MORE ON AUTOS
Boating looks better:
Dealer optimism continues to grow, as 61% of respondents are somewhat to significantly more optimistic about the industry over the next six months (48% in 4Q16). 1Q17 new boat order response trends appear to be at their highest level in years (potentially mid-to-high single digits). This is supported by lower new boat inventories so it doesn’t seem like dealers are getting out over their skis. We picked up on dealer enthusiasm at the Miami Boat Show. Now, our survey shows that 47% of dealers reported higher orders during 1Q17 (compared to just 14% who reported lower orders). (RBC)
Fed Officials Expect to Whittle Down Portfolio Later This Year: Minutes
Federal Reserve officials agreed at their March policy meeting they would likely begin shrinking a $4.5 trillion portfolio of Treasury and mortgage securities later this year, though they remained undecided on how quickly to reduce the holdings and to what level, according to minutes released Wednesday. (…)
Reducing the balance sheet is a delicate task as it could cause long-term rates to rise and undermine the expansion. (…)
“Most participants … judged that a change in the [Fed’s] reinvestment policy would likely be appropriate later this year,” the minutes said. (…)
Among the details not worked out in March was whether the Fed would phase out its reinvestment policy slowly or cease it all at once, though the minutes suggested officials saw the first option as the primary way to shrink the portfolio. (…)
Some officials said they wanted to set a numerical interest-rate trigger, meaning they would start shrinking the portfolio after their benchmark rate rose to a specified level. (…) Others favored a qualitative approach based on broader assessments of the economy and financial conditions. (…)
Under the emerging scenario they have outlined in public comments and interviews, the central bank would raise short-term interest rates two more times this year and then pause rate increases late in the year while setting in motion an effort to reduce the balance sheet. A pause would allow the Fed to watch for ill-effects before resuming rate increases in 2018. (…)
10Y treasuries are holding around 2.5% while 3-months bills have crept up from 0% to 0.8%, shrinking the gap from 200 bps last December to 157 yesterday. There is only 37 bps remaining to the 120 yield spread (A Powerful Combo: the Rule of 20 and the “120 Yield Spread”).
In Europe:
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ECB’s Draghi Says It’s Too Soon to Reduce Stimulus
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Draghi Draws Line Under ECB Rate Debate and Warns on Prices
(…) “I do not see cause to deviate from the indications we have been consistently providing in the introductory statement to our press conferences,” the ECB President said in a speech in Frankfurt on Thursday. “We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook — which remains conditional on a very substantial degree of monetary accommodation.” (…)
The ECB president countered such demands saying that the current policy path — which expects that interest rates will “remain at present or lower levels for an extended period of time, and well past the horizon” of asset purchases — is still appropriate to make sure that growth and inflation are solid enough to withstand the end of stimulus. (…)
Hmmm…If Germany is any guide:
[Manufacturing] capacity remained under pressure with backlogs increasing at the strongest pace since the start of 2014, and suppliers’ delivery times lengthening to the greatest extent in nearly six years. (…) prices charged by German manufacturers increased at the second strongest rate in 68 months.
Pressure on German service sector firms’ costs continued to build in March. The rate of input price inflation quickened for the sixth time in seven months to the strongest in five years, widely linked by survey respondents to salaries and fuel. With input prices increasing at a faster rate, service providers hiked their own charges. The rate of charge inflation strengthened for the fourth time in five months to the sharpest since July 2008. Moreover, the rate of inflation was the fourth highest in the near-20 year survey history.
Amazon to Add 30,000 Part-Time U.S. Jobs Amazon.com said it will create 30,000 part-time positions in the U.S. over the next year, nearly doubling the total as its customer base and sprawling warehouse network expand.
Of the jobs, 25,000 will be warehouse positions and the remaining 5,000 home-based positions answering customer calls, emails and chats in what the online retail giant calls its virtual customer-service department. (…)
Amazon’s workforce has been growing rapidly in recent years as it builds dozens of warehouses to be closer to customers, which reduces shipping costs and allows the company to deliver more of its own packages. Last year the world-wide workforce grew 48%, to 341,400. (…)
Meanwhile:
This will not end well:
Toronto Home Prices Just Jumped Another 33%
(…) Prices increased by a third in every major housing category, including townhouses and condominiums, amid intense competition among buyers, according to figures from the Toronto Real Estate Board. More people opted to put their homes on the market in March as new listings rose 15 percent to 17,051, after a drop in February. Still, the gap between listings and sales underscores a tight market, with supply and demand out of sync, the trade group said in a statement. (…)
The average home price in the Toronto area rose to a record C$916,567 last month, from C$688,011 a year earlier. Unit sales jumped 18 percent to 12,077, the board said in the statement. (…)
While Usher is wary of possible new measures aimed at taming the market, Bank of Nova Scotia’s Canadian banking head James O’Sullivan said governments may have to intervene in if prices remain “overheated.”
Toronto’s market is of prime concern because of unsustainable and unhealthy price increases, he told reporters Tuesday after Scotiabank’s annual meeting. He’d like to see how home sales play out between April and June before pushing for further measures.
A foreign-buyers tax, such as the one British Columbia imposed last year to cool Vancouver’s housing market, and a speculation levy should be “on the table,” he said.
