2% y/y) during April following two months of 0.2% gain. Each of the component series contributed positively to the total’s rise including personal income less transfer payments, business sales, payroll employment and industrial production.
The three-month gain in the index of 2.8% (AR) was the strongest since December.
The Index of Lagging Economic Indicators rose 0.3% last month (2.4% y/y) after a 0.1% March dip, revised from +0.1%. All but two of the seven component series contributed positively to the change in the index. (…)
From Advisor Perspectives, still no signs of recession from this indicator:
But I am still worried about the U.S. consumer’s ability to keep supporting this economy amid slow wage growth, rising inflation, higher interest rates and very low savings.
From the NY Fed’s Q1 report on household credit via @spomboy:
Government Bond Yields Wobble Near Multiyear High
Mortgage Rates Hit Seven-Year High as Ultracheap Era Ends Mortgage rates this week jumped to their highest level since 2011, signaling a shift to a higher-rate environment that could slow home price appreciation and squeeze first-time buyers.
The average rate for a 30-year fixed-rate mortgage rose to 4.61% this week from 4.55% last week, according to data released Thursday by mortgage-finance giant Freddie Mac. (…)
The concern among economists is that higher rates will prompt homeowners to keep their low-rate mortgages rather than trade up for better properties. As rates approach 5%, the risk of the phenomenon known as rate lock grows, economists said. (…)
A 4% rate on a $250,000 loan translates to a monthly payment of $1,194, according to LendingTree Inc., an online loan information site. At 5%, the monthly payment would go up to $1,342, excluding taxes and insurance.
The monthly increase is more pronounced on higher-priced homes. According to LendingTree, a 4% rate on a $500,000 loan would create a monthly payment of $2,387. At 5%, the monthly payment would swell to $2,684. (…)
BTW, one of the reasons why new house prices are rising. Can you guess when the U.S. imposed countervailing duties on Canadian lumber:
BTW #2: steel studs prices will likely also spike:
The central bank’s Beige Book, a collection of anecdotal reports from businesses, said there were “widespread reports†in March and early April “that steel prices rose, sometimes dramatically, due to the new tariff.â€
Emerging-Market Currencies Fall Against Dollar Worries percolate that U.S. bond yields will keep rising
China sees rise in companies defaulting on bonds Value of defaults marks a 32% increase year on year, says Standard Chartered
(…) Moody’s has warned that there is “a considerable amount†of refinancing due in the next two years, with some Rmb3tn of onshore corporate debt due for repayment next year. (…)
Other issuers outside of the corporate sector are coming under pressure. A local government financing vehicle owned by the megacity of Tianjin failed to repay half of a Rmb500m ($78m) trust loan late last month. (…)
(…) Ten onshore bond issuers have defaulted on 17 bonds with a total principal amount of CNY14.6 billion in 2018 (as of 7 May 2018), compared with 18 defaults on 46 bond issues with a total principal amount of CNY39.3 billion in the whole of 2017. These 10 issuers operate in sectors including ports, coal mining, machinery, shoe retailing, environmental service/EPC, biomass energy, and security surveillance equipment. Trust loan defaults have increased, including a provincial state-owned construction company. Credit events have also risen. For example, DunAn, a large private manufacturer based in Zhejiang with CNY45 billion in outstanding debt, asked the provincial government to intervene with banks to resolve a liquidity crisis, citing systemic risk. (…)
The shift in the credit cycle is coinciding with a peak in corporates’ domestic bond refinancing needs, which stems from an issuance boom in 2015 and 2016, when credit conditions were loose and the domestic exchange bond market lowered entry barriers for corporates, especially private companies. Many bonds issued in those years become due or puttable by investors in 2018 and 2019, which will result in bond maturities totalling more than CNY4 trillion per year. (…)
Trump Trade Chief Says ‘Nowhere Near’ a Deal on Nafta President Donald Trump’s trade chief said the U.S. is “nowhere near†a deal on Nafta, effectively brushing aside an offer from House Speaker Paul Ryan for more time to conclude a deal.
Japan Considers Retaliation Against U.S. Steel Tariffs Japan is looking into retaliating against the U.S. over steel tariffs, a break from the more conciliatory approach Tokyo initially adopted toward its closest ally.
Deal or No Deal: Can China Shrink U.S. Deficit by $200 Billion?
(…) “I find that difficult to contemplate,” said Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance. “Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion. A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain.” (…)
(…) Even if the two sides could agree on items to target—they don’t—and even if China cooperated by lowering import barriers, trade experts say the U.S. simply doesn’t have the capacity to ramp up production enough to make the $200 billion goal.
“The U.S. is operating at full employment. There isn’t a tremendous amount of underutilized U.S. capacity,†says Chad Bown, a trade economist at the Peterson Institute for International Economics. (…)
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Exporting Jobs Instead of Food The U.S. farm labor shortage is driving production overseas.
House Republicans are brawling over immigration again, and it could scuttle their farm bill. Most of the public debate focuses on the so-called Dreamers. But another big problem receiving less media attention is that the immigration restrictionists are detached from the reality of the American farm economy and a worker shortage that’s driving food production overseas. (…)
