Daily Brief

Scared by statistics

More plunging

As the economic data moves along to cover the global lockdown, they are telling a story at least as alarming as analysts had feared. On Wednesday the horrors related to US output and retail sales, and UK retail sales. The light relief came from Australia’s employment data, which were better than expected.

The first ecostat to make investors sit up was the New York Federal Reserve’s Empire State Manufacturing Index. In line with the modern fashion it “plunged” 57 points in April and “plummeted” to a record low of -78.2. Next up were the US retail sales numbers for March. They fell 8.7% on the month and were 6.2% below March 2019. The monthly declines were the biggest since 1946. (The US Census Bureau insisted that the incomplete data did “meet publication standards” but it in saying so it flagged the possibility that this month’s figures will not.)

Then came the Fed’s data for industrial production and capacity utilisation. Manufacturing output fell 6.3% and “most major industries posted decreases. The broader industrial production, which includes mining and energy, was down by a monthly 5.4%. The NAHB’s Housing Market Index followed and it “plunged” to the lowest level since 2012. The final offering from the States was the Federal Reserve’s Beige Book survey of the US economy, produced to enlighten members of the Federal Open Market Committee ahead of their meeting on 28-29 April. It noted that “economic activity contracted sharply and abruptly” and that “employment declined in all districts, steeply in many cases”. The US dollar was nevertheless the top performer among the major currencies, a haven for those worried by the US data and the IMFs’ earlier bleak outlook. It strengthened by a cent and a quarter against sterling.


Historic drop

The British Retail Consortium reported overnight that March brought “the worst decline in retail sales on record”. “Hundreds of thousands of jobs are at risk within these [bricks-and-mortar non-food retail] companies and their supply chains.

Sterling was not unduly worried. It lost out by around 0.25% to the safe-haven yen and franc and was roughly steady against the euro, averaging a 0.2% gain for the day.

Paradoxically, the Australian dollar was not unduly chirpy about the March employment data, which was considerably better than forecast. Instead of losing 40k jobs the economy added 6k and the uptick in unemployment from 5.1% to 5.2% was easier on the eye than the predicted 5.5%. Yet the Aussie remained under pressure as a result of the risk-off mood and it lost the thick end of two cents to sterling. Once again the Norwegian krone drew the short straw as WTI crude drifted below $20. In three days it has fallen 3.7%.


China GDP

Potentially the most interesting ecostats ahead of the weekend will be tomorrow’s first quarter gross domestic product figures from China. The market consensus is for a 10% quarterly contraction, with March retail sales down by 10% on the year.

There is nothing special among today’s data. German inflation is irrelevant, Euroland industrial production in February is a historical footnote and initial US jobless claims in the United States will be huge for a fourth week, perhaps five million or more.

Other than the Chinese data there is nothing of any consequence on Friday’s agenda.

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