HARD DATA WATCH
The National Association of Realtors (NAR) reported that pending home sales increased 5.5% in February to an index level of 112.3, the highest point since April 2016. The NAR suggested that warm temperatures helped lift sales. The gain followed declines in two of the prior three months. The pending sales figures showed strength across regions.
- Smith Travel Research reports that hotel revenue per available room is up 3.2% quarter-to-date (to 03/25), in line with from the full 2016 average with occupancy up 0.6% vs +0.1% in 2016.
The Gap Between Sentiment and Certainty Is ‘Stunning’
(…) “The divergence is stunning,” wrote Morgan Stanley economist Ellen Zentner. “Upside surprises appear to be completely driven by the soft data while hard data are simply coming in about as expected.” (…)
The Federal Reserve Bank of New York’s model, which gives more weight to the soft data, is currently projecting a 3% gross domestic product “print” in the first quarter. By contrast, the Federal Reserve Bank of Atlanta’s model, which incorporates soft data but to a lesser degree, is projecting only a 1% print. Morgan Stanley, too, expects 1% GDP when the Commerce Department releases its initial first-quarter reading on April 28. (…)
RETAILING IS HARD
- The head of retail goods supplier Li & Fung Ltd. expects “an unprecedented number of bankruptcies and store closures” in a deteriorating retail market. (Reuters)
THIS IS REALLY SOFT
- David Rosenberg yesterday:
Not only is the GOP divided as ever on most policies, but it has been so long that they had an opportunity to legislate, that they somehow have forgotten how to do this – in fact, only 58 of the current 237 Republicans sitting in the House were around the last time they passed a substantial piece of legislation back in 2005!
MORE HARD VS SOFT…
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U.S. Softens Call for Shift on Nafta The Trump administration is signaling to Congress it will seek mostly modest changes to Nafta in upcoming negotiations with Mexico and Canada despite President Trump having called the trade deal a “disaster” during the campaign.
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Whatever Happened to Free Trade? Companies and countries are scrambling to adjust to a strange new world created by a decade of economic retrenchment and an upswing in populism.
The decades-long rising wave of globalization that remade the world economy is receding. The recent rise of nationalist politicians and protectionist trade rhetoric is the culmination of a broader push against global business since the financial crisis, the WSJ’s Bob Davis and Jon Hilsenrath write, that’s left global trade barely growing when compared with overall economic output, international capital flows pulling back and managers of multinational companies starting to dismantle the sprawling supply chains that they’ve built up over decades.
The overall picture, from Brexit to Beijing, shows a trading world undergoing fundamental, long-term change—Maersk Chief Financial Officer Jakob Stausholm calls it “a deflationary mindset.” That’s left merchandise exports contracting and global supply chains no longer growing. China is helping drive the trend with its push to produce more goods for domestic consumption, and big industrial players are following. General Electric Corp. is among many looking at a “localization” strategy, which would result in more factories that serve local demand rather than the export markets that have fueled global shipping.
Jumping on that Vespa motor scooter to pick up a bottle of Perrier could get much more expensive. The Trump administration is poised to demonstrate its promised tough approach to trade rules in a long-simmering dispute with the European Union over beef, the WSJ’s William Mauldin reports, and has a menu of goods lined up for punitive tariffs of 100% that could roll out in the White House’s first formal push in a trade dispute.
The beef case, which has been simmering in the World Trade Organization for years, may provide a window into how aggressive the administration will be with trading partners. The value of imports involved is relatively small, amounting to only around $100 million, but the potential impact on light motorcycles and high-end groceries is also already prompting a backlash. U.S. importers say tariffs on products from paprika to foie gras and fine cheeses would be tough for their customers to swallow.
- Soft yuan:
HARD LANDING AHEAD
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Margin Debt Hit All-Time High in February Margin debt climbed to a record high in February, a fresh sign of bullishness for flummoxed investors trying to navigate the political and economic crosscurrents driving markets.
SOFT ON CANADA
- BOC Stephen Poloz two days ago:
If we were to raise interest rates back to normal prematurely, like today, the economy would almost certainly have a recession.